MITCHELL: Mr Rudd, good morning.
PM: Good morning Neil.
MITCHELL: Prime Minister, small business first. We've got a large small business audience and you've got a Christmas present for them, a tax break. What is it?
PM: Well, there are a lot of small businesses out there in the country and what we are trying to do for 1.3 million small businesses with a turnover of less than $2 million a year is to help with their cash flow for the period ahead.
Small businesses currently employ about 3.7 million Australians and are the backbone of the economy. They usually pay their tax on a quarterly basis, on PAYG. What we're doing is to provide them effectively with a 20 per cent tax cut for the December quarter.
And that is to help of course with their cash flow for the period ahead. It is not a magic solution to everything but we know this is a tough period.
MITCHELL: So is it a deferral or will they not have to pay?
PM: Well put it this way. Here are the calculations. Normally you would look at the budget papers. Budget papers back in May projected that small businesses would increase their tax payments by, would have an increase in their turnover by eight per cent. Okay? That was the projection back in May.
When we put out the mid-year economic forecast in November, we reduced those down to two per cent, simply because of a reflection of what is happening in the global economy.
Therefore if we applied the normal rate, as it was in the past, of an eight per cent increase on previous tax payments for the last year by small businesses, they would pay that upfront, have a cash flow problem and then they'd have to wait for a rebate later on in order to, or a refund later on, to get their money back.
So what we've done instead is to bring it down for this quarter. So it helps them with their cash flow now. Otherwise they'd be waiting another year or so to get it back through the tax refund.
MITCHELL: How much money does it involve? What are the estimates?
PM: Just under half a billion dollars and that we believe provides some help. Again Neil, this is not a magic solution to everyone's problem but we think in this difficult period which many small businesses are going through and businesses in general, this provides some help with cash flow in the immediate period ahead.
MITCHELL: It's another area, I'm getting a lot of messages from small business about is, that banks are not passing on interest rate cuts on business loans. Is that fair?
PM: Well the banks have performed differently on this question. For example in the case of the most recent interest rate cuts by the Reserve Bank, a number of those passed them on in full, I'm advised, to small businesses.
That is not always been the case historically, you're right on that. And that is something we continue to work with the banks on. Not just a full pass on for those who hold mortgages but for those with small business loans as well.
MITCHELL: Do the banks accept that you've got, you've got some real moral pressure here, given the decision to guarantee them in the past?
PM: Well Neil, we meet with the banks, the Treasurer and I, on a regular basis and we raise all these concerns and I think it's fair to say that on the question of mortgage holders, the banks in recent times have been much more responsive to what the Government and the community have been saying.
On the question of small business loans, which is a legitimate point of your question, we saw, I believe, a better performance with the last round of interest rate cuts than we had before. We will continue to apply pressure in the future.
You're right. The banks have benefited from the fact that we the Government have extended two guarantees. One for all deposit holders in the country and two, a guarantee to them for the purposes of their international capital rating.
So we have, I believe an ability to continue to apply pressure to the banks.
MITCHELL: Have they done enough on credit card interest rates yet?
PM: Last time I looked, Neil, there are like, literally hundreds of different credit card products across the country, some 300. And again the interest rates on those credit cards vary from something quite modest to something quite huge.
What I'd strongly suggest to your listeners; if you're getting ripped off with your credit card - change it. Shop around because there is a huge variety in the market. But generally, banks need to do more in reducing interest rates pass through to all customers whether it's using credit cards, whether it's using business loans or in the case of home mortgages, we've seen a much better performance anyway.
Can I just add one point though.
MITCHELL: Sure.
PM: Stability in the banking system is still fundamental. What I have to balance as Prime Minister is making sure that our major banks continue to perform well. Maintaining the stability of the financial system, with solid and healthy bottom lines.
Around the world today there are only about 13 double-A banks, rated banks, left. Four of those 13 worldwide are Australia. So in terms of international financial assessment of the Australian financial system, maintaining our banks in double-A rating standard is an important priority.
MITCHELL: Confident we're through the crisis the banks faced?
PM: I don't think we're, any of us are out of the woods Neil. I don't wish to mislead people. I believe we've negotiated the crisis so far reasonably. But 2009 is going to be very tough across a range of things including further challenges to the stability of the global financial system.
But the real challenge that we are most concerned about is the flow through effects to the real economy, to businesses and employment. Hence the measure we just talked about before, which is this $440 million assistance to cash flow for small business.
MITCHELL: I see some speculation today that because the unemployment figures weren't as bad as expected yesterday that we could be in for a soft landing. Do you think there is any hope of a soft landing for Australia?
PM: Oh look Neil. We're doing everything we can at the Government level to inject activity in the economy in order to fill the gap, which is left by the private sector cutting back.
That's what we're doing. The overall effect of this in 2009 - too hard to tell. I just don't want to turn around at the end of 2009 and ask myself this question: was there any more I could have done in terms of injecting activity into the economy through Government investment in infrastructure and the rest? And through the economic security strategy and payments to pensioners and carers, which has just flowed through in the last week.
I don't want to turn around the end of 2009 and say, is there more that we could have done that we haven't done.
MITCHELL: Well what do you say to the average person going into next year. Where is this going to touch them - jobs are insecure aren't they?
PM: Well what I'll say is this Neil, and from the beginning of this crisis I have not believed in gilding the lily, and saying that this is just a minor thing, it is a major challenge for us all.
Secondly however, I refuse to join the gloom and doom industry and say that there is no hope. What we've got to do is construct a rational basis for optimism for 2009. That underpins the economic strategy we've deployed so far.
And that's through the economic security strategy - $10.4 billion; $15.1 billion through the Premiers, the State and Territories, $3 billion of which flows next year; and we'll also be making a further infrastructure statement today.
MITCHELL: Okay, you've got more up your sleeve for next year as well?
PM: Well, we'll make an infrastructure statement today. It will be significant. But we will have a much more significant statement to make in the New Year.
We're currently working through the detail of all that. But we believe that our responsibility is to do everything possible at the level of government investment in the economy, in growth and in jobs, to take up the slack which was left by small businesses and businesses generally, who have been left in many cases reeling of the consequence of the global financial crisis.
MITCHELL: Is John Brumby going to be happy with your infrastructure statement today?
PM: Well, John's state of karmic well-being is a matter of John. I'll leave that for you to sort out with him.
I had a good chat with John yesterday in Bendigo. I was there with the good people of Bendigo opening the new Bendigo Centre with the good people from Bendigo Bank.
This statement today will be a significant statement on infrastructure and other matters. But next year, it will be much more significant across the nation building agenda.
So I think we're more likely to see many of the matters that have been raised explicitly by Premier Brumby in recent days dealt with in the statement we've made in the earlier part of 2009.
MITCHELL: So what's the aim of the statement today? How much does it involve?
PM: Well we'll have to wait for the statement itself, Neil, but I've already indicated we'll be making a statement.
It will be significant. And again the objective is this - to invest money into the economy, to do that through infrastructure that we need, bringing forward as much infrastructure investment as we can, and also to provide through that, necessary support for business.
I, as I've said before, at the time I brought down the $10.4 billion package for pensioners, carers, and first home buyers, and families, the Government remained resolved to do anything necessary, to take whatever further action was necessary, to continue to support growth and jobs.
This is another instalment in that strategy.
MITCHELL: I was talking to one of your members at parliament last week about unemployment and this was privately, so I won't name them,.
PM: Give me a hint.
MITCHELL: Well you give me the infrastructure statement.
PM: (laugh) Okay, fair swap.
MITCHELL: You go first.
PM: No, no, no. You keep it.
MITCHELL: The point that he was making was, was that the voters tend to judge Labor very harshly on unemployment because they expect Labor to be a sort of party of full employment, and his point was if unemployment gets up around eight, eight and a half per cent, it could well cost you government.
Do you think that's a possibility?
PM: Well look, I'm not in the business of commentary Neil. I'm doing whatever I can through leadership and taking decisions and acting, to reduce the impact on the Australian economy and Australian jobs of the global financial crisis.
That's what I'm employed to do.
I don't have a crystal ball, I can't tell how everything will turn out.
What I do know is, based on the information I have, the world's in trouble. It's rolling out the effect, the real economy, worldwide, and jobs worldwide.
So you can either sit around and join the commentary brigade, or hop in and have a go.
And what we've done for the last three months, building on our budget strategy in May, is to deploy the various measures that I've described already.
That $10.4 billion package by the way, in that within a 12 month period represents more than one per cent of GDP, it is a big injection in the economy by any global standard and since then, we've added the $15.1 billion package for hospitals and schools and social housing, and today, a further injection as well.
We don't want to be left wondering.
MITCHELL: The figures on China are pretty pessimistic today. Can we not look to China as at least the support of the resources industry?
PM: Well, the Chinese economy is going through reduced growth projections for the period ahead. I spent some time talking about this with the Chinese President when I was in both Washington and in Lima recently.
They've brought about a very big stimulus package of their own which got some reporting about a month or so ago. I believe the Chinese are likely to continue to review what's necessary for them and take further action as is necessary.
But you see, boosting Chinese demand is critical for us because that affects the demand for Australian resources. If their growth goes down, so does the demand for Australian resources.
MITCHELL: We'll take quick call and then we better take a break. Peter, go ahead Peter.
PETER: Good morning Neil and Prime Minister. I just, in regards to our superannuation, nine per cent that employers put in, I was just wondering if we should cut it back to six per cent that we put into our superannuation and have the three per cent flow into our pay packet and to stimulate the economy.
MITCHELL: Yeah so you have got your hands on it now.
PM: Well I think I have heard that argument before Peter and I understand the basis of concern which you know, gives rise to you putting that point of view. But the superannuation laws for Australia have been designed to help people for their retirement incomes and to get us through good times and in bad.
Because the fact is, we are all going to need a decent retirement income when we get to that point and that is why we are not proposing to change the contribution scheme now.
MITCHELL: We will take a break and come back with more from the Prime Minister in a moment.
AD BREAK
MITCHELL: The Prime Minister is with us. Mr Rudd, a caller off air wants to know whether the infrastructure package, will it be focussed on spending with Australian companies?
PM: Well our focus is to make sure that we get maximum take up from Australian firms, that is obviously what we are concerned about because we are concerned about Australian jobs. Also bear in mind this Neil, that a number of people who are employed in retail outlets in the country are selling both Australian manufactured goods and stuff that is imported -
MITCHELL: Yeah but if you are putting money into infrastructure and big projects presumably, will there be any preference given to Australian firms?
PM: We want maximum take up by Australian firms and I think people generally should be supportive of the sort of package that we are going to deliver. But my other point, which is just about what we did on consumer support earlier on, which is in the previous package we did.
Our concern is to support Australian jobs wherever those jobs are found.
MICTHELL: And we have still got to get Government to pay quickly haven't we?
PM: Absolutely, and as I indicated as a statement to small business in Brisbane recently, if the Federal Government is not paying its bills on time, we are going to pay interest back to small businesses and punish the departments concerned.
MITCHELL: But The Age is reporting RMIT research today that suggests 300,000 Australian households will actually owe more on their house than their house is worth, they will have negative equity next year.
That is quite a frightening figure isn't it.
PM: I haven't seen that report Neil so I couldn't comment on the detail of it. But look, it is, these are very tough economic times, I don't want to pretend it is anything other than that. And our job is to try and support people and families and businesses and the general economy as much as possible.
MITCHELL: That just looks like the banks have been lending unwisely though when you look at those sort of figures.
PM: Well, obviously, people will have made individual lending decisions and the circumstances surrounding them will be different. But remember also that in the last few months we have had a three percentage point cut in interest rates, and remember also that people were dealing with interest rates over the last several years which saw 10 interest rate rises in a row.
These are still difficult circumstances, but we remain resolved to do whatever is necessary.
MITCHELL: Childcare, a UN report rates Australia for childcare at the lowest of the developed countries. What will you do about that?
PM: Well we said something similar prior to the last election 12 months ago which is that according to the OECD we ranked stone motherless last.
What we have done is embark upon as part of our education revolution, a complete overhaul of early childhood education. Our commitment is to provide universal access for all kids in the year before formal schooling starts.
That means 15 hours a week, 40 weeks a year. It is going to cost us half a billion dollars over the five years the program is being implemented.
MITCHELL: What is, what is the long term answer with the ABC crisis? I mean you can't keep throwing money at it can you?
PM: Well the alternative we face with the ABC childcare crisis is as follows. Either you could just fold your arms and say, well that is a private sector problem and not do anything, or instead as Julia Gillard has done, I think, very effectively, put herself in the position of all those you know, mums and dads and anxious parents out there and saying, well, how does this affect us and what can we do to smooth the transition.
MITCHELL: But I guess, what business won't you bail out? Because there are a lot of small business people saying, well if I hit the wall, you are not going to help me.
PM: Yeah but what we are talking about with the ABC Learning Centres is this: you remember the previous government allowed ABC Learning to get 25 per cent of the long day care market in Australia which meant that one company going wrong, going bad, meant that you had literally, you know, 25 per cent of parents out there in strife.
All we have tried to do, and Julia has done this very effectively and her department, is help smoothe this arrangement. And remember of those 1,000 or so ABC Learning Centres, they have been able to determine that 720 will remain viable, of the 241 which are unviable, and this is where the Government's cash injection has come, is to enable those to remain open for the months ahead so that parents can make appropriate transition arrangements.
The alternative would have been just absolute mayhem out there for mums and dads and we weren't prepared to do that.
MITCHELL: Can you ever see yourself or the Government taking, reasserting control of the whole industry?
PM: I think what, the lesson of all this Neil is that we have got to be very very careful about allowing any single private company to get a quarter of the total market when it is dependent also on a large degree of Government subsidy.
I don't think that is healthy for the future. It is not good for mums and dads. So I think there will be an overall rethink about the way in which we deliver childcare. Many for-profit centres out there are doing a first class job, run as first class businesses.
That was not the case in relation to the way in which ABC Learning conducted itself.
MITCHELL: Prime Minister, are you a tough boss? I see 40 per cent of the new staff you've hired haven't lasted?
PM: Well, the government has a pretty demanding schedule, Neil. We've had three priorities this year. Implement our pre-election commitments, secondly to lay out our long term reform agenda for the education revolution, climate change and hospitals and in others areas, and thirdly to deal with the immediate challenges of the global financial crisis.
It's tough and it's demanding, but normally there is a pretty high turnover in political staff jobs. It's just the nature of the beast, people come in and they go out.
MITCHELL: Are you really trying to lose weight?
PM: I beg your pardon?
MITCHELL: I read that you'd hired people to get you to lose weight?
PM: That I'd what?
MITCHELL: That you'd hired staff, or hired advisers, to try to get you to lose weight?
PM: That is comprehensively untrue. And, you know the best to keep your weight under control for someone as antique as you and I, Neil - just watch what you stick in your gob.
MITCHELL: Well, it's a bit hard when you're attending all these rubber chicken lunches, isn't it?
PM: Yeah, yeah. Frankly, I am probably doing okay, as much as any other bloke who is about 50 does. So you just do whatever exercise you can, watch what you eat, watch what you drink and that is about it.
MITCHELL: Will you travel less next year?
PM: I think as I may have said once on an earlier time on your program, I would happily never step on to an aircraft ever again in my life, anywhere.
But you know as Prime Minister of the country when you are dealing with a global financial crisis, which is becoming a global economic crisis, I will travel whenever the national interest dictates that I do so.
And it is therefore, in any given year, unpredictable what will be required. I have got to say, during the year that has just passed, the amount of travel I have done internally within Australia has been huge.
Each state and territory I have visited on many, many, many occasions and I regard getting around this country, including conducting our Community Cabinets in every state and territory in the country during the course of 2008, that's part and parcel of doing the job as well.
MITCHELL: So you don't see your schedule changing, you think you will have to travel as much?
PM: I think it just will be tailored to the demands of the year.
My job, for example at the moment in the global financial crisis, global economic crisis is to, with other Governments, coordinate our actions as much as possible, and that means participating in fully, meetings like the G20 and APEC but secondly to go out there and also argue the case for Australian business and the Australian economy worldwide.
And you don't get that by sitting in the lounge room at The Lodge.
MITCHELL: Are you going to have a holiday this Christmas?
PM: Yeah I will -
MITCHELL: How long?
PM: I haven't quite sorted that out, I will very soon but I will certainly be having a break. Now Mr Howard quite rightly had a decent break each year and I will be doing exactly the same.
MITCHELL: What will you do?
PM: Read trashy novels, watch trashy television, and spend a lot of time with Therese, the kids, our friends and the cat and the dog.
MICTHELL: Yeah, you need a dose of trash every now and again don't you, I agree with that. Thank you very much for your time and all the best for Christmas.
PM: And to you Neil and to all of your listeners, I wish them a very happy Christmas.