MITCHELL: On the line, the Prime Minister, Mr Rudd. Good morning.
PM: Good morning, how are you?
MITCHELL: How will people get their money and when?
PM: Well there are two parts to that. The first is for those which have paid through the Centrelink system. If the Senate passes this legislation soon, we expect those payments to be made during the course of March. For those payments, that is the one-off tax bonus for 8.7 million Australians who are earning under $100,000 or less, that will be paid during a course of April. And again that depends on whether the Liberals support passage of this through the Senate.
MITCHELL: How will it be paid? Will people have to do anything or just turn up?
PM: No in both cases, the information is already accessible, both through the tax system, through the Australian Taxation Office in the first case, and that applies to the one-off tax bonus of up to $950. As I've said that benefits 8.7 million Australian workers. And then for the other one, of course the Centrelink system has access to those who are currently in receipt of Family Tax Benefit B.
They are the two systems which automatically click in. But Neil if I can just add this, the claims you've just referred to make up in total about something about one quarter of the total package we released yesterday. The vast bulk of this package yesterday is about building schools, school modernisation program, building roads, energy efficiency for homes, and increasing our overall stock of housing in the country.
MITCHELL: Yes I understand that. You mentioned the Senate. What is the Senate won't pass it, what would you do?
PM: Well there is a problem. The Senate therefore has a responsibility to consider the economic interests of the nation at a time of unprecedented global economic crisis. And to rise to the occasion, or to play short term politics.
MITCHELL: If they play short term politics, what can you do?
PM: That's a matter for them. They, I believe -
MITCHELL: What are your options? Would you look at double dissolution?
PM: No the ball lies squarely in their court Neil. And I think if you look at the sense of concern across the country and quite rightly before you mentioned that our central preoccupation now must be with the unemployed, and the rising ranks of the unemployed, I cannot eliminate the effect of a global economic recession. I can reduce its impact, reduce its impact on employment, and this package overall is designed to support up to 90,000 jobs. So anyone in the Senate who seeks to stand in the way of it is standing in the way of assistance to overall employment in the country as well as standing in the way of new schools, and direct payments to families under pressure.
MITCHELL: Given this is so important, given you say the Opposition's digging in, is there a possibility this could force us to an early election?
PM: Neil, I just believe in taking everything one step at a time. We have been framing this package over some time. We are doing so in response to emerging bad global economic data. My job is to chart for the nation in a strategy through which is clear about how we can see Australia through a crisis which is not of our making. I would expect other politicians in the parliament, including those from the Liberal Party, to rise to the national challenge. I note the Liberal Government of Western Australia through its Treasurer yesterday came out and explicitly supported this package.
MITCHELL: Sounds like you're not ruling it out if necessary.
PM: No I'm saying Neil that my job is to examine the data, come up with a right response to it -
MITCHELL: And implement it, and if you're frustrated in implementing it, what do you do?
PM: Well Neil. I'm sure you've got a whole series of hypothetical questions in mind there. My job is to take things one step at a time.
MITCHELL: Prime Minister, you're the one who raised difficulties in the Senate. You said you'll have trouble with the Senate. I'm asking you what you do about it?
PM: Now I'm saying Neil, I'll take it one step at a time.
MITCHELL: That's not an answer.
PM: Yes it is. The matter's before the Senate now.
MITCHELL: Okay. Did you look at cutting the GST instead of this?
PM: On the question of tax cuts of a long term nature - the reason we rejected that generally was because it doesn't provide sufficient upfront stimulus. What's our big challenge now? If you look right around the world, with collapsing growth in so many of the economies, there is a real problem in calendar year 09 moving into 2010. The key question therefore is how can you concentrate the economic stimulus activity now.
We've done that through two things. One, the payments to families you've just mentioned which represents about a quarter or so what we're doing. And about three quarters of the package represents what we're doing by way of direct investment in school modernisation in every primary school around the country. Home insulation, new housing, new roads, as well as a new package of support by way of tax benefits to small business.
MITCHELL: Did you consider cutting the GST instead?
PM: No, that's what I'm saying. We ruled out the reduction in taxes because it didn't provide sufficient upfront stimulus.
MITCHELL: Because the GST is bringing in about $40 billion. You could have had two years of GST for the package.
PM: Yeah but our challenge here Neil is to respond to the best advice about what provides us with the greatest stimulus now because my task is this - how do I support the maximum number of jobs now and, through that, deliver the sort of infrastructure the nation needs long term, for example, across all 7,500 of the nation's primary schools. That's what I'm concerned about.
MITCHELL: Is the GST untouchable?
PM: Well you've already seen through the data we put out on tax in the last couple of days, that each of those tax categories including the GST is down. We don't believe that playing around with tax rates at this stage is useful in terms of the provision of necessary stimulus.
MITCHELL: You say at this stage. I'm saying is the GST untouchable? Is it a possibility in the future?
PM: We have no plans whatsoever to adjust it.
MITCHELL: What about further tax cuts in the future?
PM: Well remember that in the Government's first Budget in May last year, we've already legislated for a further round of tax cuts which come into effect in July this year. So those will have effect as did the ones which came into effect on 1 July last year.
MITCHELL: One of your advisers Paul Keating says this could last seven years. Is he right?
PM: I'm not sure why you would put Paul into that category. I talk to a whole bunch of people.
MITCHELL: I think Wayne Swan said you talked to him regularly and got his advice on such matters. He does know about recessions, Paul Keating I think.
PM: Well nice piece of verballing there Neil.
MITCHELL: Serious point, he said it could last seven years. Is that correct?
PM: Neil, as I respond to the global economic data, what I know is the situation of the last three months has changed radically and got worse which is why we've done what we've done yesterday. It is very difficult to predict the period ahead because if you stand back from it all, we're having a debate now, how do you stimulate the Australian economy? Overriding all of this is what's happening in the global financial markets which represent the dominant factor in the entire pattern and speed of global economic recovery.
It's getting those global financial markets right which is important, so therefore that's something which will lie beyond the control of this national government. We're working on that internationally. It is difficult to predict how long and how deep this global recession will be.
MITCHELL: Okay that's true. We don't know where it's going. So that's the next question. What is the next shot in your locker?
PM: Well as I said at the announcement of the Government's Economic Security Strategy last October, I said that the Government remains prepared to take further action as is necessary to support growth and to support jobs. What we have done since then is that $10 billion injection. Secondly, what we did just before Christmas was a $4.6 billion long term infrastructure investment which covered rail freight as well as a range of other infrastructure projects. What we have done through this particular package is provide a further investment primarily weighted in the direction of schools, in the direction of roads, and in the direction of housing. And we remain prepared to take whatever further action is necessary as further economic data unfolds.
MITCHELL: Okay, so do you have a next steps strategy. As you say, we've got no idea how deep this is. You can't define it, I think the ‘29 crash only really became obvious how bad it was in the early ‘30s. So what is your next steps strategy?
PM: Well Neil, I've always said that the challenge for the nation, is also to examine carefully our long term infrastructure needs as well. And that is a part and parcel of what we have said up until now, when you look at the long term needs of our hospitals, the long term needs of our universities and our TAFEs, the long term needs of our transport infrastructure, all these are real, all these things I've been discussing at length at various state governments around the country.
What we sought to do in this particular package is deal with shorter term infrastructure needs, and build for example the schools that we need for the 21st Century education revolution.
MITCHELL: So the next step is the bigger ones, is it?
PM: Well, we will move through this step by step. You asked what are the things we're working on. I've just given you a direct answer on that. Also -
MITCHELL: Specifically though, I mean fast train to Sydney or dams or what, what sort of things you look at?
PM: You're getting ahead of yourself Neil. We're working through each of this very methodically. Each of them is very expensive. And they've got to pass muster in terms of proper analysis. Look, you see the challenge here Neil is to do two things at the same time. One, to provide the stimulus that the economy needs to continue to support jobs and positive growth. And secondly, to build the infrastructure the nation's needs for the 21st Century. In education, in health, and our transport systems, and of course dealing with the great challenges of energy efficiency as well.
MITCHELL: Prime Minister, Barack Obama has written a ‘buy American' clause into his package which is causing some angst in Europe. Would you urge the same thing when people get this money? Do you want them to buy Australian?
PM: I think across our country, what we've all got to realise is that this is an open economy. If every economy around the world shut its doors and given Australia is so trade exposed, and we have to look back to the history of the 1930s, it was the Smoot-Hawley Tariff of the early 1930s which actually brought on the Great Depression. Protectionism just effectively throws a spear at the heart of the economy because so much of our jobs, so many of our jobs are generated by the trading sector of the economy. Of course the measures that we have put forward, for example the energy efficiency -
MITCHELL: Sorry does that mean Barack Obama's got it wrong?
PM: Well I haven't looked at the detail of his deal package which I think is the one you're referring to. To be blunt, Neil, I haven't had time to go through that. I had my mind on our own package. But I'll do so as soon as I'm able. But I have articulated general principle and response. If you look at our package, I've been very mindful of the fact that when we're dealing with energy efficiency, take insulation for example, we're proposing to add ceiling insulation to 2.2 million Australian homes -
MITCHELL: Most of them in Queensland by the way. 42 per cent of Queensland doesn't have insulation. Only 42 per cent has insulation. 72 per cent of Victoria has.
PM: Well, I wouldn't have a clue, but there you go, in terms of geographical breakdown of that. But what I do know is that if we get this one right, we take about 50 million tonnes equivalent of carbon pollution out of the atmosphere, and reduce energy costs for households.
But the point I was about to make is that most of this insulation material is manufactured in Australia. I'm advised that about 70 per cent of solar hot water systems are made in Australia. Both are relatively labour intensive when it comes to installation.
These two things form the basis of what we're saying in terms of the energy efficiency measure. So we've been mindful of what's capable of being produced locally, but I'm not going to lie to people. Of course inevitably, some material will end up being imported. That's just the way it is. And if you look at our retail sector, and all those people employed in shops around the country, all those people employed in retail are often selling stuff which is made overseas. You don't want to throw them out of jobs.
MITCHELL: Which just leads me to the next point. You want people to spend this money don't you? You're telling them to spend rather than save?
PM: Our encouragement to people as I said last year is to continue to spend and invest in Australia's future. Some people have said, critical of this proposal and of the previous one, that people will just put it in the bank, will pay off their credit card debt. People will make their own decisions Neil, everyone makes their grown-up decisions, I fully respect that.
But if for example you're going to pay down a $2,000 credit card debt and reduce that to a thousand or whatever, then what it does have in terms of the impact on the economy is mean that, that is $1,000 less worth of paying down of your credit card debt, which would otherwise get diverted later on to paying down your credit card debt. In other words, people will start to spend again.
You see it's not just a simple, you know, in-out equation here. It's complex. And that's why those who've examined the impact of these sorts of supports for households around the world have recommended them, so long as they are balanced with direct investment by government infrastructure that we need, which is why our package, $30 billion of this $40 billion package goes into direct investment. Into schools, into roads, into housing.
MITCHELL: Need to take a quick break. More from the Prime Minister in a moment.
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MITCHELL: The Prime Minister is with us. We'll take a caller but please be quick because we've got a lot to get through in the next few minutes. Yes John?
JOHN: Yes, Mr Prime Minister.
PM: G'day John. How are you?
JOHN: Good thank you. You talk about jobs and growth. What about self-funded retirees?
PM: Yeah, good question John. Let me say two things about that. Firstly, if you're a self-funded retiree and paying tax in the 07/08 year, then you would become eligible for that one-off tax bonus of up to $950 if you are earning up to $100,000.
Secondly, if you're a self-funded retiree who is in receipt or in possession of the Commonwealth Seniors Health Card, and of course at the end of last year you became eligible for those one-off payments of $1,400 for singles, $2,100 for couples.
MITCHELL: Prime Minister, there's another issue there I was looking at today. Would you look at changing the rules on the minimum amount they have to take out, the self-funded retirees, because if you enforce them, and I know the Americans have done this, if you enforce them you tend to force them to realise paper losses. I think the minimum requirement is under 65 - four per cent, 65 to 74 - five per cent. Could you look at reducing those?
PM: Well Neil, if there are practical proposals along those lines we'll look at anything in the current environment, but no absolutely no guarantees. People, I mean self-funded retirees are doing it really tough at the moment. Look at the impact on superannuation funds of this collapse of global stock markets coming off the greed in global financial markets. That's huge, there's been a 50 per cent reduction in total market capitalisation on stock market value over the last year or so.
MITCHELL: And they're getting hit with the interest rates as interest rates come down.
PM: Well it's really bad.
MITCHELL: Can you do more for them?
PM: Well as I just said in response to your caller, there are two things which apply, but as I said to you before, we will continue to examine all measures which can be of assistance. But I'd just like to be very blunt about this Neil. I cannot eliminate the impact of a global economic recession on every person and every industry group. But I'll tell you what. I'm all in the business of trying to reduce it to the greatest extent possible.
MITCHELL: I understand that but do you seriously believe that if the world goes into recession, you can spend your way out of going into recession?
PM: What we're doing, three quarters of this package Neil is investing. And $40 billion, $30 billion of which is investment in schools, every primary school in the country, all 7,500 of them -
MITCHELL: Oh yeah that's good, but part of that is to avoid recession.
PM: All the subbies for example listening to your program this morning Neil, if they're concerned about their construction jobs, and I have had people like them first and foremost in mind, what I want to see is building activity in our primary schools right across the country. There'll be projects up to $3 million worth in our larger primary schools. There's 7,500 of these across the country. What am I trying to do? I'm trying to provide a rational basis of keeping, of taking up the slack which is emerging in construction, spreading that across the country and building schools we need for the 21st Century, but it ain't a silver bullet.
MITCHELL: I understand that. But if the rest of the world goes into recession, we just can't avoid it can we? I know you're going to try and I know this is part of the strategy, but if the rest of the world is in recession we're kidding ourselves that we can avoid it.
PM: Well look at the most recent figures put out by the International Monetary Fund, it has us projected for 2009, as the most solidly performing of the developed economy. Now, you know something, that's going to be really tough to keep that way. Even that IMF data had us coming in at 2009 at negative point two, just under zero growth. That's one of the reason why I've put full throttle forward with the package that we have announced yesterday. But you know, you're right there's no guarantees in this but I'm not going to haul up the white flag.
The Libs have said recession is inevitable. I'm not in the defeat game. I'm in for throwing everything at this because the psychology of the nation is important, confidence is important, having a really hard go is important, getting the nation behind you and doing good stuff for the future like in our schools is important, and that's what we intend to do.
MITCHELL: You describe this as an emergency which I think is a reasonable term. If it's an emergency, why can't we be bipartisan?
PM: Well the question perhaps should be put to Mr Turnbull who has opposed every one of the measures in effect that I put forward last year. Every one of them.
MITCHELL: Given it's an emergency, aren't the forecasts a bit optimistic. Seven per cent unemployment, surely we're looking at least nine?
PM: Well, I can respond only to the advice that I'm provided by the Treasury who look carefully at every sector of the economy. What I do know is this - those numbers are very bad when it comes to the future in fact on joblessness in Australia. And what I'm on about is reducing that impact. As I said, I want to make sure that we can support up to 90 thousand jobs through this package across 09 and 10.
The alternative effectively recommended by the Liberals is to do nothing. Other than, their one policy is bring the July tax cuts forward. I've just had a look at that. If you took those 09/10 tax cuts I referred to earlier in our conversation Neil, if you look at the impact on a taxable income of $65,000, that gives you $150.
That's the Turnbull plan. Give you a $150 benefit from that tax cut and bring it forward. What am I doing? I'm giving you $950 through the one-off tax bonus, as well as bringing in those tax cuts I've just referred to on 1 July. You see they don't even equate, let alone provide the necessary stimulus for households in the current environment.
MITCHELL: Tell me, when did you find time to write 7,000 words?
PM: I just got angry over the summer mate, because I started reading a lot about the unrestrained greed in financial markets, in unregulated financial markets which has brought this crisis which affects so many working families right across the world. So I sat down and wrote about it.
MITCHELL: You don't mind me saying you look a bit tired. You might have been better off with a holiday?
PM: Well actually, what happened was, I flew up to Port Moresby the other day, I had to because there was an emergency session at the Pacific Islanders Forum which went for a day, and I got some lurgy when I was there for the day. Up until then I was fine, then I got some lurgy and now I'm just about through that.
MITCHELL: Thank you very much.