LEHRER: Mr Prime Minister, welcome. On this comment that President Obama quoted you on, he said you spoke very forcefully about the need for nations to essentially step up to the plate and do what needs to be done to abate this terrible financial economic situation in the world. What nations were you referring to?
PRIME MINISTER: Well nations with capacity, and if you look across the world today, the capacities vary. But, Jim, this gap which has been caused by the retreat of the private sector because of the problem in private credit markets - governments have got two options, either stand back and just let people around the world take the full brunt of the storm, or governments temporarily step into the breach and provide temporary support through their budgets.
I think that's the right strategy. And remember, the International Monetary Fund - that's a pretty conservative body - out there saying that developed economies, G20 economies should be out there providing two per cent of gross domestic product in stimulus through their own actions in '09. It's what we're doing, it's what President Obama's doing. I think it's the right course of action.
LEHRER: But some of these countries are not doing it, right?
PRIME MINISTER: There have been a few who have been less enthusiastic to step up.
LEHRER: Mostly in Europe?
PRIME MINISTER: There are some. I mean, the picture varies, and it becomes a little more problematic when you start looking at the needs for 2010.
That's why this London summit is very important to provide the concerted political support necessary to get behind this temporary global action pending recovery in private credit markets.
LEHRER: Of course one of the major economies in the world is China. Is it doing its part?
PRIME MINISTER: The Chinese have stumped up a reasonable stimulus package so far. It's probably something in the order of about half a trillion. This -
LEHRER: What does that - put that in perspective. What does that mean? A half a trillion. Is that a big package? Or is that in Chinese terms?
PRIME MINISTER: There are different ways of calculating such a package in China, and of course there's a certain opaqueness with some of the numbers in China. And there are other things which the Chinese may not be currently declaring, for example how credit is being released through their banks to support businesses and consumers.
But if governments around the world - this debate on fiscal stimulus is getting going a bit at the moment - let's just look at the possibility of governments not stepping up to the plate with what they've already done. The IMF has calculated there'd be 20 million, nearly 20 million more people on the unemployment queue across the G20 economies today, including China, were it not for fiscal stimulus. I think the responsible course of action is to get behind this as a temporary measure.
LEHRER: And you don't see any signs, though, at the G20 - you're going to carry this message, Obama's clearly going to carry that message. Is it going to be up to you and a few others to try to make this case to the other G20s, that if they don't do it - the others in the G20 - we're going to have even further economic disaster in the world? Is that what you're saying?
PRIME MINISTER: I think when we look at the global economic crisis, it's important to step it through. The first thing is to stop the house - it's like a fire - it's to stop the house from burning down.
How do you do that? What you do is you step in with temporary economic stimulus to lessen the impact on economies and jobs.
The second thing you do - stop the fire from spreading. That's why it's important for the G20 to act to prevent an outbreak of protectionism, because that will just make it worse.
But the third thing is to start rebuilding the house, and that's why dealing with the damaged financial institutions - what's called toxic assets on the balance sheets of the world's biggest banks - is part of the rebuilding process.
Doing all of these three things together, and fixing up the rules and procedures for the future - that's an integrated strategy, and that's what I see from the Obama administration as well.
LEHRER: How much responsibility for this whole mess does the United States deserve?
PRIME MINISTER: It's a global recession. It has global causes. And to fix it, we need a global response. Sure, America is the world's largest economy. A lot of stuff has happened here, but a lot of stuff has happened in Europe as well. The key thing is this: Toxic assets on balance sheets -
LEHRER: Toxic assets (inaudible) cover a great many things - there are housing, there are also, there are all kinds of things that people have that used to be worth something and aren't worth anything anymore.
PRIME MINISTER: That's true. Absolutely right.
LEHRER: Okay.
PRIME MINISTER: But the impact on the real economy, which is the point I was going to make, is toxic assets for example on a Wall Street bank is intimately linked to whether a plumber keeps his job on a construction site on Parramatta Road in Sydney, Australia. Because the global economy is so connected.
That's why fixing up the balance sheets of the world's biggest banks - not just American, but European as well - is the core economic problem, which has to be dealt with and addressed. It's why Tim Geithner's plan released here in Washington just the other day is such an important step forward.
LEHRER: Now, for all practical purposes, Australia has escaped the recession up until now, correct?
PRIME MINISTER: We've maintained very modest positive growth through calendar year '08, though in the final quarter, we dipped negative for the first time. But like the rest of the world, it's a global economy, and events on Wall Street translate through to, as I say, construction jobs in cities in Australia too.
LEHRER: So you don't believe that Australia has done anything wrong in terms of running your economy and your financial system, it's just that you're the victims of others having made mistakes?
PRIME MINISTER: You know, Jim, we've all joined up to this thing called the global economy over a long period of time, and we've all benefitted from many of the things that have flowed from it, in terms of boosted prosperity, but now this has happened. It's time to pause and reflect, and I said, deal with the fire intelligently, in the way in which I suggested before.
The alternative, which I think is just wrong, is this kind of radical sort of right-wing, free-market ideology that just says, “It'll all sort itself out.” Well, I don't think that ideology served us particularly well when we got into this mess in the first place. Government has a role. That's why I support what the Obama administration is doing temporarily to step into the breach and to set up better rules for the future. And that's the challenge we've got on our plates in London.
LEHRER: You've suggested in some of the things you've written and said that you believe that there's a golden opportunity for - that's my word, not yours - for the United States as well as the rest of - Australia, and the rest of the so-called “developed world” to collaborate more with China and kind of move together as partners in some of these areas involving economic and financial matters. Explain your point there.
PRIME MINISTER: Right now, we're trying to deal responsibly, globally, with this global recession through the G20. Now what's the G20? It includes 20 of the largest economies in the world, with a few exceptions, but it's got some representativeness to it, because together they represent about 80 or 90 per cent of global GDP.
But it's also a small enough body that you can actually get together and broker some decisions politically, and in the past, a lot of our international institutions have broken down because an agreement couldn't be reached.
Now China is a player in the G20, and therefore, when we look at one of the decisions we are going to have to make soon, which is the reform of the International Monetary Fund, China will be expected to step up to the plate and put more resources into the fund. But China right now, its voting rights within that fund are the equivalent of Belgium and the Netherlands.
Well, I think you've got to change that so that China has a bigger place at the table, rightly, but also the world can then draw upon the resources which China puts responsibly into an international financial institution. That's one example of how this G20 group can help frame an outcome for the future of the International Monetary Fund, which also brings China into helping with the solution.
LEHRER: In a more general way, I mean, you are a China hand; as a professional diplomat, you speak Mandarin Chinese. Should China - what would be your advice to Americans as to how they should view China now? As a competitor? As a potential ally? As an enemy? As a potential problem? What does China represent, should represent to the average American - put it in any terms you want to?
PRIME MINISTER: Jim, I think China represents a huge opportunity for us all for the 21st century. The numbers speak for themselves. The centre of global economic gravity is moving to the Asia-Pacific region in the 21st century.
It's what's happening in China, we see it also with India, we also see it with many other economies in the region, in South-East Asia, Indonesia, but China is big - and of course the continued strength of Japan as well. Therefore, when you look to China in the future, I don't think anything is to be served by simply assuming it's all going to go bad.
I think the challenge is this, and for our friends in America to do the same, work with us in integrating China into the institutions of global governance, on the political side, on the security side, also on the economic side, through, for example the G20, and also integrate them front and centre on the great challenge of climate change as well.
If you engender that sort of environment, then you enable China to do as head of the World Bank, Bob Zoellick, once said, for China to play the role of a responsible global stakeholder. Now if China were to turn its back on that or not be responsible, the world would soon know.
But I think the smart course of action for us all is to involve them. They're not perfect. They've done some bad things in the past. But let's look at the opportunities rather than simply assume it's all threat and all risk.
LEHRER: Another subject. Afghanistan. Did - in your meetings with President Obama, did he ask you to send more Australian troops to Afghanistan?
PRIME MINISTER: No he did not. Our discussion was about the American thinking as it's unfolding through America's own review of its long-term strategy, civilian and military and diplomatic for Afghanistan. And I understand the President will make that public in due course, and also converse with America's NATO allies as well. Once we're through all that, of course we'll work with our American friends and allies about how we implement that strategy long term, but that lies a ways ahead.
LEHRER: There is no Australian policy now that you have, about whether or not to send more troops or take more troops out at this point, right?
PRIME MINISTER: What I've said repeatedly since becoming Prime Minister of Australia, we are there as a strong, reliable ally of the United States, and I've said also, we are there for the long haul. Now this war, as evidenced by introduction, is increasingly unpopular. That's just the truth of it.
LEHRER: In your own - in your country.
PRIME MINISTER: In Australia, I'm sure in Europe, and I would imagine in the United States. I have not seen polling here on it. But the bottom line is this: It's the right place to be.
I mean, think about Afghanistan, think about this: I cannot remove from my mind the image of the Twin Towers coming down. We are there because terrorists operating out of the safe haven of Afghanistan caused that to happen.
They also, having been trained in Afghanistan, were responsible for murdering nearly a hundred Australians in Bali a year later. We have therefore a combined responsibility to do whatever we can to make sure Afghanistan does not become a safe haven for terrorism again. It's going to be tough, it's going to be hard, it's going to be difficult, and dangerous.
LEHRER: Mr Prime Minister, thank you very much.
PRIME MINISTER: I appreciate the opportunity.
[ends]