MITCHELL: Mr Rudd, good morning.
PM: Good morning Neil, thanks for having me on the program.
MITCHELL: Well thank you for your time. I know it is a busy day.
PM: A few things on.
MITCHELL: Will you apologise to the Australian people for directly breaking the promises you made before the election?
PM: Neil I accept full responsibility for that and for not being able to fulfil some of those policy commitments.
MITCHELL: It is not that, it is the promises broken.
PM: No, no policy commitments.
MITCHELL: Promises broken Prime Minister.
PM: Policy commitments that we haven't fulfilled, I accept full responsibility for that.
MITCHELL: But don't you accept there were promises broken?
PM: Well we are talking about exactly the same thing here.
MITCHELL: No we are not. I am not talking about policies, I am talking about promises.
PM: Well I think we are talking about the same thing because -
MITCHELL: Superannuation tax laws, the 12 (inaudible) there will be no change to superannuation laws, one jot, one tiddle. Is that a promise?
PM: That is a policy commitment given, you have called it a promise, I think we are talking about exactly the same thing and-
MITCHELL: Well why are you avoiding the word promise? Same on the private health rebate, absolutely no change, you said, it has been changed.
PM: Exactly the same thing Neil and my response to both those points is, I accept full responsibility for not fulfilling those policy commitments and the reason for so doing is because we have copped a $210 billion collapse in tax revenue to the Australian Government.
MITCHELL: I accept that and I believe people will accept the need to do it, I am not arguing that, but why can't we just be out front and say, ‘promises have been broken, I am sorry'.
PM: I have just said it. I have accepted full responsibility for not implementing those policy commitments which -
MITCHELL: Are you apologising for it?
PM: Which I gave to the Australian people. Of course I accept responsibility for it.
MITCHELL: Are you apologising for it?
PM: Yes Neil, you can use whatever language you like. I accept full responsibility for it and people can make their judgements of me based on that.
MITCHELL: Are promises for the future to be believed, or not?
PM: Well Neil, when we have copped the biggest single hit in our national income and in the tax revenue to the Australian Government since the Great Depression, it has created some fundamental rethinking, not just within our Government but all Governments around the world.
It is very tough to make ends meet so we have had to make tough decisions. You are right, there is going to be a lot of complaints about a number of those undertakings not being implemented by the Australian Government. I accept responsibility for that. I have also got to put our public finances in right order for the long term.
MITCHELL: And we don't know what is ahead so therefore, why should we trust the promises in this budget?
PM: Well we are acting on the basis of what their independent advisers in the Australian Treasury have mapped out for us for the year ahead -
MITCHELL: Which indecently the IMF and the RBA both disagree with strongly.
PM: Well on the question of the Reserve Bank, let's take that in order. The Reserve Bank's growth forecasts for the next couple of years are identical with those of the Treasury. The Treasury then extends growth forecasts for beyond that for an additional two years.
MITCHELL: They say we will go into boom in 2011-12. 4.5 per cent growth. Nobody agrees with that Prime Minister.
PM: Well the Treasury who advise us are the same Treasury who independently provided advice to the Howard and Costello Government as well.
MITCHELL: Well they were wrong last year. Now let's assume that they are wrong again. What happens? What happens to your strategy?
PM: Well Neil I think every government around the world is wrestling with these virtually unprecedented events. If you went back 12 months and asked, would 32 of the 33 major advanced economies in the world now be, would now be contracting in economic growth, that eight of our ten trading partners would be in recession, no one was predicting that. Therefore, our own Treasury is not Robinson Crusoe on that score. Our challenge is to engage in practical positive policies now and what we are doing is investing in infrastructure for the future and supporting jobs and apprenticeships today. (inaudible)
MITCHELL: So what if we, my point is, what if we don't get the boom that Treasury is telling you, you will get. And the international Monetary Fund and Reserve Bank say you won't get, what if we don't that boom?
PM: We believe that the forecasts which are being provided by the Treasury, independently Neil, we don't tell the Treasury how to think.
MITCHELL: Well you don't tell the Reserve Bank or the IMF either but they have come up with the opposite view.
PM: The Reserve Bank's forecasts as I said before Neil are consistent with the Treasury's for the two years that they provided forecasts.
MITCHELL: Yes but (inaudible)
PM: They don't actually provide forecasts for the two out of years, on that point they are silent. Now, going back to the question of the IMF, International Monetary Fund, they also obviously have a dim view in terms of the future of the global economy, but they also point to recovery as well. Again, we rely upon the independent advice provided, but the key thing is this, given all the uncertainties out there my job for the people listening to your program this morning is to make a difference. Either stand back, do nothing and allow the full force of a global recession to knock them over or to act to provide jobs in local schools, for local construction projects, local rail projects, including a $3.2 billion investment for the regional rail network in Victoria.
MITCHELL: Prime Minister we are all agreed times are tough aren't we?
PM: Yeah, it is exceptionally tough.
MITCHELL: So why have you given yourself 65 extra staff?
PM: Well the staff across the Government -
MITCHELL: Prime Minister and Cabinet I am talking about.
PM: Ah you mean the Department of Prime Minister and Cabinet.
MITCHELL: Yeah.
PM: Well the central agency of the department of Prime Minister and Cabinet, during I think Mr Howard's time but I stand to be corrected on this, did not expand its overall policy staff at the same rate as the Treasury and Department of Finance, so when it came to core challenges of the economy in particular, we made a judgement that we needed to get greater staff resources there so that is why it was necessary to do so.
MITCHELL: 65 extra staff to the Department of Prime Minister and Cabinet, at an extra $13 million in spending. I mean everybody else is cutting, your department is not.
PM: Well when you are framing a very difficult set of economic policy decisions Neil, first of all through the economic stimulus strategy we introduced at the end of last year, secondly through the nation building and jobs plan that we unfolded in February this year, which is turning every school, primary school in the country into a construction site to help the economy, jobs and apprenticeships and in framing the budget, you need the best economic policy advice that you can get. We needed to get more policy support into the Prime Ministers' department for that purpose. It was the right thing to do. I support the decision of my Secretary in so doing.
MITCHELL: I just make the point, it doesn't look good. Everybody else is doing it tough, your department is hiring 65 extra people and spending an extra $13 million, regardless of the reason.
PM: Neil we are dealing with a $260 billion or thereabouts budget and therefore, under those circumstances, it is important to get the best policy advice possible because these are decisions which affect every person listening to your program this morning. I think your listeners would want to know that in framing a budget such as this and making the difficult decisions that we have had, in investing for infrastructure for the future to support jobs and apprenticeships today, that we get it as right as possible. Get it as right as possible for what we are doing for first home buyers, for the tax deduction arrangements of fifty per cent for small business. Getting all those things right means getting the right advice.
MITCHELL: Do you accept Prime Minister, the industry claims that the changes to superannuation could touch 450,000 Australians? That's the change to the amount that you can put in.
PM: The advice we have from the Treasury is that the affected group there will be about 1.8% of the population, there average income level of those would be affected by it is in the vicinity of 221,000 and the superannuation holdings of those most affected would be in the vicinity of about 870,000 each.
MITCHELL: So what is it, a person whose waited to get into their super, build their super until they get over the age of fifty, the kids are off the hands, they've paid off the house, they are going to put as much of their money as they can afford into super and you are telling them they can't put more than $25,000? That's going affect a lot of people.
PM: What we are saying, is that the overwhelming benefit of the arrangements brought in by Mr Howard and Costello, assisted those at the very upper income range as I said, the Treasury's advice to us is $221,000 is the average income of those most using this particular provision and secondly with superannuation holdings on average of 870,000, Our job -
MITCHELL: Is that right, I mean, but what about the example I used. There is couple earning perhaps earning 100,000 a year each, they are both in their fifties, they've said okay, the kids are off our hands, the house is paid off, let's fix up our super. We'll put twenty, we'll put as much as we can each, they are going to have 25 grand each, they could put all of one's salary in if you let them and live on the other one. That affects them and they're not wealthy. They're an average working family.
PM: What I am saying to you Neil is that the profile of those who make most use of the existing program, which has been out there from the Howard and Costello Government, is as I just described it and its overwhelmingly benefited people of the upper end of the income scale -
MITCHELL: But you agree that it'll catch people in that situation I described? Who are not the wealthy.
PM: Individual circumstances as you know Neil I can't respond to, one off case studies -
MITCHELL: That's the generalisation I'm giving.
PM: No, that's true, but I just can't, I mean each individual case has to be put and we would have to respond on the merits, that is in terms how it fits in with the policy. But I can say -
MITCHELL: I'm sorry, I don't understand, what do you mean in terms of fits in with the, it's a simple case. But then, it's a case that is happening outside this window every day.
PM: Yeah, but what I'm saying to you is that if you look at the economy as whole, our advice is that it affects 1.8 per cent of people, average income 221,000 and their superannuation holding 870,000 on average. Therefore we've got to make sure that we've provided sustainable reforms for everybody, otherwise how do you pay for things like the much needed and necessary long awaited reform to the single age pension. $32.50 a week, you can't pluck that money out of air, you've actually got to, you've actually got to provide, offsetting savings elsewhere in the system and we've done so.
MITCHELL: Do you agree there is a danger that your changes to superannuation could lead to an increase in the tax minimisation industry?
PM: Well, the tax minimisation industry Neil, as you know, I think we all know, is out there flourishing all the time seeking to find its way around any new changes to the law.
MITCHELL: But this is going to drive people towards tax minimisation, away from superannuation.
PM: Neil, tax minimisation agents and those engaged in tax avoidance, will be out there trying to find their way around these rules as they've sought to do so with previous tax rules, nothing is new under the sun as far as that's concerned and I'm sure they'll find creative ways to make the most of the current system as well.
MITCHELL: Are you also reviewing the age at which people can access their superannuation? It's now sixty, are you looking sixty seven?
PM: We have no intention of changing that, I'm not advised of any such plans.
MITCHELL: It's in the Henry Report isn't it?
PM: Well, when it comes to the Henry Report we'll consider that in its totality.
MITCHELL: But you're not, you're not considering at any stage, even in the Henry Report, you won't be considering increasing the age at which people can access their superannuation?
PM: When it comes to the contents of the Henry Report I have not received any direct briefing from the Secretary of the Treasury as to its likely final sets of recommendations, so I'm not going to enter into a discussion about what it might or mightn't contain. What I am saying is, a tough decision we've had to make in this budget is concerning the aged pension and when you become entitled to it.
There have been lots of reports in the past according to Generational Report put together by Mr Costello when he was Treasurer, pointing to the, whether we could sustain payments in our health care, our age care system, our pension system for the future given the ageing of the Australian population. All those hard decisions have been squibbed, we've taken one hard decision, which is to phase in, the aged pension entitlement age to sixty seven starting in 2017
MITCHELL: Prior, yeah and complete in 2023 isn't it?
PM: That's correct, but it's a decision which been squibbed for the last twelve years, we're taking it, it's necessary when you go out to the next ten, twenty, thirty years, in terms of the long term sustainability of payments for pensions in our economy, given the aging of the population.
MITCHELL: As the economy is starting to recover we hope in 2013 and some very optimistic forecasts are in there, your carbon tax kicks in and takes out $13 billion in 2013. That's equivalent I read today of increasing the GST to 12.5 percent and it will be passed onto people. Will you look at delaying that? Given the fragile nature of the economy.
PM: Well the Carbon Pollution Reduction Scheme Neil, we have already put forward our proposals which are supported in the broad by the Australian Industry Group, the Business Council of Australia, as well as three as the leading conservation groups in the country, including the Climate Institute as well.
We don't know what is going to happen in the Senate and whether they will pass this thing. I hope they do because business is crying out for certainty on this and that is certainly what the BCA and the AIG have been saying.
Let's see how it goes. We have got to get this right for the future, get the balance right and I believe we have in this package because, let's face it, around the world, we are going to have other economies who are going to begin to contemplate applying punitive environmental tariffs against countries which are not lifting, which are not engaged in taking their own appropriate action to bring down greenhouse gas emissions.
MITCHELL: Why is the level of debt sustainable and when do we go back into surplus?
PM: On the question of the budget surplus, we will halve the budget deficit in three years and our plan as reflected in the budget papers is to return the budget to surplus within six. On the sustainability of the debt, can I just read you what Standard and Poors have said overnight, this is a credit rating agency, they said and I quote them, ‘we believe that deficits and associated borrowings do not alter the sound profile of the country's public finances', furthermore they say, Standard and Poors rating services said that, ‘the Commonwealth budget is consistent with Australia's triple A long term credit ratin. ‘The Triple A rating is the highest rating assigned by Standard and Poors', unquote. That is their assessment of all of the temporary borrowings contained within our budget papers.
MITCHELL: But Prime Minister, you can take assessments from anywhere.
PM: Standard and Poors in my experience Neil are a pretty tough bunch of customers, they go through these things in fine -
MITCHELL: Well so are Moody's, have you read Moody's assessment -
PM: Fine, fine detail.
MITCHELL: Moody's Investors Service, have you read their assessment?
PM: I haven't got that one in front of me.
MITCHELL: Well it is contradictory to Standard and Poors, which one do we accept, quote ‘the Australian Governments' flexibility in trying to return to a surplus will be constrained by higher interest costs' unquote, Moody's New York. Which one do we accept?
PM: The overall rating of Australia, that is a Triple A rating is reinforced by Standard and Poors today. They have said that our public finances are in strong order.
MITCHELLL: Moody's is, well not contradicting it but taking a less optimistic line. Who do we believe?
PM: When it follows, it follows that if you are going to engage in the necessary stimulus that we have done for the economy, that you are required to rely upon temporary borrowings. Secondly -
MITCHELL: But (inaudible) why are you quoting Standard and Poors, but rejecting Moody's?
PM: Neil if I could finish my sentence in response to your question. 30 percent or so of the temporary borrowings that we have engaged in are to fund investments in infrastructure or to provide other forms of stimulus.
70 percent comes from the fact that we have had a $210 billion collapse in Government tax revenue. And here is the core point. If we do not temporarily borrow for that, that amount of money is equal to cancelling the Commonwealth's total payments to the states each year for four years for all payments to hospitals and health.
And one other thing I just need to add on that, and it is as follows. This morning, this is one day after the Budget, Mr Hockey, the Shadow Treasurer was asked this, what would their overall debt be? His response was that it would be $25 billion less than the Government. That was what he said. Simultaneously, the Leader of the Opposition, Mr Turnbull said he couldn't name a number.
Now on one day, or 12 hours after the Budget is delivered, for the alternative Government not to have a position on temporary deficit and temporary debt and their ceilings, just shows complete chaos as far as Liberal Party policy is concerned.
MITCHELL: I will ask him about it later. The Australian Medical Association and various doctor's associations say that your changes to the rebate will lead to fewer people having operations, some people not even getting operations. Waiting lists will blow out and the standard of treatment will drop. What is your answer to that?
PM: Well again I go to the analysis which is provided by the Treasury about the impact of these measures which again affect people -
MITCHELL: You are relying a lot on Treasury. These are people on the ground.
PM: The Treasury actually distil all this data. There is a lot of people in the Treasury who are policy offices who collect the data from across the country, they are independent advisers, they give the same advice to the Liberals when they are in power. That is exactly how it works. Their advice is that as a result of these changes to PHI, that there will be something like a 99 percent plus retention of current policy holders. Therefore I think that is a useful projection for the future.
We believe that if you mix that with the other measures we are taking by way of assisting the states with elective surgery procedures. The first time the Federal Government has done so, large investments with each of the state hospital systems, we are making a difference there as well.
MITCHELL: So if the waiting lists blow out, does the buck still stop with you as it did before the last election?
PM: What I said before on the future of the hospital system Neil, was that we would get to about midterm, we would review the outcome of the National Health and Hospitals Reform Commission's Report on the future allocation of responsibilities in health and hospitals between Canberra and the states. We'd look at the options they put forward and then we'd frame our decision on that and if we decide based on that, that we need to move forward and take responsibility for the funding for the hospital system in the future then I said we would also seek to get that support by way of going to the people directly by way of referendum.
MITCHELL: Prime Minister what are the unemployment benefits for a single person?
PM: I don't have that figure right in front of me at the moment.
MITCHELL: Do you know what the single pensioner gets?
PM: The single pensioner based on what we have just done will actually go to disability and carer pension, single aged weekly will be $304.19
MITCHELL: Okay I think that's including, (inaudible) unemployment benefits.
PM: That's correct and you're absolutely right on that and the, that affects 1,250,000 single pensioners, then of course you have the ten dollar increase which does to the 1,030,000 pensioner couples as well as what happens with other categories of persons receiving additional assistance from us including carers who will receive an additional one off payment.
MITCHELL: Given the debt and given the need to reduce deficit are future tax cuts off the agenda?
PM: I think what we've done in this budget Neil and there's been some controversy about this, is we have implemented the commitments that we gave prior to the last election on tax cuts for this year and for the following year and for this year and the following year let me just give you one number. If you're an average family on, if you're a family with a combined income up to about $80,000, if you aggregate this year with next year's tax cuts you'll be something in the vicinity of about $1050 a year better off.
Now that's covering this year and next year. Beyond that we'll be looking very carefully what the recommendations of the Henry Commission of Inquiry into the tax system has to say to us by year's end.
MICTHELL: Final question, could this be an election budget?
PM: Well this is, these decisions Neil are really, really tough, we believe we've got a mandate from the Australian people to serve out our full term but can I say it's really important, absolutely important that this budget is delivered in its entirety. We must ensure that our actions to support the economy now and jobs through infrastructure investment also and our payments to pensions and our payments on paid parental leave are supported by the $22 billion in savings.
MITCHELL: So it's all or nothing is it?
PM: Well we believe this is an important, integrated financial document. That's why it's actually important because of the Senate for us to know. Will the Liberals support and which will they oppose of the investments we put forward in the budget, which will they support or oppose in terms of the savings, the $22 billion of savings we've made and what on earth is their confused position on temporary borrowing and temporary deficit given that their Shadow Treasurer and Leader have fundamentally split this morning on this fundamental issue.
MITCHELL: Thank you for your time.
PM: Thanks mate.