JONES: Prime Minister, thanks for joining us.
PM: Good to be with you.
JONES: Are you prepared to accept that the hit you've just taken in the opinion polls is due to people's fear of the Government taking on massive public debt?
PM: Tony, those who were polled will answer that question. I understand that some of the decisions that we have taken are unpopular, decisions which are necessary, however, in the national interest. Decisions such as taking the strong and decisive action necessary to support jobs by investing in infrastructure, and in part that is supported by deficit and debt.
And secondly, by taking hard savings decisions to return the Budget to surplus in the medium term. Neither of these actions may necessarily be popular, they are however necessary and in the national interest. And my job as Prime Minister is to take tough decisions in the national interest in the midst of this global economic recession, which is the worst downturn in three quarters of a century.
JONES: Very briefly, is it debt that has people worried?
PM: Tony, I believe that a number of the decisions which the Government has taken are not popular, but I stand by them because they're in the national interest. It is easy for the Liberals to run a scare campaign on deficit and debt; that is what they're doing at the moment while seeking to camouflage the fact that in fact their response to the Budget in the Budget reply indicates that their own deficit and debt strategy is one dollar less than that of the Government's and that they would not repay that amount one year earlier than the Government. It is simply an exercise in politics.
JONES: Alright, but you've seen what the polls and the Nielsen poll has said. We can tell you that we've got some of tomorrow's Newspoll figures. You've dropped six points in the better prime minister stakes to 58 per cent. Malcolm Turnbull's gone up five points, and you've lost six points in the satisfaction rating. What do you think is actually happening here?
PM: Well, Tony, I do not care what is in opinion polls because my job is to act in the national interest. From time to time those decisions will be popular. From time to time those decisions will be unpopular. But let's go back to the (inaudible) here - we are wrestling with a global economic recession here which is creating a challenge for all economies around the world, and our strategy is this; we will support a strategy of nation building for recovery, investing in the jobs and small businesses we need for today by investing in the infrastructure our economy needs for tomorrow.
That's our strategy. But in doing that, we have to take hard decisions. One of which is to support our current investment in the economy, through temporary deficit and temporary debt, and secondly to then take hard measures, which are not popular, to return the budget to surplus in the medium term. This is a responsible strategy; it's one that we will prosecute. It is necessary in the national interest.
JONES: OK, but there's no question your team will be sweating on these figures, this is the first Newspoll since the Budget and on the other side of the coin in it, the important two-party preferred figure, Labor's actually gone up one point. It's now 56 to 44. How do you read those figures and the disparity between them?
PM: Tony, the truth is I don't, for the simple reason that these things go up and down. But the challenges facing the economy remain constant and in fact become more acute because of where we are in the midst of this global recession. I have said throughout my time as Prime Minister I do not pay attention to opinion polls when they've been up, I don't pay attention to opinion polls now.
The simple reason for that is that it is necessary in this job to act in the national interest, and when you're faced with hard challenges - and I fully accept the fact that our political opponents would run a dishonest scare campaign on debt and deficit, notwithstanding the fact that their policy, when you strip it away, is virtually identical to ours. I understand the politics of that. I understand the politics of the unpopularity of $22 billion worth of savings to bring the budget back to surplus.
But my responsibility as Prime Minister and that of the Government of which I lead is to act in the national interest and to prosecute a strategy which has as its mission to bring our economy back to recovery and to lift it from the global economic recession, which all, virtually all advanced economies, are now affected by.
JONES: OK. Let's move on. What's the peak figure of the projected public debt in terms of tens or hundreds of billions of dollars in the coming years? What's the peak figure?
PM: Well, these are clearly outlined in the Budget papers and they're usually expressed in terms of a percentage of GDP. We peak, in around about 2013, at about 13.8 per cent of GDP.
JONES: How much of that is in tens of billions or hundreds of billions of dollars; how much is that?
PM: Well, let me step back in terms of the elements of this. First of all, 70 per cent of our overall position here is determined by a $214 billion collapse in tax revenue. That's one slice of it.
JONES: OK. I understand - we understand that. So what is the figure of peak debt in hundreds of billions of dollars? What is the actual figure?
PM: Well, Tony, I'm about to come to that when I go to the constituent parts. About $214 billion comes from a collapse in tax revenue and that is happening right across all the advanced economies across the world. That's about two thirds of it. Then you go to the remaining third of it, which is made up of what we're investing in infrastructure and other forms of temporary stimulus. And of that remaining one third of our total borrowings, the largest proportion is made up through infrastructure investment and the smallest proportion is made up through other forms of temporary stimulus. Put that altogether...
JONES: But all I'm asking for is one figure.
PM: Well, I'm about to come to that, Tony. I'm taking you to the constituent parts. Put all that together and you'll see clearly outlined in the Budge papers that we're aiming to a gross figure of 13.8, which comes out at about 300. The Liberals have said about 275 for themselves and then they've failed to nominate or to support $22 billion of savings in the Budget, which makes our positions virtually identical. That's the point I was making.
JONES: That figure is $300 billion, is that right?
PM: As I said before, 13.8 per cent of GDP as described accurately in the Budget papers. There's nothing new about that.
JONES: Is there a political spin rule which says the Prime Minister must not say that figure? Because it seems very hard to get you to say $300 billion.
PM: Well, Tony, there seems to be a political spin rule on your part to go back to this time and time again. The Treasurer made this absolutely plain in the Budget papers. I said before the figure was 300 as the Liberals' was 275. Add $22 billion of non supportive savings, they come to a similar figure. The key thing, though, is this - let me just add this point. This comes to some 13.8 per cent of GDP by the time it reaches its peak at around about 2313, 2014, and then comes down to something like 3 per cent of GDP across the decade.
The point I wish to make is this: this is the lowest net debt of any of the major advanced economies. Secondly, it is lower by the factor of seven, that is it is seven times lower than the average net debt of the major advanced economies. And finally, Standard And Poor's international ratings agency, when they evaluated our budget, not only reaffirmed the Government's triple-A rating, credit rating for Australian sovereign debt, but on top of that, indicated in its statement that Australia's public finances were in sound working order. This needs to be put into absolute context, therefore, against the dishonest debt and deficit fear campaign being mounted by the Liberals.
And bear this in mind in addition - foreign debt, which was raised in the Parliament the other day by the Shadow Treasurer Mr Hockey, increased from something under $200 billion when Mr Costello first became Treasurer, and maxed out when he left at around $600 billion. Went up by 200 per cent. And remember, Mr Costello and Mr Howard said they would take actions in 1995 to reduce foreign debt; it went up by 200 per cent instead. And I really think the Liberals should think long and hard before they embark upon a fear campaign on debt and deficit given their extraordinary record on this.
JONES: Prime Minister, people fear debt. In their household budgets as times get harder they want to rein in debt, but now their Government is doing the opposite and they're confused. Why are household budgets different to national budgets?
PM: Our responsibility as a national government, learning from the lessons of the 1930s, Tony, is to act on what the economists describe as a counter cyclical fashion. That is, that when you have not only just an economic downturn nationally, but a synchronised global economic downturn there is one responsible course of action on the part of governments today learning from the lessons of the '30s, and that is to invest and inject activity in the economy now to support jobs.
Let me give the example of what we're doing. Treasury has calculated that the impact of this Government's actions, its stimulus actions since October last year, will support 205,000, 210,000 jobs more than what otherwise would be the case were we not to embark upon this course of action. That represents a critical difference compared with what the employment and the economy would otherwise be suffering at present.
Our actions are in that sense, similar to that being embraced by practically all of the rest of the G20. When I attended that meeting in London recently, each and every government around the world, learning from the lessons of the 1930s, is injecting activity in the economy to make unemployment less than it would otherwise would be, to boost activity, to support business until we get a normal return of private credit flows at which point stimulus is withdrawn. That's the core reason why government is doing what it's doing through temporary deficit and temporary debt across all the advanced economies.
JONES: How tempting is it to go to an early election before the economy gets worse?
PM: Tony, I go back to what I said to you earlier in this interview. I'm elected to govern in the national interest. I take my responsibilities as Prime Minister seriously at this time of great global economic crisis. Therefore what we have done is act early, decisively, and in a strong fashion, in seeking to inject activity into this economy now. We will prosecute that strategy, nation building for recovery, supporting jobs and small business and apprenticeships now by investing in the nation building infrastructure we need for the future.
JONES: OK, but what about the question?
PM: And we intend to implement it. Now as far as any interference with the financial integrity of the Budget is concerned, I said before, I said in an interview with Kerry O'Brien last week quite clearly that like my predecessor I'm quite conservative on the question of governments serving their full term. I don't believe it's in the economy's interest for there to be a double dissolution election. I simply say, however, it's important in these difficult economic times for the financial integrity of our Budget to be preserved. Why? Because we have a strategy to return the Budget to surplus and that requires honouring the $22-billion worth of savings contained in the Budget.
JONES: What does the double dissolution decision hinge on? Which Bills? What does it hinge on, when you issued that warning to Mr Turnbull; what does it hinge on exactly?
PM: Well, Tony, you're the one who's talking about hinging, I am simply saying that I have no interest in having a double dissolution election. I've simply stated the obvious point, however, that if we wish to return the Budget to surplus then the proper thing to do, the appropriate thing to do, is to embrace the $22 billion worth of savings we've outlined in the Budget. Whereas Mr Turnbull has already indicated and underlined the fact today through his comments is a $3.2 billion hole in the tax offering he made in his Budget reply last Thursday.
JONES: So does that decision on a double dissolution election hinge on the Opposition, the Coalition allowing everything in the Budget through?
PM: Tony, I'll say it again; I have no interest in there being a double dissolution election. What I've said equally is that I have a fundamental national interest to ensure that we return the Budget to surplus as early as possible. That means embarking upon our strategy to halve the Budget deficit within three years, return it to surplus within six. Mr Turnbull is currently threatening at least $3.2 billion worth of that through his actions on tax the other night. Furthermore, he's not indicated clear cut support for the $22 billion worth of other savings we've identified in the Budget. The responsibility lies with him on this score. I've got a responsibility to engage in sober public finance. I intend to do so.
JONES: Alright, let's move on. According to today's Nielsen poll, you've upset people with your plan to raise eligibility for the pension to 67. What are people supposed to do if they can't get work in their 60s and they have to wait yet another two years before they can get on the pension?
PM: As I indicated in my remarks to you earlier tonight, Tony, I mean the business of government acting in the national interest is not a popularity contest. These are tough decisions.
JONES: You have said that, but let me just put this to you. Why would a Labor Party make life tougher...
PM: Let me put this to you, Tony -
JONES: Well, hang on, why would a Labor Party make life tougher for people on low paid jobs, whose parents and grandparents only had to work until they were 65, and bear in mind here, we're often talking about people who are blue collar workers who might be exhausted from a lifetime of manual labour, and whose only alternative if there are no jobs available will be to go on a disability pension or unemployment benefits, putting them below the poverty line?
PM: Well, Tony, thank you for the question, and fair crack of the whip in the answer, which is this. This is the same Labor Government, and you've used that descriptor which has just brought about the single, largest pension reform in this country's history by a $32.50 in the single age pension, a Labor Government reform, followed by a $10 a week increase in terms of the married rate.
These were ignored by our predecessors for 12 long years. We have acted, but in so doing we have a parallel responsibility to ensure that the age pension is sustainable across the long term as far as Australian public financial management's concerned. That's our responsibility, and when we put this together, therefore, this decision as far as the age, the qualifying age for the age pension was part and parcel of it. When the pension was first introduced back in 1907, I believe, and the age pension age was set at 65, obviously calculations were then made in terms of average life expectancy beyond the age of 65. Things have radically changed in the intervening 100 years.
JONES: What hasn't changed is how easy it is to get a job in your 60s. And by the way, on the question of the vulnerable, there's nothing in your Budget for sole parent families. There's nothing in your Budget for the unemployed. Why is that?
PM: Tony, we have a responsibility to return the Budget to surplus in the medium term. If on the one hand we're injecting $16-billion - $16-billion - to provide justice for the single age pensioners of our country and at the same time, we're about to progressively introduce an increase to the age pension qualifying age from 2017 on, not kicking in finally until 2023, this provides in our argument a reasonable time in which people can prepare.
Furthermore, it provides an important reform in terms of long term financial sustainability of the new age care system, or the new age pension system we've introduced; as well as the support we're providing for carers. This government has acted where our predecessors failed to provide justice for aged pensioners in order to ensure in particular that the single aged pensioners are properly supported. Remember, the national Seniors' Association came out and has supported both these measures. One on the increase to the single age pension. And two, the increase in the qualifying age. It's necessary for the long term.
JONES: Is this recession worse than the recession in the 1990s?
PM: Well, I'm not quite sure where your next questions about to lead, Tony. I can only guess.
JONES: I'm sure you can imagine. Let me - I'll put it another way (inaudible) Since you're anticipating, have you asked the Treasury to explain why they think this recession is no worse than the one in the 1990s?
PM: No, well in answer to your first question, all of the advice indicates that this is the worst globally synchronised economic downturn since the 1930s. That's why the degree of economic difficulty we have at the moment in supporting our economy through this difficult time and reducing the impact of unemployment while still returning our Budget to surplus in the medium term is phenomenally complex.
JONES: Why does the Treasury think it's the same, or not as bad in fact, as the recession in the 1990s in terms of getting out of it?
PM: Are you referring to Treasury forecasts in terms of growth?
JONES: Yes.
PM: Well, I think it would be nice to be clear and upfront about the question, Tony, rather than trying to throw one down the leg side like that. Can I just answer the whole question about Budget forecasts in the following terms. In the recessions of the '80s and '90s, the years of it took for recovery to bring back the economy to reasonable growth were respectively one years and two years. The projections contained were embedded within Treasury's forecasts for growth on this occasion, rest on a three-year recovery timetable. So, in fact, their assumptions are more conservative on the time for recovery, both when compared against the recession of the '80s and the '90s and that is borne out from the economic historical data.
JONES: Kevin Rudd, as usual it's great to talk to you. It's all we have time for, but we thank you very much for talking to us tonight on Lateline.
PM: Thanks for that one down the leg side, Tony.