HOST: You have broken a lot of promises lately, why should voters believe that you will actually now get the budget back into surplus?
PM: Well firstly the Government's proud of its record in delivering on the big reforms to the health and hospital system, the education revolution, and so many of the key elements of responsible economic management. On the question of economic management, can I just say this: we did the right thing during the global economic crisis. We kept the Australian economy out of recession, almost uniquely amongst the major advanced economies. But now we have a new task which is to build a platform for future growth. And what I believe in passionately is that when the circumstances present themselves you bring the budget back to surplus, and that is why we are, through this Budget, managed to bring about a set of numbers which has our net peak debt halved, which also has our Budget back in surplus three years ahead of time and in just three years time. These are pretty solid achievements when measured across the rest of the world.
HOST: But that economic growth and that return to surplus, is built on the assumption that our terms of trade will reach 60 years high, that the mining boom will continue to grow, and yet you're putting this new tax on the mining industry that could hurt that very growth.
PM: Well let's go to the underpinnings of the Budget itself. The reason we are able to bring the Budget back into black in just three years' time, is because one: the performance of our export industries, that is true. Two, because of our actions in the economy, we've actually kept nearly a quarter of a million people out there in work, who would otherwise be unemployed. They continue to pay tax -
HOST: You've wasted a lot of money too, on insulation programs -
PM: But hang on David. Let's just get this absolutely right. They continue to pay taxes, otherwise we'd be paying them unemployment benefits, and also, Lindsay Tanner and the team having bought about some savings, key savings. Put those things together, we're confident therefore, of the surplus that the Budget papers project for three years' time.
HOST: But as I say, money's been wasted in this process as well, can you seriously say that every dollar spent has been spent wisely?
PM: David in the process of public administration, things go wrong, I'm not going to say to your viewers that everything's been done perfectly, it hasn't been. But on the core question of conservative economic management, keeping the economy out of recession, number one. Number two, now that we are through the global economic crisis, bringing our Budget back to surplus three years ahead of time, these are the core things which matter for families, for pensioners, for carers.
Because by bringing the Budget back to surplus, in which I believe our current circumstances absolutely necessitate, it underpins our ability to do all these other things like building also the investments for the future.
HOST: But the new mining tax, according to the industry, it is going to undermine that resources boom, undermine the ability to continue that growth.
PM: Well let me just respond to that in its own terms. Firstly the mining industry council recommended that we head in the direction of a profits-based tax for the future, let's be very clear about that.
HOST: Not a retrospective one.
PM: They recommended a profits-based tax, that is the actual system. The second one is this, the Petroleum Resource Rent Tax, which has been operating now for 25 years, amidst predictions of doom and gloom for the future of any offshore investment in Australia way back then. And since then we've had the biggest resource projects this country has ever seen, that's the second point. But the other thing is this, the Treasury's independent modelling through Econtech, says that if we put together the various measures that we have for mining, including a billion dollar plus package of incentives for the exploration industry, that the mining industry will actually grow in its activity by 5.5 per cent.
We've got to separate out, a fear campaign about projects closing, to getting on with the business of tax reform so that all Australians get their fair share from the resource which they ultimately own.
HOST: You are negotiating some details on this with the industry, I am just wondering what is up for negotiation, obviously the 40 per cent rate stays, you're still going to get the same revenue, $9 billion a year, but are you negotiating on where it kicks in, what profit level will you start to tax?
PM: Look we've been very clear about this. We think the rate is about right. On the other elements of the negotiation with individual companies, we're looking at detail, implementation and transition.
HOST: So what profit level it kicks in, is that up for negotiation?
PM: I will leave that to the negotiators.
HOST: But you're the Prime Minister.
PM: I'll leave that to the professional team of negotiators and you know why? Because each individual firm's circumstances are somewhat different.
HOST: But are you seriously saying you're happy for the negotiators to decide what profit level this tax should kick in at?
PM: Can I say I intend to leave the process of the negotiation with the team which has been appointed to do that. It'll then come back to the Treasurer, and it'll then come back to the Cabinet.
HOST: So it is ultimately your decision?
PM: It will then come back to the Cabinet. And therefore it's the right way to do these things. Any fundamental tax reform like this one, which is aimed at producing a fairer share for all Australians in tax cuts, in company tax cuts, in more super as well as tax breaks on your bank account savings, you've got to get this right, and therefore it will take time and we'll work through those matters with the 80 or so companies who are already in negotiation with the Treasury
HOST: You've cut spending in this Budget in a number of areas, just a couple of them, child care subsidies have been cut by almost $300 a year, why?
PM: Well the key question that we had to wrestle with was, first of all, maintaining our pre-election commitment to increase the child care rebate from 30 per cent to 50 per cent, we have done that, at considerable cost to the budget, and that helps with the affordability of childcare for families right across the country. Secondly, we committed also to taking that up to threshold of $7,500.
What we've done is actually keep it at that threshold, it went up to $7,800 at one point, it is back at $7,500. We understand that will affect probably something like three or four per cent of families, 97 per cent of families we are advised, won't be affected by that. But you know, if you're going to bring a budget back to surplus, in all these challenges, you've got to make disciplined and hard decisions in certain areas and this has been one of them.
HOST: Climate change is another area, we knew you've shelved the emissions trading scheme until 2013 at the earliest and last night announced a new renewable energy future fund. Can you tell me how is this any different to Tony Abbott's direct action climate fund?
PM: Renewable energy is based in the first instance on this Government having passed a renewable energy target of 20 per cent. That didn't exist before, the previous Government did not act on that. The second point is this: we have already out there, a $4.5 billion clean energy initiative which comprises support for renewables, also support for clean coal, and support for various arms of energy efficiency.
The purpose of this new fund, this renewable energy future fund, is to provide an opportunity for investment at commercial levels with companies out there in the solar area, in the wind area, in the tidal area, in all those other areas -
HOST: It's picking winners, isn't it, in the private sector, which is what you've criticised about Tony Abbott's approach?
PM: Well the key thing though is to be actually realistic about what can be produced by renewable energy at the end of the day. We believe it can make a big contribution, but our commitment to greenhouse gas reductions has not changed one bit. Our commitment to an emissions trading scheme as the most efficient and the cheapest way of getting there has not changed one bit.
HOST: So why didn't you have a double dissolution to force that through.
PM: What's changed is that you've got, of course, Mr Abbott who has decided for politically opportunistic to block this not just once, but multiple times.
HOST: Which means you can hold, under the constitution, a double dissolution election. Why not?
PM: The key things as I have said year in, year out, is that my overall view is that it's important for Governments to serve their full term.
HOST: But you can do that and still have a double dissolution election.
PM: My view has long been that Government should serve their full term. Let's be very clear about this on the question of action on climate change. We accept it's real. Mr Abbott says, to use his own term, it's absolute crap. We say that the science is fair 'dinkum. He says it's not. We say that the most effective way of producing long term significant greenhouse gas reductions is by and emissions trading scheme, he says not.
HOST: Yes but you could still go to a full term or there abouts and have a double dissolution election to put this scheme in place, to deal with the great moral challenge of our time, are you squibbing it?
PM: On the key question of action on climate change, the fundamental thing is to keep working on the renewable energy front which we are doing now. Secondly, to deal also with the challenge of getting the necessary consensus around an emissions trading scheme to get it through the Parliament in the first place.
HOST: But are you scared of a double dissolution?
PM: Can I just say this, when you have a combination of the Greens on the one hand, voting against the scheme that we put forward, and the conservatives on the other hand, voting against it in the other direction, it makes the passage through the Parliament a very, very difficult prospect.
That is why we will continue to advance the whole question of dealing with renewable energy. Our commitment to an emissions trading scheme has been deferred until action by 2013, as you indicated before. But we believe that this problem has not gone away, therefore it is important to get started now.
Around the world, various Governments have difficulties getting cap and trade schemes or whatever through their various legislatures; it doesn't mean you stop action, in means you get on with that action in the here and now.
HOST: The Treasurer last night made it clear that there's not much room for more spending given the state of the Budget, to get back into surplus in three years time. Given that you have been spending a lot in the last couple of years, are you seriously saying you will now tighten the belt, you won't, in the lead up to the election, be making big spending promises.
PM: We have said since the last Budget that the trajectory back to surplus would be by applying a two per cent cap on expenditure. We've done that in the period since then, we've done that through this particular Budget, and we intend to adhere to that in the future.
HOST: A pretty frugal campaign coming up?
PM: Well we said before that this would be a no frills budget, we believe that steering Australia through the global economic crisis required the Government to expand its activity in the economy. It also says that when the private sector rebounds, that you've got to also make sure that Government pulls back because producing a surplus like that is absolutely critical in order to do the things that you need for working families, keeping pressure off interest rates, making sure that your investments are carefully targeted on health and hospitals and the things that count right across the country.
That's what I believe and I believe conservative economic management is all about that.
HOST: Just finally Prime Minister, Gordon Brown has stepped down as Prime Minister in Britain. You worked with him very closely through the G20 process and I know you've praised him a lot, particularly for the work in Pittsburgh at the G20 there. You've spoken to David Cameron I understand this morning, are you sad to see Gordon Brown go?
PM: Gordon Brown is a very good man. His contribution, particularly at the London Summit last year of the G20, which he chaired, was fundamental in breaking the fall in the global economy which was occurring at the time. That, the economic historians will point back to in decades to come, was how we managed to prevent this global recession becoming something much worse.
I've spoken this morning to David Cameron. I've wished him very well, congratulated him on his win, told him to take an hour off with his wife Samantha and enjoy the moment. I said, the real job will start in an hours' time. And I'm confident that this relationship, which I really do think is above party politics, is one which is going to go from strength to strength.
HOST: Prime Minister thanks for joining us.
PM: A pleasure.