HOST: Now, the Prime Minister is with us. Julia Gillard, good morning to you.
PM: Good morning.
HOST: We've been running a phone poll on this. We have asked: are you prepared to pay a flood levy to rebuild Queensland? 93 per cent have voted no from 4,500 calls. Are you going to be able to convince people that this is actually necessary, that you don't have the money to pay for it yourself out of our taxes?
PM: I believe Australians do want to make a contribution to recovering from this unprecedented natural disaster, unprecedented in terms of the scale around the country and in Queensland, so Kochie, I'm going to keep putting the argument. I am absolutely determined to work to secure the rebuilding of Queensland. That's why I put the package together. It's the right package and I'll keep explaining it for people.
HOST: Look, no-one will quibble about the need to spend money to rebuild Queensland. Absolutely everyone agrees with that, but what we disagree with is that we pay our taxes, you've got the money, you've got it in emergency slush funds to come up with the $1.8 billion.
PM: Kochie, I am going to have to disagree with you on that. It is simply not true.
I know you have made a reference to the contingency reserve in the Government's budget. To quote Peter Costello, a former Treasurer of this country, that is not a rainy-day fund. It is not sitting there to spend on natural disasters like this one.
The contingency reserve is necessary to keep the budget on track. In the budget we've got all sorts of programs like Medicare and the PBS, the program that supports buying medicines. Now, we model the best estimates of what that is going to cost the budget, but you don't have to be too far wrong in those assumptions - more people going to the GP in a year, for example - for more money to be needed. So, the contingency reserve is there to meet occasions like that.
If it wasn't there, then the budget would blow out and the Treasury verified that as recently as when it looked at Mr Abbott's and Mr Hockey's costings for the election campaign. They went to the contingency reserve and Treasury said no, no, that's a budget blowout.
HOST: OK, good point.
So this is your emergency money, this is an emergency, why not dip into it? Will you guarantee, say at the end of this financial year when you get all your budget figures for the household budget for the country and there hasn't been an overspend in any of these areas or you have earned more income from other areas than you budgeted it for, you'll allow that contingency slush fund to be used to rebuild Queensland. Why not?
PM: Kochie, it's just not right to refer to it as a contingency slush fund. That terminology is not right and it's meant to conjure up something in people's minds-
HOST: -It just sits there.
PM: That is not true, Kochie. It doesn't just sit there. This is not a magic pot of money that can be rolled pot in the face of an unprecedented natural disaster-
HOST: -Well, what if it's not used? It just sits there.
PM: That money is necessary as part of the budget process because in something as complicated as the Federal budget, where there are demand-driven programs like Medicare and the PBS, to take two good examples, it is needed, it is needed to make sure the budget stays on track-
HOST: -But what if it's not this year?
PM: What you are inviting me to do is make some wild guesses and risk a big budget blowout and I'm not prepared to do it Kochie, I'm not prepared to risk that.
HOST: No, what I'm saying is the levy starts in July. At June 30 when you get all the numbers from this year and you don't need to dip into your contingency reserve for your conservative bias allowance, use the money rather than leave it sitting there for another year.
PM: Well, the contingency reserve is there every year. It has been under every government-
HOST: -OK.
PM: When Mr Howard was Prime Minister, when Peter Costello was Treasurer, the contingency reserve was there. Kochie, you are making an error. I'm sorry to say it, and I know that on financial advice you're a good man to go to, but you are making an error about the nature of the Government's budget. It is not true to say-
HOST: -OK, I am not alone in making the error. There are a few doing that error.
PM: It is not true to say to Australians there that there is a big pile of money there that somehow I could just go and use. That is not true, Kochie.
That's why I have put a package with the levy as an element, and let's remember more is being done in budget cuts than is being asked for from Australians in a levy.
HOST: A lot of people saying what do we spend on foreign aid? Why don't we haul some of that back because we need it more at home rather than give it to other countries.
PM: Well, in the budget cut backs I announced yesterday, we are cutting back around $2 for every $1 that we are asking Australians to contribute in this levy, and when we look at the design of the levy-
HOST: -No, no the question was foreign aid, why don't we cut back foreign aid. How much do we spend? $5.5 billion goes to foreign affairs department, not all in foreign aid, but that's just the headline rate? Why don't we cut back foreign aid to other countries because we need it here?
PM: Kochie, we do make contributions around the world in foreign aid. I think Australians have prided themselves on being good global citizens. We're often the first to go and assist when people are in poverty and are in real trouble-
HOST: -Now we need it.
PM: Well, now we obviously need to rebuild Queensland and other parts of the country, and I struck what I believe is the right package to do that.
HOST: So your answer's no? You won't reduce the foreign aid budget?
PM: What I selected for cut backs yesterday, Kochie, are the things that I think should be cut back at this time. Programs to deal with some green climate change matters, we're going to price carbon. That's a more economically efficient way to do it and some deferral of infrastructure-
HOST: -Bob Brown happy with that?
PM: -that's about making room in the economy to rebuild Queensland-
HOST: -Is Bob Brown happy. Are the Greens happy with that?
PM: I'll let Senator Brown and others speak for themselves. I've struck the package I believe is right for the nation.
HOST: The basic fundamental is we don't trust politicians with these new levies. We don't trust that the money is going to be used in the right areas and you're not going to raid it for something else. You're going to have this big pot of money, $1.8 billion, and say only $1.5 billion is needed or $1 billion, you haven't off-set the increase in revenue from the stimulus.
Do you guarantee that you won't raid the money for other purposes - rolled-gold guarantee?
PM: Absolutely. 100 per cent. Every dollar will be used for flood rebuilding - every dollar, every cent. It will not go anywhere else.
HOST: Do you guarantee that if the Federal budget is better than expected you'll then give the money back?
PM: Kochie, we are going to proceed with the levy and the cut backs that I have announced. That's the right way-
HOST: -But you say you can't but a cost on it. You say no-one knows the real cost of it. If you don't need all of that money will you give it back, or, if, for example, you don't dip into your contingency reserve or your revenue receipts are more than expected and your costs are lower and the deficit isn't as big, will you use that money to rebuild Queensland and then reimburse the levy?
PM: Kochie, I don't see any circumstances where the bill for rebuilding Queensland and the nation is less than the $5.6 billion I outlined yesterday. It could be more, and if it is more then we will cut back other area areas of the Government budget in order to fund more. that's the approach that I'm taking.
HOST: OK, alright, Prime Minister, we'll have to leave it there, run out of time. Thanks for joining us.