JONES:
Prime Minister Howard is on the line, PM good morning?
PRIME MINISTER:
Good morning Alan.
JONES:
PM I know you made a speech yesterday about reform, just before we get to that, there are lots of headlines in today's papers about you, none about the comments yesterday by Iraq's outgoing Prime Minister Dr. Allawi, who said he wanted to thank Prime Minister Howard and the Australian people and the Government of Australia for their commitment to Iraq. Australia will always be remembered as a great friend of Iraq. Those kinds of comments don't tend to get much coverage do they?
PRIME MINISTER:
No they don't, and I think that, not for my own sake, but for Australia's sake, it's a pity, because what is happening in Iraq is an inspiring demonstration of the determination of people against horrific odds to build a democratic future for themselves. I don't think I've seen a more inspirational sight, inspiring sight, in recent years than that of those Iraqi's holding their ink stained fingers aloft after they had voted. And when bearing in mind that people were required to negotiate bombs and intimidation and murder, and all sorts of threats to them and their families, and yet 59 per cent of them turned out, more incidentally than turned out in the last US presidential election, under a voluntary voting system. Far more than turned out in the last election to the European parliament, which was about 41 percent, so I think there's something happening in the Middle East, there really is, and it's not only in Iraq, you're now seeing a very cautious move towards a more democratic government in Egypt. You have seen the election of Mahmoud Abbas as leader of the Palestinians through a democratic process, you are seeing the pressure building on Syria to pull out of Lebanon. I'm sure that the contribution of the much criticised Bush policy in Iraq has been enormous to this process.
ALAN JONES:
Okay, I agree with that. Prime Minister also before we go, one other question I asked your Foreign Minister this the other day, there are people who listen to this programme and they may sort of be a bit myopic, I hope they're not, who are as increasingly as days pass, expressing deep concern for the fate of Schapelle Corby and expressing the view that in Indonesia something is wrong with the way this lady has been treated, and a concern about what they perceive to be the inadequacy of the Australian Government's response. Now you would know that the defence team asked the Federal Police if they could be called into Indonesia to testify forensically the origins of the marijuana sample. Indonesian authorities declined. People are asking why didn't our Government put more pressure on Indonesia to say look this is a limited concession that should be made in order to be sure that justice is transparent. Now we find today that yet again the trial has been delayed, it seems this is like death by slow torture, week after week she appears for one day and then there are delays of ten, eleven and twelve days. Yesterday one of her people, her brother was in the witness box, now there is a delay, March 4 today, the matter doesn't resume until March 17, this girl's virtually on death row.
PRIME MINISTER:
Alan, without knowing of course the truth of the matter, I don't know, I can only, and I have had a briefing about it. I have responded to other concerns people have raised, the advice I have had so far is that it is being conducted in accordance with Indonesian legal and court procedures. I sympathise with the person and anybody, irrespective of guilt or otherwise, and we don't know that yet, there's the strain and physical distress, mental trauma is immense, I am following it, I have taken a personal interest in the sense that I have been concerned on the face of it, about some aspects of it. I choose my words very carefully because I have to respect the legal system of another country, and people do know when they go to other countries how tough their drug laws are. No Australian visiting a country in South-east Asia could fail to be aware that they have very tough drug laws and they take a very uncompromising attitude towards drug offences, that is Singapore, in Malaysia, in Thailand, all of those countries, and that has been known throughout the region for the 30 or 40 years.
ALAN JONES:
It's rough justice if you don't take drugs...
PRIME MINISTER:
I understand that Alan and what I can say to your listeners and I don't think they are being myopic at all, it's a very understandable reaction. The Government is aware of its obligations and we'll continue to follow the case to the extent that we can, consistent with the right of Indonesia to run its justice system, we will respect, we will do everything we can to advocate her interests.
ALAN JONES:
Okay. Prime Minister back to this business about reform, you were outspoken yesterday on this question of interest rates. Many people are ringing here and saying, now we don't understand all this, the interest rates, the price of money went up because the Reserve Bank said we've got to keep inflation in check, but if the price of money goes up and health insurance premiums go up and the price of petrol goes up, oil goes up and then you increase the price of money, aren't you building in to the very inflationary pressures that you are trying to resolve.
PRIME MINISTER:
Well that's right, as a matter of economic theory that is right. The Reserve Bank had to make a difficult judgement and I am not going to criticise the decision that was announced the other day, we gave the Bank independence to set interest rates when we came into government.
ALAN JONES:
You might explain it, to interrupt you, to our...
PRIME MINISTER:
Yes.
ALAN JONES:
Many people ringing here think that you have put up interest rates.
PRIME MINISTER:
No well we haven't, we decided when we became the government nine years ago, that it was better for the orderly conduct of monetary policy if we gave the authority to the Reserve Bank to set interest rates, just as the Federal Reserve in America, I mean Dr Alan Greenspan sets American interest rates, George Bush doesn't. The Governor of the Bank of England sets interest rates in England, not Tony Blair and equally in Australia, interest rates are set by the board of the Reserve Bank which the government appoints, which includes some senior businessmen like Hugh Morgan and Frank Lowy, and the Governor Ian Macfarlane who I think has been a very good Governor and done a very good job...
ALAN JONES:
Absolutely...
PRIME MINISTER:
A very good job, I mean he is entitled to some of the credit for the strength of the economy...
ALAN JONES:
Yes.
PRIME MINISTER:
And they have to make these judgements, now naturally even though they have the power, the authority, naturally I get asked about interest rates, cause I am the Prime Minister and I preside over policies which influence the state of the economy.
ALAN JONES:
Okay. Now let me ask you this about yesterday because at the time you were saying that you couldn't, you as Prime Minister couldn't see a case for another increase in interest rates. The Bank's Assistant Governor was arguing, that they were sticking to their guns about what they did on Wednesday because quote: "There were unusually strong levels of domestic demand, now on those figures that came out two hours after, he [inaudible] announces increased interest rates, the figures demonstrated that consumer spending on clothing and footwear was well down, on food well down, spending on housing and apartments was down 4.8 per cent, spending on renovations and additions to existing houses down 1.9 per cent, in other words the economy had already slowed which you know but the Governor, the Assistant Governor was saying yesterday, there were unusually strong levels of domestic demand, which book's he reading from?
PRIME MINISTER:
Well there is, now this is quite confusing, I will acknowledge that, there is a dispute between the Bank and the statisticians who collect those statistics about the relative strength of the economy, to put it bluntly. The bank thinks the economy, in relation to those factors that influence a decision on interest rates is performing more strongly than does the statistician. Now we're in a very difficult situation where there is evidence that those arguments, it's pretty hard to run the proposition that we have a slowing economy when we have the highest level of employment, or the lowest level of unemployment for thirty years and certainly there is evidence of a shortage of labour and of wage pressures building in certain parts of the economy because of the strength [inaudible], yet on the other hand as you rightly point out, the statistician has recorded otherwise now it's not an easy judgement to make and I know it sounds confusing to the public because it is one of those occasions where there does appear to be, and the Treasurer made this point on Tuesday, Wednesday, there does appear to be a conflict between the Reserve Bank's assessment of the strength of domestic demand and the statistician's assessment or measurement of domestic demand.
ALAN JONES:
Isn't the real problem here though I mean many of my listeners have alluded to this because I think one of the things we've got here in Australia now is a much more literate electorate, people actually understand these things much more than they did and they are saying one of the real problems is the psychology of all this now. There have been massive headlines in the last two days, you are led to believe that we've all got one foot on the grave and one on a banana skin and that can lead to a damaging psychology in terms of the way in which people behave economically.
PRIME MINISTER:
Well that is true and I think the electorate is very literate, and I hope I don't sound in any way patronising in saying it, I believe it and they're entitled to rational explanations from everybody, particularly from me about all these things but I think there is a danger that we will lose perspective. We should remember we have very low levels of unemployment, we have low levels of inflation, we have a budget that is strongly in surplus, we have by historic standards still very low interest rates and we have very strong business investment and at the end of the day it's the investment of business which generates the wealth and generates the jobs, so I think there is a danger if you get too focussed on one particular movement in interest rates, and I acknowledge that that will cause difficulties for home borrowers, I do acknowledge that, but those rates are still at 7.3 per cent, compared with what they were some years ago...
ALAN JONES:
Can I just ask you there, in terms of one of the headlines, in 1995 you weren't prime minister but you said then, the overwhelming economic problem, this is John Howard, is our damagingly high current account deficit, it was then with respect, a miniature $22 billion.
PRIME MINISTER:
Yes I did say that.
ALAN JONES:
And in the last three years, that current account deficit alone in three years has gone out by $150 billion, it's now $691 billion, how do we respond to that, people keep saying exports will pay for imports but they haven't for 35 consecutive months.
PRIME MINISTER:
Well and it, I don't think you will ever have a situation where they're in constant balance but a country can go on importing more than it exports provided that it does have a capacity to pay for the excess imports and when you have a strong economy, you attract investment, now true it is that I said that, I don't run away from it and years ago the nominal amount is less than it is now but when I said that, our budget was in deficit, our unemployment rate was a lot higher, I think probably our business investment levels were lower, our inflation rate was higher and our interest rates were higher. In other words, all the other indicators were less powerful or less strong than what they are.
ALAN JONES:
Okay, well now supposing that there's the reform thing and you've got to grow the economy, now everyone seems to be saying...
PRIME MINISTER:
You've got to keep it growing.
ALAN JONES:
There seems to be a desperate need for infrastructure investment, rebuild our ports, can you imagine how much national productivity would improve if we didn't spend billions of dollars on drought relief and we can accelerate export production by providing reasonable supplies of water. When are we going to see a national commitment to infrastructure development?
PRIME MINISTER:
Well we are, as you mentioned, water, we are seeing the beginnings of that in the last election campaign, I committed myself to a $2 billion National Water Fund largely to be spent in cooperation of the states. Now I am very pleased that over the last two days both the Premier of Victoria and the Premier of Queensland have said that they will go ahead and participate in that initiative and that will mean for example, money can begin to flow for the Wimmera Mallee pipeline, which is going to provide a great deal of relief to people in the western part of Victoria. Now this has been a long sought after process.
ALAN JONES:
I am always beaten by the bell when I talk to you, now we do have to go to the news, why don't we just say that we'll leave it run for a bit and we'll come back and specifically talk about that issue and nothing else, next time we talk.
PRIME MINISTER:
I'd like to Alan.
ALAN JONES:
Okay, that's the Prime Minister Howard, thank you for your time.
PRIME MINISTER:
Thank you.
[ends]