AUSTIN:
Well the Prime Minister of Australia, John Howard, is my guest. Fifteen successive years of growth, interest rates at a 50 year low, unemployment at a 28 year low, the fastest growing economy in the OECD, also the fastest growing levels of consumer debt in the OECD, one of the lowest levels of household savings, poor current account deficit despite record prices for our resource exports. A few problems looming on the horizon although the economy currently is going gangbusters. Prime Minister, good morning to you.
PRIME MINISTER:
Good morning.
AUSTIN:
Queensland is one of the big exporters.
PRIME MINISTER:
Yes.
AUSTIN:
Resources, coal, copper. We've heard from the Deputy Prime Minister; the head of your infrastructure report released tomorrow that he thinks that Auslink should be extended to take over places like the Dalrymple Bay coal terminal. Why would you want to take it over when the economy is going gangbusters. We're getting record prices?
PRIME MINISTER:
What John was raising, and I spoke to him this morning about this, what he was raising was the desirability in relation to ports and having a single regulator so that some of the delays that undoubtedly occur in relation in Dalrymple Bay-I mean it did take 20 months for the regulator to make a decision on that-that there is a case for having a single regulator. As for the aggregate administration of the ports, well self-evidently, if it's administered by a private company, we don't want to take that over. He was arguing for a single regulator.
AUSTIN:
It's a victim, in a sense, of record prices for coal...
PRIME MINISTER:
The dispute at Dalrymple Bay was that the operator wanted to charge a certain amount and the exporter thought that was too much, and they had an argument and it was left to the regulator, the competition authority in Queensland, to make a decision. And all my information is that that took 20 months. Now that clearly is too long. I think everybody would agree on it. There may be reasons for it, but we need to find out if there is a better way of doing it, and that's something that I'd like to talk to the states about at the next premiers conference, or COAG as they now call it but we all understand it to be a premiers conference meeting, which is taking place on the 3rd of June, and if we could reach agreement on a cooperative arrangement concerning a single stream of regulation then I think that would be better.
AUSTIN:
Now Peter Beattie, Queensland's Premier, has had his own frustrations with the Queensland Competition Authority. I assume he'd be amenable to discussions.
PRIME MINISTER:
Well, I hope he is. We will be in meetings later this morning to launch three water initiatives which will benefit the people of Queensland, and I appreciate the cooperation of the Queensland Government on these initiatives. One of them will benefit the Gold Coast. It will introduce some innovative techniques of relieving and managing water pressure, which will save water. There's a recycling project in the Mackay, which is going to be of great benefit to the Reef, and also a feasibility study on ground water in Bundaberg. Now these are practical projects which involve cooperation between the Commonwealth and the states, and the sort of cooperation between levels of government that I know Australians want. Australians want solutions. They don't really mind who delivers the solution as long as it's delivered.
AUSTIN:
This is 612 ABC Brisbane at 24 minutes to 9. Australia's Prime Minister John Howard is my guest. I want to come to some of those water issues a bit later on...
PRIME MINISTER:
Yes.
AUSTIN:
But I just want to stick on this resources thing and about the economy for a moment...
PRIME MINISTER:
Certainly.
AUSTIN:
Prices for our resources, our exports, about the highest we're ever going to get at the moment, aren't they?
PRIME MINISTER:
They are the highest we've had. Whether they're the highest we're ever going to get-I don't know. But they are certainly very high because we have a lot of resources that are in heavy demand, and the growth of China in particular is so massive that that country's demand is almost insatiable.
AUSTIN:
And our resource exporters can't really keep up almost. That's been the problem with Dalrymple. They just almost can't get enough coal.
PRIME MINISTER:
Well, they haven't, but one of the reasons they haven't been able to get it out is there has been this argument about pricing, and the pricing determines the willingness of the operator to invest in expansion. If you're running a port and you can't get a decent price for handling the exports, then you don't make enough money to reinvest in the port and to expand it and make it bigger, and therefore you can't get as much throughput. I mean that's the problem, and we need to make sure that that sort of thing doesn't happen in the future. Without trying to apportion blame about the past, it is just not acceptable, when we have these boom conditions in Australia, that there should be a self-imposed impediment to our exporting as much as we can.
AUSTIN:
What's in it for Peter Beattie, Queensland's Premier-having a joint regulator? What's in it for him?
PRIME MINISTER:
Well, I think what's in it for either of us is to have something that works better. I mean if these things work better, to put it bluntly, it's good for both levels of government. There's no mileage in either level of government looking as though it can't agree with the other and, as a consequence, the public or the national interest is suffering.
AUSTIN:
Prices are at their peak - at or near their peak, most of the reports I've seen at the moment. If they start to decline in a couple of years, which some are saying they are - in about 2 or perhaps 3 years from now resource prices start to decline - this will worsen our current account deficit and put pressure on inflation, won't it? Potentially.
PRIME MINISTER:
Well obviously if things go bad they won't be as good as they are now. That's self-evident. But our best projections are that the export commodity boom or strong performance will continue for quite a while, and people have been forecasting for a long time that something or other is going to put pressure on inflation but it hasn't happened. Now, I'm not complacent about that. I think there will be a turn around in our current account deficit later this year as the full benefit of this big increase in commodity prices starts to flow through. The key about those figures is that they reflect the situation in advance of our enjoying the benefit of this big surge in export prices.
AUSTIN:
I ask you this because you're aware of the-what's the word-difference of opinion between Ken Henry and some on the Reserve Bank. Most Australians perhaps may not really realise that our current account deficit is one of the key drivers of inflation with very high levels of household and personal debt. If inflation goes up at all it really puts pressure on ordinary mums and dads who are in hock up to their neck.
PRIME MINISTER:
Well, there are a lot of drivers of inflation. The current account deficit has an impact. I think something that has an even greater impact is of course wage pressures, and the level of the currency can have an impact because the theory is the lower the dollar, the dearer the imports, the higher the dollar, the cheaper the imports. It fluctuates it a bit. That can have an impact. The high oil prices have an impact, although that has been ameliorated a bit by the strength of the Australian dollar. I note your reference to household debt. It is true household debt is high. It is also true that household assets are at a record high. It's one thing to rack up debt while your assets are declining. It's another thing to rack up debt while your assets are increasing in value, because the capacity of people to meet their debts has risen as well their debt. So I think we have to keep a sense of perspective about this.
AUSTIN:
As a nation we should be saving to invest. There's been a lot of comment about our poor savings record.
PRIME MINISTER:
Well we are saving nationally. We are, at a government level, saving.
AUSTIN:
But not at a personal level. Mums and dads aren't ....
PRIME MINISTER:
Yes, but in aggregate economic terms if the nation saves through the public sector then a higher level of personal indebtedness is quite sustainable on an economic basis because it is significantly offset by the public sector savings. And if you look at the- and particularly if somebody's personal indebtedness is matched by their wealth increase, there's no doubt that Australians have on a per capita basis more debt than they used to have, but there's also no doubt that they have more wealth because the value of most people's principal asset, namely their house, has increased significantly, to put it mildly, over the last few years.
AUSTIN:
Am I right in saying we have the fastest growing level of consumer debt in the OECD?
PRIME MINISTER:
Well, there are different measurements of that. But I'm not arguing that it's growing rapidly, but the point I'm making is that that is a mark of consumer confidence. It's also a mark of the capacity of people to repay. If you have valuable assets, and you have a capacity to meet your debt, there is inherently no great evil in incurring some debt. Now that's, now some people obviously incur more debt than they should, and I would always encourage people to borrow less and to be more prudent, of course. But I think we, once again, have to keep a sense of perspective. All of these things have got to be seen in a context, and if you are running up debt, personal debt, and your wealth base was decreasing, and if the Government was running up debt as well as households running debt, you would have a big problem. But we don't have those latter two things and they therefore, the absence of them therefore, counteracts the increase in household debt.
AUSTIN:
I've heard it put this way: as a nation we should be saving to invest, whereas we're borrowing to consume.
PRIME MINISTER:
Well that is an inaccurate description of what Australia is doing. Australia, through the Future Fund, is in fact investing against future liabilities. If we were running deficits...
AUSTIN:
At a Federal Government level?
PRIME MINISTER:
Well, yes, at a federal government level and the states-some states are in modest deficit, but not deep deficit. Our public sector debt position now is a country mile ahead of what it was a few years ago.
AUSTIN:
Very good.
PRIME MINISTER:
It's very good and that gives us great reassurance.
AUSTIN:
But I've got to bring it down to the mums and dads, households...
PRIME MINISTER:
Yes, but the mums and dads are affected by what the country does. My point is that if we were in debt as a nation and our asset base was declining in value, and we were also running up personal debts, we would have a big problem. But because the last of those three things is offset by the first two of those three things our position is sustainable.
AUSTIN:
This is 612 ABC Brisbane, The Prime Minister is my guest at 17 minutes to 9. He's heading off to the Gold Coast shortly to make some announcements about water. I'll get to that in just a moment. Prime Minister is there any room-a bit of discussion about federalism...
PRIME MINISTER:
Sure.
AUSTIN:
The relationship with the Federal Government and the States. We've got some problems here in Queensland. Other states have as well. We're better than most. We're probably the best position of all of the states in Australia.
PRIME MINISTER:
I would never argue with that in Queensland.
AUSTIN:
But if you sort of regulate the ports, something like ports get a joint regulator, would you be considering extending, if you like, the influence of the Federal Government to something like education? Education services are one of the big exporters of Australia-one of the growth areas.
PRIME MINISTER:
Well we already have a major role in education. But I don't think education is something where the Commonwealth Government should have the only role. The ports relate...
AUSTIN:
It's an export growth industry, isn't it?
PRIME MINISTER:
But it covers Australia's interface with the world. Goods come into ports. Goods leave ports. Where do they come from? They come from overseas. And where do they go? They go overseas. So that is quintessentially something that covers Australia's relationship with the rest of the world. When it comes to eduction, I don't think, while ever we have a federation in this country-and we'll have a federation indefinitely, let's be realistic-there's in a case for the federal government running local government schools. I don't. I think they are things that should be run by the states, just as I believe that policing the streets and chasing criminals within Brisbane or within Queensland-cooperate with the other states and the Federal Police if they go interstate-they should be run by the states. We run the universities; we fund them. The states still have some legislative role. There's a bit of an overlap and a bit of a problem there.
AUSTIN:
And they're a big earner of export income, aren't they?
PRIME MINISTER:
Oh, they are a big earner of export income. The universities are. There are modest income earnings also from primary and secondary schooling. Some foreign students come here and pay for that opportunity. But that doesn't alter my very strong view that the present education system, I think, the balance between the Commonwealth and the states doesn't work too badly. We've got to be careful in this area that we don't exaggerate the difficulties and the differences. I have this view about the health system of this country. It's got a lot of flaws and I know it's been in the news here in Queensland, and I don't want to buy into that-that is a matter for the Queensland Government, and they have to deal with that and they have to debate it with the Opposition here-and I'm not buying into the argument, but I would think it a great pity if through all of these things the idea developed that Australia's health system was vastly inferior to the health system of other comparable countries, because I can assure you it's not. If you're a battler in this country it's better to get ill in Australia than to get ill in the United States or Britain or Japan or China or any part of Europe.
AUSTIN:
I'm sure that's the case. We're going to take a break for the traffic in just a moment. I want to ask you one more question, and I'll come back to the traffic in just a moment. But just on the health issue, in fairness to Premier Peter Beattie and Health Minister Gordon Nuttall, part of the problems of the Queensland public health system have been driven by a shortage of doctors and Queensland is one of the biggest users of internationally trained doctors and there's a short supply of public trained doctors around the county and around the world. Is there anything that the Federal Government can do to assist...
PRIME MINISTER:
We have done an enormous amount.
AUSTIN:
Anymore you can...
PRIME MINISTER:
You can always do more but look, this particular issue in Bundaberg, I mean that has particular characteristics.
AUSTIN:
Bundaberg, Harvey Bay, potentially other places...
PRIME MINISTER:
Well anyway. I don't think, I don't think you... and I'm not suggesting the Queensland Government is trying to do it but I don't think there'll be any shifting of the responsibility for that elsewhere. But that is a matter for the Queensland Government and the political process in Queensland to work out. I'm simply making the point that I think it would be a terrible shame if we developed the idea in this country that our health system is vastly inferior to that of other countries because at a primary care level and as far as specialist performance is concerned, it's not-it's a very good health system and I think we spend a little too much time denigrating it and too little time supporting it.
AUSTIN:
But there's nothing you can do to assist...
PRIME MINISTER:
Well we are already doing a lot. We have increased the places, we have fast-tracked the entry of foreign doctors into Australia, we have tried to introduce practice nurses-well not try to- we have introduced practice nurses, we have introduced other measures to relieve the shortage of doctors in rural areas of Australia and we'll continue to do things as and when they seem appropriate and we have the capacity to do it. There is a shortage of doctors, part of it is a function of the fact that it's much harder now for doctors-particularly in remote areas of Australia to persuade their wife or their husband to go with them to a remote area Australia, the career aspiration of the husbands and wives of doctors now are vastly different from what they were 30 or 40 years ago and often the wife or the husband of a doctor in a rural area finds living in a rural area without a career opportunity of his or her own, less encouraging and less inviting than what it might have been 40 years ago. The change in the composition of the medical workforce in Australia over the last few years has been quite dramatic-there are far more part-time female doctors now than there use to be, their mobility is often less. All of these things come together to create the shortage, it's not that some wicked government at a certain level is saying well we don't want more doctors, it's just that well a lot of these things have come together to make it harder to get people-particularly to go to remote areas of Australia and that is a particular consequence for a state like Queensland which is so large.
AUSTIN:
Let me just check on the roads around Brisbane, just bear with me.
(COMMERCIAL BREAK)
AUSTIN:
Just before I come to water and the drought in Australia, there's been a lot of talk as you know about the situation facing Douglas Wood. An Australian Muslim cleric in Iraq, said he believes that he's made phone contact with the people who are holding Mr Wood. What's the Australian Government's knowledge to his point in time, do you have...?
PRIME MINISTER:
We have no independent verification of that. We are no better informed or advised than what you are on that particular aspect of it. I can't say whether that phone call did come from Mr Wood. But my only source of that story is indirectly from the Sheik's spokesman in Sydney.
AUSTIN:
Kaysar Trad.
PRIME MINISTER:
Yes. I don't any independent information and I hope that it's true and everybody is working to one objective and that is to try and get this poor man released. We're working very hard in different ways, I don't choose to go into all of the things that are being done but they're being done with one objective in mind-to try and secure the man's release and I appreciate the help of other people and we all want to work together in a cooperative fashion and consistent with the policies that we have upheld in relation to hostages. We don't want to inflame the situation by needless and unnecessary comment-equally we have to understand in situations like this, people often, I don't mean the Sheik, but I mean others will often represent things to be other than what they are and it's always sad when expectations and hopes of tense family members and friends are raised.
AUSTIN:
The Muslim cleric obviously believes he's spoken to his captors. When will you know, when will you be able...
PRIME MINISTER:
I cannot tell you that because I don't know whether the story you just referred to is at it appears.
AUSTIN:
Okay. Do we have any sort of hostage retrieval team there on standby?
PRIME MINISTER:
Well we have a group that we mentioned is over there and it's composed of various personnel and it's working very hard.
AUSTIN:
There are major concerns about water or the lack of it in Australia, it's been a historical feature of Australia, particularly though about the Federal Government's drought policy, that it isn't working. It's been 18 months since the drought summit, what alternatives are being considered to make assistance more accessible to farmers, things like interest rate relief, relaxation of assets tests...?
PRIME MINISTER:
Well we have interest rate relief at the moment. We have an exceptional circumstances system which basically says, once an area is drought declared and that recommendation or application has really got to come through States, once it's declared, the person affected gets the equivalent of the unemployment benefit, equivalent of the dole, plus an interest rate subsidy of up to 5% or half the interest rate being paid on the loan, which ever is the less with a cap of $100,000. Now that is the basic thing that operates in relation to exceptional circumstances. There can be more relief depending upon the length of time that an area remains in drought. There are arguments about whether it works as efficiently as possible, there are always arguments about whether areas are declared as drought affected-sometimes the authorities don't think they are drought affected, there's always an argument at the margin, you've got to try and measure it according to the average rainfall.
AUSTIN:
There seems to be a lag?
PRIME MINISTER:
Well sometimes there is and I understand that and we have tried to reach an agreement with the States to and we pay about 95% of the cost of it, we pay... I mean the great bulk of drought relief in this country is carried by the Federal Government. Now I'm not having a go at the States, I'm simply defending the role of the Federal Government... I mean by a factor of 10 to 1 almost-drought relief in this country is carried by the Federal Government. Now I'm not saying States don't do good things and I'm not saying the Federal Government shouldn't carry the lions share of it but we've spend hundreds of millions dollars into- over the billion dollars in the last few years on drought relief and we have that provided for in the Budget. And incidentally there's been a suggestion that the Budget has cut money, it hasn't cut money. We made an estimate of how much we'd need for drought relief, if the drought ends up being more severe, we'll spend more because it's a demand driven programme, there's no cap on it. We don't say we're going to spend a billion dollars and therefore if we need to spend $1.5 billion, well the people getting the $500 million miss out-they don't, they'll get $500 million.
AUSTIN:
I think one of the problems has been for farmers, particularly in Queensland- if they have, if it's $219,000 in off farm assets, they're ineligible...
PRIME MINISTER:
Well there's an argument about that but then that's always-there's always an argument, there's always been assets test in relation to any kind of government support, any kind of unemployment benefit or welfare payments and I think the point to be made is that the increasing number of farmers through necessity do have off farm income and that is one of the reasons why some kind...
AUSTIN:
They've been encouraged to do that haven't they?
PRIME MINISTER:
Well they've been - necessity has driven them to do it in many cases because of the drought. I mean the one thing no government can do is make it rain. We can provide relief, we can provide assistance and one of the best things we ever did was bring in the farm management deposits several years ago, whereby if you had a good year, you could put a lot of your income into a fund and you didn't pay tax at the higher marginal rate, you were then... would otherwise then have had to pay because of your good income. And in a bad year you can pull the money out and use it to help get by and pay a lower rate of tax because your income in that bad year is by definition lower. And those farm management deposits which were introduced by us about five or six years ago have proved to be an enormous benefit to many farmers around Australia. And one of the things that has helped many farmers get through recent drought, but we are facing a very severe problem. I'll be going to some drought affected areas in New South Wales tomorrow, I'm going to the Gold Coast this afternoon and I'll be going from there to Mildura and then on to some of the drought affected areas of Western New South Wales to see for myself and to talk to some of the people affected. And if there is further that we need to do, we will do it. I'll be taking this issue and Mr Truss will be taking this issue to Cabinet on Monday, to talk about it and I'll get a report from him and John Anderson who's joining me in Western New South Wales tomorrow, we'll be reporting to Cabinet on our assessment. I just want to assure the farmers of Australia that obviously within reason and as is appropriate, if further help is needed, it will be provided. We feel for them, we care for them, it's not their fault, some of them have been knocked three, four, five years in a row with no winter crops and they've had a terrible time and I really feel very sorry for them and they should understand that's my mood and as I say within reason and as is appropriate, if further help is needed we'll try and provide it.
AUSTIN:
That will give them some encouragement I think. What's the announcement you are making today on the Gold Coast?
PRIME MINISTER:
Well I'm making an announcement with the Queensland Premier of three projects. One of them is to provide innovative approaches to pressure management, to conserve water in the Gold Coast city area and we think it will be a very valuable project and we're providing some $10 million for that and we're providing $29 million for recycling of Mackay's waste water to better protect the Great Barrier Reef from 250 tonnes of nutrients each year. I mean the idea is to recycle and stop the nutrients going onto the reef and there's been a lot of talk about how they have a negative effect on the reef and if we can improve the recycling of that waste water, then that will preserve water and help the reef.
AUSTIN:
Have you ever considered trying to actually pump it back inland, like some farmers have been asking for, for years?
PRIME MINISTER:
If somebody comes up with a project that works in that area, will really work as distinct from a theory-I mean they've been a lot of theories about that but you've got to get something that is affordable and workable, we'll have a look at it. We have a $2 billion National Water Fund that I established in the election campaign and what the Federal Government is doing is going into partnership with the States and Local Government and in the Queensland case, we're working with the Gold Coast City Council, we're working with the Queensland Government and we're working with the Local Government authorities in Bundaberg and Mackay. Now this is a sensible way, we're putting in money, the States are putting in money and we're responding to projects that have been put forward and we're going to do this all around the country. But I have an open mind on big solutions to the water problem of this country. If something can be made to stack up, I'll look at it, but for decades we've had theories about turning rivers inland and so forth, they have really not gone much beyond theory. If they ever got beyond theory, well I would not be reluctant to have a very careful look at them.
AUSTIN:
Good to see you again, thanks for coming.
PRIME MINISTER:
Thank you.
[ends]