STEFANOVIC: The Prime Minister, good morning to you.
PM: Good morning, I'll just do a great Australian fly swat. Here we go (swats fly) I'm fine.
STEFANOVIC: Alright, good, good, good. Well there is some deep concern - before we get onto Australia Day - there is some deep concern about another interest rate rise here. Now, before the election you promised to do everything possible to ease some of those inflammatory economic pressures. What are you doing?
PM: Well Karl, you're right. We've got an inflation problem which has been emerging since the early parts of 2006. And, it's got bigger and we need to take action against it now that we've formed Government over the last six weeks.
Three things. Firstly, we're got to restrain what's called public demand. That means producing a very substantial Budget surplus which is why I gave a speech on Monday saying that come the Budget, our target - subject to global economic conditions - is to produce a Budget surplus of 1.5 per cent of Gross Domestic Product. That's to try and take some of the pressure off the Reserve Bank.
Two other things. Firstly, to outline our strategy for dealing with the skills crisis because that also helps. The Reserve Bank has been issuing warnings on this for years and years and years - twenty (warnings), in fact. And they've been ignored in the past. We need to act on that, and that's why we're, for example, moving to establish Skills Australia and to bring on new apprenticeships quickly.
Thirdly, on infrastructure bottlenecks. That also makes the job of the Reserve Bank harder and that's why in Perth again on Monday we established Infrastructure Australia, to nationally co-ordinate the delivery of major infrastructure projects across the country. That's part of our war against inflation. We've got to fight to fight to make the job of the Bank easier, but it's going to be a tough, tough challenge.
STEFANOVIC: Alright. Considering all of that, is it responsible to go ahead with the tax cuts when inflation is rising so sharply, those tax cuts that you promised?
PM: Well Karl, we take seriously our pre-election commitments to the Australian people. We said we're going to deliver those tax cuts and it would be quite wrong of us to walk away from those undertakings. But I tell you what, when we made those commitments, we also made sure that our other non-tax commitments to the Australian people leading up to the election were very modest, costing much less money than that which was put forward by the Government of the time - the Liberals. As a result of that, we are in a position - because of a hard line approach to savings, a modest set of pre-election commitments and now this determination to produce a very significant Budget surplus - we are in a capacity to deliver those tax cuts responsibly, and that's what we'll be doing.
STEFANOVIC: Now, despite the inflation levels at the moment, will you press ahead with those tax cuts and also the Family Tax Benefits?
PM: Well, all of our pre-election commitments remain in place and we don't walk away from any of them and will not walk away from any of them. I take seriously what you put to the people and therefore what has to be delivered to the people. But as I said, the other areas available to us to take pressure away from the Reserve Bank, and from monetary policy and therefore interest rates, is what do you do with your overall Budget surplus, what do you do in terms of savings and that's why Lindsay Tanner, the Finance Minister, is currently engaged in a razor gang exercise against all unnecessary expenditure in the Government. And on top of that, as I said before, acting as part of our five point plan - our five point plan of action - against inflation, working also on infrastructure and skills.
STEFANOVIC: Alright, some of these things are going to take a considerable amount of time, obviously, to have a flow on effect in the economy. Realistically, do you think Australians should be preparing for at least one interest rate rise?
PM: Well, Karl, I said repeatedly throughout 2007 that I was never going to put myself in the position - like my predecessors - of delivering public lectures to the Reserve Bank. You either accept the Reserve Bank's independence or you don't. What I can do is through Budget policy - the thing which I control - is take as much pressure off the Reserve Bank as possible. That is why we've committed to this very substantial - approximately $18 billion surplus - as a target for the upcoming Budget. And on top of that, act in these other areas. If you get all these things right then you can reduce the pressure. But I go back to the underlying point. These inflationary pressures have been coming up in the economy since early 2006. That's two years ago. We've been the Government now for six weeks. First speech I gave this year was outlining our five point plan of action against inflation. We're implementing it, and we're going to do everything that we can to take that pressure off. But at the end of the day, you can't turn the Queen Mary around overnight, it takes a while.
STEFANOVIC: Alright, well also, something that might take a while, are these industrial relations changes. You're looking at uniform national industrial relations reforms now. But that change is going to be some while off. And have you decided on them yet?
PM: Yes, we've been in close consultation with states and territories through the Deputy Prime Minister, Julia Gillard. And our view, Karl, is pretty simple. We have a national economy. If you're a business operating in Queensland or South Australia or Tassie, then it follows these days that you don't have to be all that big of a business to have - another great Australian salute, excuse me - it stands to reason that it's now probable that you're going to be operating in more than one state. And as I talk to small businesses right across Australia - medium sized business as well - one of the problems they face is these different regulatory environments from one state to another. And this actually represents an enormous compliance cost for business. It makes it harder for business to go out and earn a quid. One of those areas in industrial relations where you've got different state jurisdictions. That's why we in partnership with the states and territories will be moving towards a uniform national system, and Julia Gillard is doing excellent work in drawing all those threads together.
STEFANOVIC: Alright. And some other news that is dominating the headlines at the moment and we just want to draw you on if we may, Heath Ledger has dominated the news this week. Were you as shocked as the rest of us when you heard the news?
PM: Absolutely stunned. I was sitting with my family at the time and just thought, how could this happen? This is a bloke who just had his life and career ahead of him. Enormously talented, I'd seen some of his movies, and was a bit of a fan of his acting skills. This is just a tragedy, a tragedy that doesn't compare with that of his own family. So, look, I think this has just taken the nation's breath away. It took my breath away.
STEFANOVIC: Alright, thank you for that. And also in Emerald this morning we're hearing news of looting. Now, as a Queenslander and as an Australian, I guess like the rest of us you're absolutely appalled at that sort of behaviour considering the crisis they have been facing in the last few days?
PM: Yeah, well last Sunday I flew up to Charleville to work with Anna Bligh on just checking to make sure we'd done everything possible in terms of the preparations for the Warrego River there. At that stage, Emerald was just emerging as a challenge and I've been in virtually daily contact with Anna, the Queensland Premier, to make sure we can do what's physically possible to help all those families who have been dislocated by the floods. And, everyone in Emerald, we're watching carefully in terms of what their future needs will be.
But when I get this report this morning about looting in a town which has had the worst flood in its history, you've got more than a thousand people evacuated from their homes - it revolts me. It just absolutely revolts me that people could do this sort of thing. I'm confident that the Queensland Police will crack down on this like a tonne of bricks, and so they should.
STEFANOVIC: Alright, well said PM. I think everyone is thinking the same thing. Well the first Australia Day for you as Prime Minister - to change topics absolutely completely - what have you got planned for us?
PM: For Australia Day?
STEFANOVIC: No, I mean for us - Lisa and I (laughter).
PM: My plan for you guys?
STEFANOVIC: Your five point plan for us, that's all we're after. What have you got planned for the day?
PM: For today and for Oz Day itself?
STEFANOVIC: Yeah.
PM: Well, it's a big day today in Canberra. As you know, I'm sitting here on, I think it's your stage, the stage which will involve the concert for Australia Day tonight.
This morning, Therese and I and the family will be welcoming the finalists for the Australian of the Year to a morning tea over at the Lodge. Looking forward to that. This is one of the great things about Australia Day, it's the Australian of the Year award, because it really does encourage excellence right across the country. You don't have to agree with every point of view, every finalist or every person who has won the award, what's great is you celebrate the excellence of Australian achievements.
Tonight, the concert here, where the Australian of the Year is announced, looking forward to that. We've got the Veronicas playing I think, so we'll be singing along (inaudible)
STEFANOVIC: Now, now PM. We have to pull you up there. Do you know one of their songs?
PM: Um, I was talking to my daughter about this last night, Jess. Hang on. The one that they actually got going with is 4ever. So there you go.
STEFANOVIC: Oh! Nice. (Laughter).
WILKINSON: Well done. Excellent.
PM: Got you Karl, got you Karl.
STEFANOVIC: Yeah, yeah. You've got me a few times. They also said they were very keen on meeting the, quote, ‘K-Rudd', after the awards tonight. You are in with the Veronicas?
PM: Well, they're pals, I understand it - I'm looking forward to meeting the Veronicas, it'll be good fun - they're pals with Erin Swan, also from Brissie, who is Wayne's daughter and Erin sings with another group, Norma May. Gee, I hope I got the name of her group right. Something like that. Sorry Erin if I got it wrong! The Veronicas put music in my home town of Brissie right on the map. They're a great group I'm told by people in the age group, so I'm looking forward to meeting them.
STEFANOVIC: Alright, we look forward to seeing you and Therese dance away tonight and also we look forward to seeing you at the awards ceremony that Lisa and I will be hosting.
PM: Tomorrow, by the way, one final thing. Tomorrow morning, as in Australia Day itself, we have a flag raising in the national capital. And importantly, what will go on right across the country which is welcoming a whole bunch of people into the Australian family as they take up Australian citizenship and I think that is one of the great things about our national day. Looking forward to that enormously.
STEFANOVIC: It is. Thank you Prime Minister, appreciate your time.
PM: Thanks guys.