MITCHELL: Prime Minister, Mr Kevin Rudd, good morning.
PM: G'day, how are you?
MITCHELL: I'm well, thank you. Just down to business. Should David Hicks be able to sell his story?
PM: Well, there's a thing in Australia called the Proceeds of Crime Act. And it specifically prohibits the sort of activity which is being envisaged by Mr Hicks. Therefore, if he was to proceed in that direction, it would be a matter for what the police did and what then the DPP did independently under the powers vested in that Act, and that Act goes back to 2002.
MITCHELL: Yeah, the lawyers are arguing though because he didn't commit a crime within Australia - against Australian law - that he is not covered by this?
PM: Well that will be then for the lawyers to debate. All I'm saying is there is a piece of law in Australia called the Proceeds of Crime Act, that's what it deals with, which is the capacity of people who have fallen the wrong side of the law to sell their story for profit. It's there. But it's not a question for a Prime Minister or a politician to say how a particular piece of legislation applies to the individual circumstances of a case. That's why we have got an independent DPP and independent coppers.
MITCHELL: Yeah, fair enough. But it's reasonable that the Prime Minister has an attitude towards it. Do you believe in the Hicks case, which is a special case, he should be able to tell his story?
PM: I think what I believe in is the independence of the law and the independence of our courts and judicial processes. There is a law there for a specific purpose. You are right to point out the fact that there are peculiarities related to this individual case Neil, everyone knows that. But I'm not going to make a judgment as to how the details of his case apply to the Proceeds of Crime Act, that's up for others.
MITCHELL: Do you, what do you believe media organisations should be bidding for it?
PM: Well, I think all organisations should be mindful of what the law says. They'll make their own judgment based on their own legal advice as to whether they've potentially fallen fowl of the Proceeds of Crime Act. I'm not going to tell them what to do either.
My overall instincts in terms of the media, and this goes to recent comments by the AFP Commissioner on public reporting of terrorism cases for example, is that I err strongly in the direction of maximal media scrutiny. And the reason being that if you look at the history of the Haneef case, media scrutiny I think was basically on the money.
But, here we've got something quite specific, which is whether a person who has fallen fowl to the law, and I know there are complexities associated with that, should be able to sell their story for profit. And I'll leave that determination to the independent judicial and legal authorities.
MITCHELL: Okay, on to something else. The economy. Now you've inherited a tough one obviously. Interest rates likely to go up, inflation issue, stock market wobbly. Is it an important time for unions to show wage restraint?
PM: It's an important time for everyone to show restraint. And that means both public and private. You know, inflation is fuelled by a few factors. One is the extent to which you've got enough capacity in the economy, and that's why skills and infrastructure are really important.
The second is what the Government does in terms of what is called public demand. That's the extent of the Budget surplus. And you've already seen what we have had to say on that. And that is that we are setting ourselves a target of about an $18 billion surplus for the upcoming Budget because we have to do our bit to tighten the nation's belt so that we don't fuel the fires of inflation.
The third bit goes down to private demand. And that means - that goes to the whole question of restraint across the economy. And of course, the people in the trade union movement should be mindful of that as well.
But you only begin to have an effect on inflation when you have a full frontal assault on that. And remember, the previous Government got 20 sets of warnings about inflationary pressures. Ten interest rate rises on the hop. And when we took over, we had inflation running at 3.6 per cent per annum. That is, as reflected in that most recent CPI data, which goes to the December quarter last year, the highest inflation rate in 16 years.
MITCHELL: You have obviously a closer relationship with the ACTU than the previous Government. Will you ask the ACTU for restraint? Because they are not making good noises at the moment about wage restraint.
PM: Well I spoke to a meeting of, or a gathering of, trade union leaders in Canberra last night and I was just talking generally about the election but I was actually pretty blunt about the fact that we've all got to fight the fight against inflation. It's going to mean some very tough decisions for us all this year. And we will have to sort all those things through. They legitimately will argue on behalf of their members, but my responsibility is to act in the national interest on behalf of the Government and it's quite clear that restraint is necessary.
But there is a supply side question here too. Sorry to use economic jargon, Neil. And that is, the overall supply of skilled labour. Now, why do we face the pressure of wage based inflation? The reason is that there is an undersupply of skilled labour and in part that is because our predecessors were asleep at the wheel on skills training for a long, long time. And that's created the problem we've got and we've got some measures in mind to try to deal with that in the short term, on the supply side, and that goes, for example, to a decision I announced in Brisbane recently to fund immediately an additional 20,000 training places straight away. These are short termers to actually bring people onto the labour market.
MITCHELL: Do you have a figure in mind that you think would be a reasonable wage increase over the next year?
PM: No, none at all from my point of view, Neil, because we live in a market economy. And these things will be determined in individual negotiations. And that's as it should be. We abandoned the principle of centralised wage fixation a long, long time ago. And that's why we've got a flexible modern economy.
But I think everyone - employers, employees, as well as all those out there supporting those various arguments in the economy - need to be very, very mindful that public economic enemy number one right now is inflation. We've all got a combined responsibility to fight it. And part of the reason lies, it is absolutely bad for small business, for business in general, and for working families.
MITCHELL: Would you agree that one of the biggest dangers with public enemy number one though is a wage breakout?
PM: It is one of the contributing factors if there is a problem on that score. But, inflation is a multi-headed beast. As I said to you before, part of the contributing factor to inflation has been an excessively loose Budget policy by our predecessors. That's why we set a more ambitious Budget surplus target for the upcoming Budget. The other lies in quickly acting on some key skills shortages and infrastructure bottlenecks to try and relieve pressure. That's that five point plan to fight inflation that I announced in a speech I gave in Perth a week or so ago.
MITCHELL: So if there is an interest rate rise next week, as most commentators seem to think is likely, is that on the head of the previous Government?
PM: Well, I don't think it's profitable for anybody if we're fighting the fight against inflation to just engage in some sort of political blame game. The truth is this Neil, we've inherited an inflation problem from our predecessors. I don't think anyone out there in the economic -
MITCHELL: You've not been there long enough to change it, actually -
PM: Well that's true. They were there for 11 or 12 years, it's just a fact. I mean, look at the incoming Government brief, there's a problem. Look at the fact that there were 20 successive inflation warnings from the Reserve Bank which were successively ignored on skills and infrastructure pressures. Look at the looseness of Budget policy on the part of our predecessors going into the election and the fact that frankly, we, within a month of taking over Government, have had to turn this around and say, here is a five point plan of action. Budget surplus, point one. Point two, how do we deal with increasing national savings and private savings. Three, on skills. Four, on infrastructure. And five, how do you actually help also people who are wanting to get back into the workforce to get back in the workforce through increased workforce participation, and that goes down to childcare questions as well.
MITCHELL: Well you put all that together, it sounds like we should brace ourselves for interest rate rises.
PM: Well, I think you've probably interviewed me on this a dozen times last year, Neil, which was do I believe in the independence of the Reserve Bank. Yes, I do. And, if you believe in the independence of the Reserve Bank, they are the ones who set interest rates and that should be their independent preserve.
My job as the Prime Minister is to make sure that we are doing everything through Budget policy to make the job of the Reserve Bank as easy as possible. That's why I took the decision in my first speech of the year to make it clear to all concerned that we will be shouldering a large part of the Budget policy burden by making clear our commitment to an $18 billion surplus in this coming Budget, and of course, one thing we've got to keep a weather eye on though Neil, is what happens in the global economy.
MITCHELL: Okay. Well, you talk about the surplus. Lindsay Tanner's saying yesterday $4 billion in cuts coming out in the May Budget. Any areas untouchable when you cut?
PM: One we've been quite plain about is defence. In fact, I spent a long time yesterday speaking with the defence chiefs - both civilian and military - and to make plain to them what I was clear about prior to the election. That because national security is the first responsibility of Government, that the defence Budget will be preserved. In other words, consistent with the pre-election commitment, there will be a 3 per cent real increase in the defence Budget right through until 2015. That's on an annual basis. And that's because if you are making long term defence planning decisions including buying new kit and equipment you've got to have some Budget certainty.
MITCHELL: And the tax cuts are untouchable?
PM: The tax cuts as we promised are untouchable. We, the Government, we just take seriously what we said to people before the election. I know there has been some controversy about the tax cuts, but we believe that - particularly with particular pressures being faced by working families - that those cuts will be helpful and the challenges which lie ahead. But we believe that through a rigorous programme of savings, and Lindsay Tanner's razor gang, and a general tight approach to Budget policy, that we can do our bit by producing a much better Budget outcome than was being projected by our opponents only two or three months ago.
MITCHELL: Is their argument that the tax cuts could in fact compensate if there is wage restraint?
PM: Well, it's a complex argument. And, there is no ultimate piece of mathematics on this. Particularly given we are dealing with a market economy where individual wage setting for, you know, firms, sectors, industries will differ and vary depending on supply and demand factors.
MITCHELL: Well that's true. But you're asking both the employer and the employees to show - to react to it - which means the employers get tough and you're asking the employees to be a bit understanding.
PM: What I'm saying is that we're clear cut about our commitment to those working families, and therefore, employees, about what we said before the election. Which is that those tax cuts are proceeding. They will help. There maybe some other things that we can do on the way through as I indicated in my speech in Perth, about how we also assist the general future direction of savings policy as well.
MITCHELL: Where are you guys going to get the $4 billion then?
PM: Well, Lindsay Tanner and I and my colleagues, were here until about midnight the night before last going through, line by line, programme by programme, department by department, areas of interest - if I can put it that way - in order to get to a big number. If you're a new Government, you do have an advantage of looking at things from (inaudible), going back to some basics. I'm sure there is going to be pain and difficulty emerging from some of these cutback decisions. But we haven't reached them in finality but we're pretty clear about the sort of targets we need to get to.
MITCHELL: Will everybody hurt in some way?
PM: I think there'll be a fair bit of general, you know, difficulty arising from these cuts. But, let's be frank. The overall problem which working families are going to face is if inflation is let loose and starts to rip into people. And we have an overriding national economic responsibility not actually just to declare it as public economic enemy number one, but to launch a coherent fight against it. Can I just say, that if our predecessors had started this years ago, we'd be in a much better position.
MITCHELL: Is welfare untouchable?
PM: Well, when it comes to the existing set of welfare payments, we believe that people who are needing welfare assistance - there are multiple categories of welfare - are going to face the same sort of challenges this year as they did last year and maybe more acutely. And therefore we're going to be very, very mindful of the impact of those, particularly at the bottom end of the income spectrum, who are going to need all the help they can get to negotiate the struggles of the year ahead.
MITCHELL: So does that mean welfare is untouchable at the lower level?
PM: Well, it means that we believe that when it comes to social security payments, that you've got a whole bunch of people out there who are doing it really tough. And therefore, taking the meat axe to those sort of payments I think is not desirable.
But, can I say, when you look at the administrative expenses of Government departments, in this $200 billion plus Budget that we run nationally, there are many, many areas that we can look to, which frankly, are not core business for the nation which we can take the axe to. There'll be screams and squeals here and there. And there will be cries of saying, well why was that cut and this not. I accept responsibility for that. Tough decisions have to be taken. We're doing it.
[Commercial break]
MITCHELL: The Prime Minister is in Canberra, he'll take a quick call. Jack, go ahead, please.
CALLER: Good morning, gentleman. I've just got a quick question for Mr Rudd.
PM: G'day Jack.
CALLER: Recently the Australian banks justified an interest rate increase to their customers based on inability to secure low cost loans from the US. We've now seen a one and a quarter interest rate cut out of the US. What's the Government going to do to pressure the banks?
PM: Well, Treasurer Wayne Swan has been pretty blunt about this, and particularly in relation to a couple of the banks, saying quite plainly that the magnitude of their rise did not reflect the extent of the challenge delivered to the banks by...
MITCHELL: But they should be coming down now, they've come down in the US, shouldn't they?
PM: ...by the sub-prime crisis in the United States. Complex arguments there Neil, in terms of cost of credit between banks. But certainly the scope of the rise, by a couple of those banks, was not frankly justified, and Wayne Swan was very blunt in saying that. I support his comments.
MITCHELL: But do you think that they should be bringing them down now the US rates have gone down?
PM: Well, when it comes to what official interest rates should be, as you know, we respect the independence of the Reserve Bank, they determine interest rates - official interest rates - we don't.
On the commercial decisions made outside of the official interest rates framework, which applied in the case of these recent moves by the various Australian private banks, I've got to say there has to be a process of making it very clear in the public commentary from the Government when people go beyond the pale. A number of those banks did go beyond the pale. We said it, and I think Wayne Swan was very blunt about that on behalf of the Government and I support his position completely.
MITCHELL: Do you have full confidence in Mick Keelty, head of the Federal Police?
PM: I absolutely have full confidence in Mick Keelty. On the recent stuff, concerning his comments on the role of the media in reporting terrorism trials, he is speaking obviously in terms of his own capacity as head of the Federal Police, the Government has its own view and the Government's view is that the media should simply abide by the laws of the land and I err, as I said to you earlier in this program, on the side of the media giving full and frank coverage. I think the media's role in the Haneef case was in the national interest.
MITCHELL: He seems to have a different view of how democracy works?
PM: Well, he's entitled, like any head of a service agency, for example, as you know the State Police services will express a view about things should be handled, that's fine. I mean, we're not going to put a clamper on anybody. He should be able to express his view. On behalf of the Government, however, I support fully the views put by the Attorney-General, Robert McClelland, yesterday which is that we're not going to be in the business of imposing some sort of media black out on the reporting of terrorism cases.
MITCHELL: Are you close to getting a form of words on the apology?
PM: Getting there. This is really tough, Neil, actually. I had a session with Jenny Macklin, the Minister on this, this week. We, through her, have gone through a big round of consultations. And we've also been doing it through various communities in the Northern Territory. Jenny has also met with two representative groups of the stolen generation. So, that's happened as a first round.
Next week we'll go through a further round and we'll be closer to the content of that apology as we get closer to parliament itself.
MITCHELL: Certainly a number of groups I've spoken to, (inaudible) raising the expectation of some form of compensation. Will you unequivocally tell these groups no compensation?
PM: We will not, under any circumstances, be establishing any compensation arrangements or any compensation fund. Absolutely blunt on that. Tell you what the reason is -
MITCHELL: But if they seek it, I mean, if they seek it, if they pursue it through the courts, what will the Government do?
PM: Well, if people seek it through the courts, guess what, ever since the stolen generation report came down, any individual has been free to seek compensation through the courts.
MITCHELL: Well yes, but they are arguing that with an official apology, they will have a stronger argument in the courts. Will the Government be represented in any such court cases?
PM: Well, let's cross all those bridges when we come to it. We're absolutely robust in the view that we've been put to us through our legal advice, and on this question, as I've said, there'll be no compensation fund, no compensation arrangements. But since year dot, any individual in Australia is capable of taking any legal action against any Government to seek compensation or redress for any matter. They can do that.
What I'm saying, very bluntly, is that this Government - the Government which I lead - will not, consequent to the apology, be establishing any compensation fund or arrangements for those affected. The reason for it is this: we've got to get this right, it's unfinished business for the nation. Aboriginal people were dealt a very raw deal through this. We need to make amends for it. I will do that through an apology. It's then time to move on and to move on to working together to close the gap in health, education outcomes for aboriginal and non-aboriginal Australia, and for example, practical areas like infant mortality differences between non-aboriginal kids and aboriginal kids.
MITCHELL: So, will the Government fight any attempts for compensation?
PM: Well, I will take advice on any such hypothetical in the future, Neil. But I've got to say, our previous position, our clear position of policy, is that there will be no compensation fund, no compensation arrangements. And if anyone were to advance a legal case on these matters, they are free to do so. But we would, of course, be robust in our legal advice that there is no basis for them to do so on the basis of the apology which we will render in the parliament.
MITCHELL: Do you support - I'm sorry - have you given any thought yet to a new Governor-General?
PM: Oh, a little bit, but not much is the honest answer. I think the current Governor-General has most of this year to run. And frankly, I've had a few other things on my mind in the previous six weeks or seven weeks I've been Prime Minister. There has been a few other things happening, mate.
MITCHELL: Yeah, but are you happy with him making comments on the cricket the other day?
PM: I think the Governor-General is perfectly entitled to express his point of view. And, on the question of civility in the game, I think all of your listeners would like there to be greater civility in the game generally. Not apportioning any responsibility to any particular team. It's a tough and competitive business, you can conduct it with a bit of civility.
Remember, in politics we are, shall we say, less than civil to one an other so I'm very cautious about preaching from glass houses here. But I think the nation would expect of us in a political sphere to be more civil towards one an other in the future. And I think the history of the game of cricket, I think people would like a bit more civility as well.
MITCHELL: And just very quickly, because we're nearly out of time, do you support the dredging of Port Phillip Bay?
PM: Well, our job on that - I think you've probably interviewed Peter Garrett on this some time ago...
MITCHELL: Yes, I did.
PM: ...is narrowly defined through the Environment Protection Biodiversity Act. And the Commonwealth Environment Minister, Peter Garrett, has got to make determinations based on matters of national environmental significance, world heritage properties, national heritage places, etc. He's made a determination on that already, he's got another one coming up. And he's got to make an independent, unfettered decision. I support his handling of it entirely so far.
MITCHELL: Thank you very much for your time.
PM: Thanks, Neil.
[ends]