NEIL MITCHELL: The Acting Prime Minister, Julia Gillard good morning.
JULIA GILLARD: Good morning Neil.
NEIL MITCHELL: Well the head of the ANZ bank, Mike Smith says that if this US package doesn't go through or doesn't work, the prospect of a depression in the United States. Do you agree?
JULIA GILLARD: Well the Prime Minister is over in the United States and he's certainly urging the United States to act. What we know Neil, is that here at home in Australia, we can be reassured we've got a well regulated financial market and we are in a very different circumstance to what has happened in the United States. We don't have the same exposure to sub-prime loans. We don't have the same regulatory issues so whilst obviously we're in troubled times and globally there is so much uncertainty abroad. Here we've got a well regulated financial sector and an economy that's showing some resilience in the face of this trouble.
NEIL MITCHELL: But we are going to feel this aren't we?
JULIA GILLARD: Yes, we are not immune from what happens in the rest of the world; we are going to feel it. The nature of the financial system today is that it is global...
NEIL MITCHELL: So how will we feel it?
JULIA GILLARD: ...we do feel the effects. Well for our banks obviously they are affected by what happens globally, we've got to recognise that and the Treasurer's been making the point very clearly that we're not immune. But we also have to recognise the differences. And in circumstances where people can be quite worried because they get up and look at the newspaper headlines every day and listen to the radio and worry about what's going to happen next, I think it is important to keep reminding that we're in a very different situation when it comes to the strength and resilience of our banking system.
NEIL MITCHELL: But we do have the Reserve Bank, ASIC and the Prudential Regulation Authority preparing a contingency plan in case banks get into trouble.
JULIA GILLARD: Our regulators have been working together and working all year and it goes to show that the regulatory system in this country works well...
NEIL MITCHELL: The quote from the bank yesterday “there may be circumstances where a public sector response is required in order to satisfactorily resolve a financial distress situation”. I mean there they're talking about the possibility of the same sort of bail out we are looking at in the United States.
JULIA GILLARD: What our regulators have been doing is, all year they have been working together. We have a well regulated financial system, the quality of our regulators is good and obviously they work strongly together. They work strongly monitoring the situation, making the adjustments to ensure liquidity. You would expect them obviously, as people who are prudent, to canvas all circumstances and possibilities. The message from the Reserve Bank and from the regulators has consistently been that our banking and financial system is very strong, it is well regulated, we are not in the same circumstances as the United States, we do not have the same exposure to a sub-prime mortgage problem.
NEIL MITCHELL: Yes I agree entirely. They are saying that the banking system's very strong but this is what their plan is though isn't it? They are drawing up contingency plans.
JULIA GILLARD: The essential message Neil and I really do think it's very important obviously confidence and the fact that people worry needs to be upper most in our minds in these uncertain times. I think it's very important for people to recognise that our independent regulators are telling us that our financial system is well regulated and in a different circumstance; indeed it's been described as light years of difference from what is happening in the United States.
NEIL MITCHELL: Well look we got a very blunt and simple question on this last week from somebody who said is my money in the bank safe?
JULIA GILLARD: Well our regulators obviously would say yes, your money in the bank is safe. Our banking system is strong and well regulated.
NEIL MITCHELL: How will it affect us then? Jobs- will jobs go in Australia?
JULIA GILLARD: Well our economy is subject to two countervailing forces at the moment and the Treasurer and the Prime Minister have been making these statements all year. What is happening in the global financial markets really means the truth of those statements is even more evident. On the one hand we've got a domestic inflation problem which we need to deal with. We also have inflation flowing from world events like global oil prices and increasing food prices and obviously with global financial markets in this amount of turmoil the cost of credit is going to increase for people. So there are all those pressures. Those pressures lead to ten interest rate rises, consecutive interest rate rises in a row, there were ten under Peter Costello's watch. We saw an interest rate reduction relatively recently...
NEIL MITCHELL: What do you mean the cost of credit is going to increase?
JULIA GILLARD: The circumstances with banks dealing with each other obviously affected by the global financial circumstances.
NEIL MITCHELL: So how does that affect us- interest rates?
JULIA GILLARD: Well the upwards pressure on interest rates here in Australia has been a result of the inflation issue that we've been dealing with in the last....
NEIL MITCHELL: No, no, no that is not entirely right is it? Because the banks, in fact, stayed ahead of the official rates because of the sub-prime crisis. So they were trying to get money back because of their bad investments.
JULIA GILLARD: But the last interest rate movement Neil was down and the point I am making is that there are countervailing forces in our economy. There's the dealing with the inflationary pressures, there's the fact we did seek consecutive interest rate movements - the last one was down. But obviously that is going to feed through to the economy and we've seen that. On the other hand, the resources boom continues to run strongly for us- we've good terms of trade.
NEIL MITCHELL: So what is the message really to people who are concerned, people who read the headlines, hear the discussions and the word depression being thrown around, let alone recession being thrown around- what is the advice to people? What is your advice to people as Acting Prime Minister?
JULIA GILLARD: My advice to people is basically to understand we are in a different situation from the United States when it comes to our financial institutions, point number one and very important in terms of people being worried about the future. Point number two, this nation does have some challenges to face up to. We've got an inflation challenge to face up to and the Government's been dealing with that through its Budget surplus, though its new investment in skills and our new long-term plans for infrastructure. We've also got to face up to the fact that we need to be driving productivity up and that's really what our new workplace relations settings are about, as well as making sure people get treated fairly.
My advice to people in these times is I think Australians are very sensible people, they get up every day and they go to work and they work hard, they come home and they make decisions about how they are going to spend the money they earned. People want to buy a home, they want to invest, they want to look after their families. So they should keep on doing all of that.
NEIL MITCHELL: What? Stay clam?
JULIA GILLARD: I certainly don't want anyone to have an impression that they should have some anxiety about our financial institutions. We're making the point very strongly and the independent regulators are making the point, that our financial institutions are very strong. We have at the moment very low unemployment; the most recent unemployment figures were very low. There's people out there working hard doing what people normally do. So yes absolutely keep a weather eye on all of the circumstances, people are going to listen to the radio, they're going to work their way through the newspaper but at the end of the day for people who are looking after their families, their circumstances are going to be about going to work, working hard, earning that money and making provision for their family as they always have.
NEIL MITCHELL: So business as usual?
JULIA GILLARD: Well it's obviously not business as usual but Neil can I say that there is a difference between prudence and caution and planning as opposed to getting too worried about these things. Yes we've got to be focused; we've got to understand the nature of the challenges and in understanding the nature of those challenges, we're not immune from world events but we do have a strong, well regulated banking system. We have an inflation challenge in this country; the Government's policies are calibrated to deal with that inflation challenge. We obviously have other challenges in this nation like facing climate change and drought and a series of others but they're the type of economic fundamentals that we're dealing with.
NEIL MITCHELL: If may just finally notice it was good enough for George Bush to have a bipartisan approach with Barack Obama and John McCain, why not Kevin Rudd do that? Malcolm Turnbull has put the offer on the table, why not?
JULIA GILLARD: Well we're calling for a bipartisan approach too Neil and particularly a bipartisan approach to delivering the Government's Budget. The Budget is about dealing with the inflation challenge; the Budget is about delivering a surplus that we need as a buffer in uncertain times. The worse of all possible things when we've got global uncertainty is to have Budget uncertainty. So we've been calling on the Libs to work with us to deliver the Government's budget and I'd have to say we haven't seen one iota of cooperation.
NEIL MITCHELL: Just quickly- football who's going to win?
JULIA GILLARD: I've tipped the Hawks. I'm obviously a Bulldogs supporter Neil so last Friday night was not a particularly happy time for me. So in the absence of being able to go for the Bulldogs, I've gone for the underdog.
NEIL MITCHELL: And Malcolm Turnbull's been making certain confessions on television- got anything to confess to us?
JULIA GILLARD: What would you like me to confess Neil?
NEIL MITCHELL: I don't know what you've done.
JULIA GILLARD: I've been working hard and extraordinarily well behaved. Does that stack up as a confession or not really?
NEIL MITCHELL: Does it matter that he smoked dope?
JULIA GILLARD: Does it matter? Look I can't imagine that it matters in any way shape or form, no.
NEIL MITCHELL: Did you?
JULIA GILLARD: At university; tried it, didn't like it. I think many Australian adults would be able to make the same statement so I don't think it matters one way or the other.
NEIL MITCHELL: I agree with you. Thank you for speaking with us.
JULIA GILLARD: Thank you.