SANDY: Good morning Mr Rudd.
PM: Good morning Sandy, thanks for having me on the program.
SANDY: You must be very pleased with that news yesterday?
PM: Well we're in the middle of tough economic times globally, and around the world and in the middle of this global financial crisis we've had more than 25 banks either fail or have to be bailed out. Therefore, we believe it's important to get the balance right between maintaining the stability of the Australian financial system and providing maximum help to working families under financial pressure, and that's what we've been seeking to do through our approach to economic policy at a tough time.
MIKE: Were you pleasantly surprised by the size of the cut. One per cent's big?
PM: This was decisive action by the Reserve Bank, decisive action to help families, but decisive action also, which we believe is consistent with the global economic outlook we face. The Government itself, Mike also remains committed and has indicated its willingness to take decisive action itself by bringing forward our agenda for nation building across Australia through our Building Australia fund and getting on with major projects across Australia. You see...
MIKE: Can we ask you about the infrastructure thing in a minute, I'd very much like to come to that. Just on the interest rate cut there for a bit, Malcolm Turnbull is saying the banks should pass on the full one per cent cut, and you're not pushing for that - why not?
PM: Well my first responsibility as Prime Minister and that of the Treasurer as well is to maintain the stability of the Australian financial system and that means taking a very clear-sighted look at what's happening around the world with the liquidity of the banking system. As I said before, if you've got 25 banks or more now that have either failed or have had to be bailed out, my first responsibility is to maintain the stability of the Australian financial and banking system. Now that means that has direct impact on families, it has direct impact on small businesses to make sure that our banks are in tip-top working order. That's been our number one responsibility. Also, within that framework, to make sure that we've got maximum support for working families through the high mortgages which they've been paying up until now. It's getting this balance right and taking your responsibility seriously, rather than just engaging in populist politics.
SANDY: Prime Minister, everyone's focussed on the United States and Europe, but Australia is now heavily dependent on the Chinese economic boom. Well what's the outlook there?
PM: Well, I was talking to the Chinese Prime Minister a couple of nights ago about this very question, and that is, what China plans to do in the period ahead. (inaudible) see China's own growth projections down slightly but that's down from something like 11 and 12 per cent, down to nine and 10 per cent. China has a huge impact on the economies of the east Asia region as well as now the global economy. My understanding is that China will continue to drive strong economic growth for its own national purposes, but that's also good for countries like Australia because China is such a major trading partner of ours.
MIKE: So do you reckon our commodity prices, you know, coal and so on, will hold up?
PM: I can't give you a price-by-price response to that Mike, and obviously commodity prices are being affected by what is now the global economic climate, where you've got so many economies in Europe who are already experiencing negative economic growth and lots of commentary around the place at present about the current state of the American economy. China is the third big factor in this, together with Japan in our own region. China, however, continues to generate strong economic growth and part of the long-term strategy of this Government, and the strategy for the period immediately ahead is how to more deeply and broadly engage with the Chinese economy, which is now critical for Australia's continued economic performance.
SANDY: So for Australians waking up this morning and thinking about our economic outlook, what can we expect - a recession, a contraction, a soft landing?
PM: We believe, and our understanding from everything that we've analysed internally is that the Government's current policy course of action will see Australia through these difficult economic times. It's going to be tough, there'll be bumps along the road, and some hard decisions will have to be made. Some of them won't be popular, but we believe the policy course of action we've set for the nation will see the economy through. I've got to say, that if you look at the underlying strengths, which is against what's happening in Europe right now, where you've got most major economies generating negative economic growth, Australia continues to generate positive economic growth. On the question of Budget, Australia has a substantial Budget surplus as a consequence of Wayne Swan's Budget back in May. If you look around Europe they don't have that buffer of flexibility for the future because most of those economies are running significant Budget deficits already.
And also the strength of our future business investment outlook, this causes us to be confident about the Government's current policy economic directions.
HOST: You mentioned the infrastructure projects earlier. I suppose they are designed to keep our economy pumping as well are they?
PM: Well there are two parts of policy here. One you saw from the Reserve Bank in its decisive action yesterday which helps working families and which is also designed to maintain the stability of the financial system, but the Government itself as I was saying before to Mike, is also committed to taking decisive action on its own part, as we have already indicated by bringing forward our nation building agenda. And the nation building agenda through our $20 billion building Australia fund is designed to get in there and support major infrastructure projects for the country.
HOST: Have you got specific projects in mind or are you waiting to see what comes up from the States?
PM: Well what we did at the beginning of the year was we established Infrastructure Australia. That is the first time any such body has been created nation wide, chaired by Sir Rod Eddington. Right now they are finalising the lists of infrastructure requirements put to them both by State and Territory Governments and by others across the country and they will determine based on that an audit for the current state of the nation's infrastructure stock and a priority list for getting on with the job. We are doing it in a systematic, thorough fashion and we have indicated that that body Infrastructure Australia will bring forward an interim report by year's end that we will get on with the business of rolling up our sleeves and funding these projects.
HOST: I think Prime Minister you will have a cue a mile long of Sydney-siders outside your office saying please put some money into our roads and our public transport and our trains. Is that on the cards?
PM: Well nationwide one of the criteria that we are applying to Infrastructure Australia's assessment is what can government credibly do to reduce urban congestion. Certainly when I've looked around the huge cities in Australia - Sydney, Melbourne and also in Brissie - there is a real problem in terms of urban congestion.
So, the practical challenge is how do we deal with it.
One of the things that stunned me over the years is how is it we got to the beginning of the 21st century without any of our three major east coast cities with a coherent plan, let alone the reality, of an expense urban metro system.
Now, we've got to see what the independent advice is from Infrastructure Australia, they're working on it, but urban congestion is critical. Good for the economy, good for commuters, and I believe also, good for reducing greenhouse gas emissions.
MIKE: Well there's a hint.
There have been reports here in the Sydney papers, I'm sure you've seen them, that you're not going to fund, or not keen on funding, the north-west light rail system in Sydney, allegedly because it won't bring you any votes. True or false?
PM: That is, can I say, comprehensively false.
First of all, we have an independent decision making process to decide these things, which is what Dr Rod Eddington's body, Infrastructure Australia, is currently working its way through.
Secondly, it's a matter for State Governments what they put forward to Infrastructure Australia. They can put forward anything they so choose. The decisions will be taken by Infrastructure Australia in terms of the recommendations they bring forward to the Federal Government.
We're up for all well thought through, well documented proposals.
SANDY: Prime Minister, can I ask you, changing tack here, pensioners still hoping that I think you'll have a Christmas present for them. Will you?
PM: Well, we've said before that in the Budget we have brought forward some $5 billion worth of additional payments for pensioners. And that's provided the equivalent of something like $15 to $20 extra per week, if you put all the elements of those additional payments together.
But I've always said, this is simply a down payment on the future. We've got to get the long term reform of the pension system right. Every $10 a week that we would increase the pension by in the future results in an extra $2 billion to the Budget bottom line in one year - $8 billion across the forward estimates. And if you take it up to $20, that's $4 billion a year, you take it out to $30, that's $6 billion a year.
We've got to make sure we get this absolutely right because it goes into the Budget bottom line for the future at a time of great economic challenge for Australia. But I've always said, the Government is committed to reforming the pension system. And we will do it.
MIKE: Prime Minister, thanks very much for your time, it's good to talk to you always.
PM: Thanks for having us on the program.