UHLMANN: Prime Minister, good morning.
PM: Oh, good morning Chris.
UHLMANN: What will the Budget deficit be next year?
PM: The Budget deficit next year we are projecting is $57.6 billion or about 4.9 per cent of GDP.
UHLMANN: Why didn't the Treasurer mention that in his speech last night?
PM: All of the outline for the deficit for the next year and the year after outlined in the Budget papers in black and white and secondly the Treasurer made specific reference to what our net debt obligations would be over time.
That is a key measure and as far as net debt is concerned, the key factor is this - that we will have a net debt which is lower than that of the major advanced economies and furthermore when our net debt reaches its peak at 13.8 per cent of GDP, it will be something like seven times less than that of the major advanced economies.
UHLMANN: Well, if you are making comparisons, Prime Minister, we are going to go from below zero to $188 billion of debt in four years. Can you name another time in Australia's history where we have accumulated debt at such a rate?
PM: Can I say, Chris, we are looking at the worst set of global economic circumstances since the Great Depression. We are in unique times. These are unique challenges.
You can either stand back and allow a full visitation of this global economic storm onto the Australian economy or you can act and intervene, and our strategy is clear.
We will act and intervene by supporting jobs, small business, as well as apprenticeships today by investing in infrastructure for tomorrow.
That underpins our Budget strategy and we believe it is right and necessary because it supports up to 200,000 jobs next year and the year after when unemployment is cutting a swathe across the rest of the world.
UHLMANN: Prime Minister, you say we are in unique times but without above trend growth, the Budget won't return to surplus, will it?
PM: We have already indicated in the Budget when we project the Budget to return to surplus. We will halve the deficit in about three years and our projection is to return the Budget to surplus in six.
That is a responsible course of action to take. If again you measure our Budget deficit numbers against the major advanced economies around the world, it comes in at less than half.
Therefore we believe we are taking a responsible action but necessary action to support the economy now and -
UHLMANN: But it is correct to say, isn't it Prime Minister, that you basing that assumption on a return to a position where you are in surplus on the fact that we will grow above trend, aren't you? That is a large part of the assumption that you are making.
PM: The assumptions contained in the Budget papers are provided through the independent advice of the Treasury, Chris, as has occurred through the same Treasury advisors to the previous Howard and Costello government. That goes to the growth assumptions for the out-years of the Budget cycle.
On top of that, can I say that when the Treasury analysts have looked at recovery patterns in previous recessions in Australia, then of course the methodology they apply is similar.
UHLMANN: But you are saying the last two recessions are going to be like this one. You just told us that this one was unique.
PM: I'm saying that the depth and breadth of a global synchronised downturn where eight of our 10 trading partners around the world are in recession, the fact that some 32 or 33 of the major advanced economies of the world are contracting, underpins the dire circumstances of the global economy. And in response to that, what we have is a positive plan to assist with the economy now and to set us up in terms of productivity enhancing investments for the future - infrastructure, skills, the sorts of things Australia needs for the future - in contrast to the predictable levels of negativity and opportunism we see from the Liberal Party and Mr Turnbull in their reaction.
UHLMANN: Prime Minister, a very important part of this though, of your plan for recovery which you outlined last night is that we will grow above trend. Now the IMF doesn't believe that the rest of the world will. Why does Treasury and if we go back to what Treasury was saying 12 months ago, they were predicting a $21 billion surplus. That has turned around for this financial year to a $35 billion deficit.
Why should we trust this kind of forecast?
PM: These Treasury advisors are independent, hard-headed individuals who have advised independently the previous Australian government as well.
I notice that the Liberal Party have attacked again the integrity of the Treasury today as they attacked the independence of the Reserve Bank last year and last week attacked the independence or the professionalism of the Australian Statistician.
The key thing is, we have a positive plan for the future. We have outlined it. We believe it is sustainable. It is the right course of action and if you look at the state of the Australian economy now relative to most of the other advanced economies, whether it is in housing construction, whether it is in retail sales or in other areas, we are doing better on average than the other economies now but we have got a long, long way to go.
UHLMANN: So Prime Minister, no more cuts will be needed? You think that you can keep a lid on spending growth and we wait for the good times to return and that is how we return out of deficit?
PM: Well, the disciplines that we have applied in this Budget, Chris, are there for all to see.
UHLMANN: But is that the path, Prime Minister?
PM: The path is as follows - $22 billion worth of structural saves in the Budget to offset structural spends and investments including the adjustment to the single aged pension and the investments we've made in universities and higher education research.
Secondly, beyond that, we have applied ourselves a two per cent real spending ceiling for the future and beyond that again to allow the taxation base to recover as the global economy recovers.
Based on that, we have a credible strategy going forward and in those who would doubt it, I would just draw your attention to what Standard and Poor's have written overnight, this is the international ratings agency and I quote them, "We believe the deficits and associated borrowings do not alter the sound profile of the country's public finances." Furthermore Standard and Poor's say that the Commonwealth Budget is consistent with Australia's AAA long term credit rating.
UHLMANN: So you are utterly confident in these figures? That we will return from deficit quite soon in fact?
PM: You know something Chris, we are in a very difficult set of global circumstances. You speak to our Treasury advisors, we are looking at circumstances which their predecessors and those before them probably didn't have to deal with. We are looking back to the 1930s for precedents.
These are difficult decisions, they are hard decisions. We believe however we have got the balance right.
UHLMANN: Precisely Prime Minister but you talk about the 1930s then you use your examples of where we are going to grow from the 1980s and the 1990s. On one hand you say the circumstances are unique and then you say we will grow out of this recession the way we did in the last two. How does that add up?
PM: How it adds up, Chris, is that we are relying on the independent forecasters within the Treasury. The Government doesn't go to the Treasury and dictate what the projections are to the future. These are generated by the Treasury and I would suggest that those are the same advisors which provided advice to Mr Howard and Mr Costello in the past as well.
I would also say that for the next two financial years that the forecast provided by the Treasury are also consistent with those provided by the Reserve Bank, though the ones you are debating are the two outer years within the forward estimates.
Overall, their advice is sound, their advice is strong, they are a great bunch of professionals and I would simply say to the Liberals again, it is far better they engage in a positive debate about alternative strategies for the country's future than predictably, once again, rolling around in negative attacks on our independent officers, opposing everything and proposing nothing.
UHLMANN: Prime Minister, what was the toughest decision in this Budget?
PM: It was very tough to look at the future of the aged pension. There have been two intergenerational reports in the past which have recommended, commissioned by Mr Costello, which recommended that Australia act in terms of the ageing of our population, the cost to public finance over time.
The previous government squibbed it entirely in terms of raising the age pension age. We have acted on that but acted in a reasonable time frame to give people sufficient time to prepare.
That was difficult. A number of news outlets have attacked that today but that's a tough decision which we believe is necessary for pension sustainability in the long term.
UHLMANN: Prime Minister, thank you.
PM: Thanks very much Chris.