CURTIS: Prime Minister, welcome to AM.
PM: Good morning.
CURTIS: Your reaction, first, to the death of the terrorist Noordin Mohammad Top. How much does this dent the capability and leadership of terrorism in Australia's region?
PM: Our advice is that it does so significantly. This is welcome news and I congratulate the Indonesian security authorities for their success. This has been a very difficult operation over a long period of time and the credit goes to the Indonesians, through their security agencies, for doing this.
However it doesn't leave us in a position where we can feel complacent about the future. Jemaah Islamiah is still alive and well; Al Qaeda is still alive and well.
But this is a very significant result. This man has been a mass murderer, he's been responsible for the murder of Australians and I congratulate the Indonesians on their success.
CURTIS: Will you be pushing them, though, to reinforce their success and keep up the fight against terrorism?
PM: Absolutely. Our relationship with the Indonesian Government on counter-terrorism is very strong. This relationship began to be built under the previous Australian government. We have sought to build on that and expand it further. We cannot afford to be complacent and I believe the Indonesians fully understand and accept that themselves, given their own, again, recent experiences.
And again on Noordin Top, the fact that we have had this individual responsible for the most recent Bali bombing, the two Marriott bombings, the bombing on the Australian embassy in Jakarta and potentially others as well, this has been a very significant result.
CURTIS: You've had a win of an entirely different sort with windfall profits from the Reserve Bank contributing about $5 billion to your coffers last month. Does that money need to go straight to the budget bottom line to pay off the deficit?
PM: We'll work our way through all of these things through the normal Budget processes. We have undertaken what I would describe, strongly, as conservative economic management which is to expand the role of government in the economy through fiscal stimulus when the private economy is weak and to roll that stimulus back over time as the private economy recovers.
That's the responsible thing to do and we'll be working our way through all of these matters on the expenditure and the revenue side as we prepare for the next Budget.
CURTIS: You do though have a Budget under considerable pressure and as the Treasurer will outline today you've got a growing and ageing population. Can you any longer afford to tolerate the sort of inefficiencies and wasteful spending we've seen outlined in Parliament over the last two weeks in the schools program?
PM: Well, firstly I would note very carefully that in the Deputy Prime Minister's response to many of the questions raised by those from the Opposition in the largest school modernisation program in Australia's history, that many of the questions they raised have proven to be unfounded at all. Secondly-
CURTIS:- But not all of them-
PM: Secondly, if you're rolling out a school modernisation program involving all of Australia's 10,000 schools, it follows logically that on the way through there are going to be bumps in the road, and what the Deputy Prime Minister has put in place is means by which each of those can be dealt with as they arise, and she's been doing so.
Secondly, were we not engaged in that sort of infrastructure stimulus for the country, the results that we've seen underpinned by the recent reports by the OECD and others which has the Australian economy, uniquely worldwide, generating positive growth over the last year with the second lowest unemployment of the major advanced economies, with the lowest debt and with the lowest deficit of the major economies, and the only one not to have gone into recession, one is part of the other.
So what we're doing through nation building for recovery is supporting jobs for tradies, supporting work for small business today by investing in this nation-building infrastructure for tomorrow.
CURTIS: But Julia Gillard put or suggested during the week that the problems occurred at the state level because they were implementing your program. Isn't that a reverse blame game? Aren't you ultimately responsible for how federal money is spent?
PM: The Deputy Prime Minister is making a simple statement of fact and that is the agencies we deal with in the implementation of the largest school modernisation program in Australia's history - 10,000 schools, government and non-government right across the country - is either through state and territory governments on the one hand, or what is called the block grant authorities or the non-government school authorities, including the Catholic school authorities, on the other.
CURTIS: We haven't seen any problems raised in the non-government sector. Are the state governments simply not up to the job?
PM: No, what I'd say is that as you're rolling something out in order to achieve two objectives - which is to support jobs for tradies now and work for small business now, and building the infrastructure we need for tomorrow - it's going to be challenging.
Let's look at this in overall perspective: 10,000 schools and you mentioned before the population growth for Australia for the future, a population which we project will rise to 35 million by mid century. The school buildings we're laying out today - new libraries, state of the art libraries, new science centres, new language centres - these are there to serve the needs of the next 40 years to make sure that our kids have the best education opportunities possible.
It's a good program, it's the right program, but inevitably when problems arise you have mechanisms for solving them on the way through. That's exactly what the Deputy Prime Minister is doing.
CURTIS: You're heading off to the United States for the G20. You'll also be talking climate change. You had the surprise appointment yesterday of Brendan Nelson as ambassador to the EU where no doubt he'll be dealing with climate change issues as well.
Will you be expecting him to tow your line on emissions trading, a policy he doesn't agree with?
PM: Well let me take those two points in sequence.
Climate change is not nearly a done deal globally. This is a huge and complex negotiation we're involved in right now, and when we go to the United Nations in New York and the Pittsburgh summit at the G20 next week, let me tell you it's going to be very hard to generate real progress on the way through to Copenhagen, which is only about 80 days away.
Secondly on the case of the appointment of Brendan Nelson, obviously we welcome his appointment. I welcome the fact he's accepted this appointment. As Brendan said yesterday, as an Australian diplomat he will act consistent with the decisions of the democratically elected government of the day. That is simply normal.
CURTIS: Did you talk about the issue of emissions trading?
PM: I think we've, Brendan and I have had a few conversations. I'm not quite sure whether we canvassed that one in particular.
But Brendan's an enormously experienced person in Australian public and political life. He understands that when you transition, as he will when he leaves Parliament, from being a member of Parliament in the political process to being an Australian diplomat, your role changes, and as it should.
CURTIS: There are many Liberals who do agree with his position on emissions trading. Is it looking increasingly likely that the only way you're going to get an emissions trading scheme is through a joint sitting of Parliament after a double dissolution election?
PM: Part of our challenge in dealing with the Liberals and the Nationals on climate change now is there is no unity on their side on it.
I noticed the other day Senator Minchin, for example, said that he's waiting for the Government to draft the Oppositions amendments. Well, that is a remarkable abandonment of responsibility.
The problem we have with the Liberals is that under Mr Turnbull's leadership they are split right down the middle on climate change, right down the middle on WorkChoices, right down the middle on most things that you can advance in the public policy debate.
CURTIS: Doesn't that make it more likely that you won't be able to get your scheme through the Senate, as it's currently compromised?
PM: My job as Prime Minister of Australia is to try and make things work. That will be the attitude I bring to bear.
Climate change is important for this, the driest continent on Earth, where the effects of climate change will be felt earliest and hardest, and therefore I've got a responsibility to make everything possible work in order to bring about an agreement in the Australian Parliament.
That's the attitude we bring to bear. But my call to those opposite is: how is it possible for us to negotiate with the Liberal and National Party which cannot agree on a common position on climate change? My challenge to them during the one month of recess is form a common position. That is the least expectation which a government or the Australian community can have as we march towards this important decision for the future - Copenhagen and beyond.
Because as temperatures rise, droughts become more intense, water problems in countries like Australia get worse, the impact in tropical Australia through tropical storms gets worse, the economic cost for Australia gets much greater. It's time to act.
CURTIS: Prime Minister thank you very much for your time.
PM: Thank you for having me on the program.