STEFANOVIC: Prime Minister, good morning.
PM: Good morning Karl.
STEFANOVIC: Well, we wake to the news this morning that Tony Abbott has closed the gap as Parliament begins. Did you tell your colleagues yesterday you could lose the next election?
PM: What I said to the colleagues yesterday is that no first term Government is ever guaranteed of re-election. This'll be a very tight and hard-fought election. I think the Australian people expect that'll be the case. And it's just a reality that we're going to be into a tough struggle for an election year, because there are many tough decisions to be made by the Government, and not all of them will be popular- but our intention is to govern in the national interest.
STEFANOVIC: House figures today too with reports that 26,000 households could be placed under severe mortgage stress if interest rates are raised today. Does that add to your re-election burden?
PM: Well interest rates have a real effect on the family budget, that's a fact. And the other thing to bear in mind is that interest rates were reduced to near-record lows by the Reserve Bank over the last twelve months because of the global economic recession. And right now, I think you'll find that average mortgages are about $600 a month less than they were in the middle of 2008.
So there are some comparisons there, but let's face facts. Any increased interest rate has an effect, and hurts working families - that's the truth of it. I think the banks here have a responsibility Karl, I saw the National Australia Bank over the weekend saying they'd keep any interest rate adjustment on their part to within any official interest rate rise, that's if one comes. My call on the other commercial banks would be to follow the NAB's suit.
STEFANOVIC: There's nothing you can do about it though - they'll do what they want, what they'll please.
PM: Well we've seen that before, and I'm sure that at times in the future we'll see it again. Don't underestimate however, the impact of the public's attitude to these things because I think that's one of the things that the NAB had in mind when they took their decision over the weekend. I think it'd be the right thing to do for the other banks to follow suit.
STEFANOVIC: Okay, let's hope so. Now Tony Abbott releases his climate change plan today as you'd be fully aware - now you have done your costings, your pricing models for your ETS. How many Australians will be worse off if that is passed?
PM: What we have, through the modelling done by the Australian Treasury, Karl, is something as basic as this. All low income earners will be compensated by more than one hundred per cent for any cost of living increase which the Treasury calculates would be in the vicinity of 1.1 per cent. For middle income earners, there will be compensation as well, for the bottom half of middle income earners, about one hundred per cent, and then on a sliding scale for upper middle income earners. And then for the wealthiest Australians like you and me mate, we're on our own.
That's how it's done. Ninety two percent of working families will be provided with compensation. That's the bottom line. See, the contrast here though, can I just make one point - and that is that what Mr Abbott has said so far about his scheme, not a single dollar, has he suggested, would go in compensation to working families.
There's no magic pudding here. If you're going to act on climate change, it costs the economy, it costs businesses, and some of those costs flow through to consumers. We offer a compensation package for working families - ninety two percent of working families would receive compensation. Mr Abbott is offering none.
STEFANOVIC: Okay, see there seems to be some confusion here, a lot of confusion over just how much goods will increase. Can I use this as a basic example - can I ask you this question? How much for example will the price of bread increase under your ETS?
PM: Well, if you look at the way in which the Consumer Price Index is calculated Karl, it takes together the whole basket of goods. What's a loaf of bread at the moment - $2.40.
STEFANOVIC: $4.
PM: No, $2.40 at the no brand level, up to $4, $4.80 for some of the better brands. That's the range, approximately. So you apply the increase in the cost of living to that as part of an overall basket, you will see an increase.
STEFANOVIC: But do you know how much?
PM: Well Karl, I don't run every bread manufacturing outfit in the country. That's the bottom line. But let me tell you this -
STEFANOVIC: What about petrol? How much will petrol go up?
PM: Well petrol is currently $1.23-$1.27 a litre. So here's the bottom line on petrol - that under our scheme, there is a full adjustment for any increase in the petrol price. And therefore there would be no net impact on motorists. We have done that deliberately because we are very conscious of the role which the family car plays and the family vehicle plays often in the family small business. We have actually gone through this in a whole lot of detail.
STEFANOVIC: What about milk? How much will milk go up under your ETS?
PM: Well as I said, milk would form part of the same basket of goods. Two litres of milk - then you're looking at the impact of the price there, $2.80 or something like that, depending on the brand that you're looking at, and therefore, what would be the adjustment there? It would again be applying approximately the 1.1 per cent CPI increase that we're talking about. But this is a weighted basket of goods which includes bread, includes milk, includes the other essentials as well, that's how the Consumer Price Index is calculated. We've been very upfront about this, Treasury's calculated the price impact, 1.1 per cent increase overall.
And we've also been upfront about the fact that for ninety two percent of working families, there will be compensation provided. Mr Abbott says there will be -
STEFANOVIC: How can you base your compensation though Prime Minister, with all due respect, how can you base that compensation you're not absolutely sure about? How do you know how much it's going to be at the end of the day?
PM: Because Karl, we will adjust this on a regular basis based on the actual cost-
STEFANOVIC: So it might be never-ending?
PM: Well there is a one-off adjustment in the price because of what happens, but then you make sure that you are providing proper adjustments for families on the way through. This is why this scheme has been very carefully planned. We have spent a lot of time on it. The overall price increase to cost of living - 1.1 per cent. Ninety two percent of working families being provided with compensation, that's on the one hand.
Mr Abbott is offering a magic pudding, no compensation for families, and that's because he's going to transfer the burden it seems, for the cost of his scheme on to taxpayers. And they'll be paying it by different means.
STEFANOVIC: Alright, we'll see what he comes up with a little bit later. I know that you have to go to Church. Just quickly and finally, Barack Obama is coming to town. When will that be? And it'd be a good time to call an election after he's been here, won't it?
PM: Well, when you talk about having to go to Church, it's the first day of Parliament. The tradition in Canberra is that both sides of politics go to a commencement service. That's what we're doing this morning.
As far as President Obama's visit, he and if Michelle and the kids come as well, are all welcome guests in Australia, as would be any President of the United States. This is really important for our bilateral relationship, 70 years this year since we established diplomatic relations with the United States. And what we'll be spending our time doing is looking at the future of our security relationship, the challenges of terrorism but also, this is the biggest economy of the world, and the recovery of this US economy affects every working family who's watching your program this morning. They are the two things we'll be talking about.
STEFANOVIC: Alright Prime Minister, always good to talk to you. Thanks for your time, today shapes as a very interesting year. Appreciate it.
PM: Thanks Karl.