CARY: Prime Minister, good morning.
PM: Good morning, Greg. Thanks for having me on the program. How did you go in the Cup?
CARY: Not nearly as well as you. I could say shocking, but so could you.
PM: Exactly. All I can say is the moral of that story is that the less you know about horse racing, the better.
CARY: Theres a moral there.
PM: Because frankly, I do know the front end of a horse from the back because I grew up on a farm, but I actually know nothing about horse racing, so my thanks to those mad punters in my office who two out of the three last Melbourne Cups have actually tipped the winner – and Im the beneficiary.
CARY: So no giving up the day job?
PM: No, mate, no, no.
CARY: Too many serious issues to address. We dont have a huge amount of time, so lets do that. Maybe, first of all, to the Cocos Islands and the unfolding tragedy there. Whats the latest youre hearing?
PM: In Cocos, the latest advice is that 27 survivors have been recovered and they are on the LNG Pioneer, including one 15-year-old. Its believed that two youths, aged 14 and 14, are among the missing. The body of one deceased person is also on the LNG Pioneer and two others were sighted but not recovered, and that is as it stands at the moment, and of course this has been a very difficult search-and-rescue operation.
CARY: The whole thing is very difficult and our, this is obviously tragic. Tony Abbott, yesterday, getting close to obscenity, blamed you, personally, for what had happened. He retracted, in fairness, later in the day. However, in your quieter moments, are you totally convinced youve got this right?
PM: We went to the last election telling the Australian people absolutely upfront about the responsible, fair, tough border protection policy wed be implementing if we won office. Thats the one weve been implementing for the last two years. It is hardline on people smugglers. It is humane in dealing with asylum seekers.
Youre always going to get attacked from the Right and from the Left. People on the Right, on the far Right, saying that you should put children back behind razor wire, people on the far Left saying you should have no border protection whatsoever. I believe this is the right policy in the national interest. These require tough decisions and they wont necessarily be popular decisions.
CARY: None of us pretend that this is easy, but now we have the Oceanic Viking with 78 onboard in Indonesia waiting some kind of resolution there. There is at least one theory that says those who have now tried to come direct from Sri Lanka are bypassing Indonesia because they know theyre not going to get here by via there, so maybe theyre now going to start to come here, so the tragedy can be the unintended consequence of the original policy.
PM: Well, the first point to say is that the operational practices of people smugglers are known to them, and on people smugglers themselves, our hardline policy has been to crack down, and we now have a large number of convictions, a large number of people in Australia currently before the courts for people smuggling offences, and well continue to do that.
At the same time, our job is to deal with the problem, which is not unique to Australia, but which has been shared by countries around the world. There has been a civil war in Sri Lanka only three or four months ago. I spoke to the President of that country only a couple of nights ago. 260,000 people displaced, 130,000 have gone across to India. Weve had some tens of thousands go to various parts of the world, and so far, in Australia, weve had some 1,000 to 2,000, in that vicinity, head towards Australian waters or come to Australian waters.
Its a challenge for all countries, so to deal with it systematically it means dealing in the source country, Sri Lanka. Weve appointed a special envoy to deal directly with the Sri Lankans on how you stabilise the country, provide proper housing for people in that country to reduce the push factors out. Were dealing with the Malaysians, the Indonesians, on further security and border control cooperation, but up in the seas themselves, we have a record investment in the assets, sea and air assets, we have conducting maritime surveillance, and so far, in the period that Ive been Prime Minister, weve had about 98 percent of vessels not reach the mainland. Weve interdicted them and taken them to Christmas Island.
CARY: You obviously thought, though, that youd cut a deal with the Indonesian President. Are you satisfied that theyre doing enough?
PM: Well, when you speak about recent developments with the Indonesians, take this other boat currently in the Indonesian port, this arose because of a rescue operation in Indonesias own search-and-rescue area. A distress signal went out. It was in the Indonesian search-and-rescue area. They had no vessels nearby – we did. We intercepted the vessel, took people onboard, and then the Indonesians coast and surveillance authority then approved the Australian vessel to come to port.
Now, obviously, dealing with these things on the ground is tough, its protracted, its detailed discussions, but, you know, this is one boat of the many that weve had to deal with in recent times, and remember, in the period that Mr Howard was in office, well, over 12 years, I think nearly 250 boats, nearly 15,000 people arriving here by boat-
CARY: -They seemed to have it sorted by the end, though, didnt they.
PM: Well, you know what happened in the period 2005-2008, and the period 2001-2004. What happened here in Australia, both in decreases and increases of arrivals, was happening in every other country in the world. So between 2001-2004, if you look at the decrease in exits from Iraq, Afghanistan, Sri Lanka and elsewhere, they were mirrored right across the world. Similarly, with an upsurge from 2005-06-07, you see, again, that occurring across all countries in the world.
Why? Because what happens with the outflow of asylum seekers or the reduction in the outflow is entirely contingent on whether there is war at home, and whether that war is out of control or not, and thats what we are wrestling with. Its a practical problem for governments past, and it will be for the future, but we intend to pursue a responsible, fair, tough policy in the national interest and as Prime Minister of the country Ill make those decisions whether they are popular or not.
CARY: OK, I want to get to interest rates and whats happening in Fiji and other matters in just a moment. Just finally on that, though, I understand that the survivors from whats happening off Cocos will go to Christmas Island. What then? There seems to me a sad irony about all of that.
PM: Here are the arrangements under search-and-rescue operations. I described to you before what happened with the vessel off Indonesia. It was in Indonesian search-and-rescue authority. Under international maritime safety law, they issued the call for assistance. Whoevers got the vessel closest goes – in this case, us. Then you take that vessel to the nearest port, in this case, an Indonesian port with their approval.
In the case of this vessel, out there some 700km north-west of Cocos Islands, its in the Australian search-and-rescue area. We had no vessels available. A couple of foreign-flagged vessels came to assistance but again, consistent with normal procedure, you then go to the nearest port of call, which in this case is Christmas Island, where these individuals will be processed in the normal way.
CARY: So theyll be processed from Christmas Island, which the initial folks had designed-
PM: Well, remember we dealing with, we dont even know what the status of these individuals is, but we are dealing in a consistent manner with the provisions of international maritime safety law. Put it this way: if youre an Australian – have you ever done any sailing?
CARY: A little.
PM: If youre out there, youve got thousands of Australians out there at the moment, and a vessel gets into strife, you are dependent on all other countries in the region and beyond honouring their obligations for search-and-rescue if a distress beacon goes up. It works both ways, and its difficult, and we know there are other factors at work with people smugglers in this case, but weve got to deal with the obligations of maritime law because it affects Australia.
CARY: Our Prime Minister, Kevin Rudd, our guest. Its 9.15. We dont have a lot of time, but a couple of other weighty matters to get through.
Another interest rate rise yesterday. Looking at some figures this morning, it suggests the changes will force a household with a $300,000 standard variable mortgage to pay $92 more a month than before the first rise last month. A household with a $500,000 mortgage will pay an extra $154. Mortgage holders will pay about an extra $120 million a year to their banks as a result of yesterdays increase. These ongoing rises will push the standard variable mortgage rate to about 7.75percent a little way down the road, eventually adding $287 a month to the cost of repaying that $300,000 mortgage.
This is the question-
PM: Ill come to your figures in a minute.
CARY: OK, but were trying to stimulate the economy and the stimulus package is still out there, and at a time when times are still fragile for small business and for many consumers, were taking away the capacity of people to spend at the same time as were trying to stimulate the economy. Im not understanding the logic of that.
PM: Well, the interest rate changes by the Reserve Bank over the last 12 months have been overwhelmingly stimulatory, and still are. Interest rates came down 4.25 percentage points to 50-year, emergency level lows. Whats happened in the last two months is theyve gone up half a percentage point, so now we have interest rates 3.75 percent lower than what they were a year ago.
CARY: Historically low.
PM: But hang on – therefore, the job of stimulus is still being done by interest rates, the likes of which have not been seen for a long, long time. And on your point about the dollars paid on a $300,000 mortgage, as a result of yesterdays increase of 25 basis points, or a quarter of a percentage point, youre right. Obviously, increased payments of an extra $46 a month, but this is still $662 lower than in August last year, so if you want to know what the impact on stimulus is, youve still got this impact of a massive cut in interest rates over the last 12 months which is still out there, in relative terms, stimulating the economy.
It is exactly in harness with the Governments stimulus strategy through the Budget, which peaked in the second quarter in 2009 and is itself now coming down in the way in which we designed it.
CARY: I understand that, but if it is that were trying to stimulate the economy, I dont see how making people pay more, and not just mortgage holders, but small business and all other interest rate levels, by reducing their capacity to spend must be impacting the impact of any stimulus.
PM: The challenge here is to manage the crisis well and to manage the recovery well. These are two different challenges and they are both very complicated. On the crisis, remember, through the combined efforts of what weve done through direct government stimulus into the economy, the largest school modernisation program the countrys ever seen and other forms of investment, Australia, as of today, the only advanced economy to have grown positively in the last 12 months, the only major advanced economy not to have gone into a recession, with the second-lowest unemployment and with the lowest debt and the lowest deficit.
Now, against what has been the worst global crisis in 75 years, that is a reasonable achievement so far. Now were moving into how do you manage the recovery?, and youve got to be very careful there about making sure that you are doing that in an effective, measured and smooth way over time. Remember what the Reserve Bank Governor has said – emergency level interest rate reductions where necessary when the bottom was falling out of the global economy, and what he has said in his statement yesterday is that any return to what he has described as normal interest rates would occur gradually.
But you know, weve got be very mindful of whats in the global economy at the same time.
CARY: Now, just on the Reserve Bank, its anticipated theyre heading towards what they call this neutral cash rate, which is around about 5 percent. At the moment were, what, 3.5 percent, so that would, logically, presume 1.5 percent in the foreseeable future? How do you see that?
PM: Well, Greg, nice try. I dont predict what the Reserve Bank Governor will do, because monetary policy and interest rates policy is determined independently by the Governor, but your question before is how do these two arms of policy work together? They work extraordinarily strongly together in preventing hundreds of thousands of Australians, including your listeners, losing their jobs. Had we not intervened, and the Bank not intervened, over the course of the last 12 months, unemployment would be through the roof. If we had the same unemployment rates now as theyve got in Europe and the United States, then wed be looking at more than a million Australian unemployed.
Now, our job as a Government was to step in and to intervene. We took early and decisive action and did so, our job now is not just managing the crisis, it is managing the recovery. That has its own particular complications as well.
CARY: OK, well try and cover a couple of other bases before you need to go in a little while. Talking of crises, Fiji, their Prime Minister, self appointed, Frank Bainimarama has expelled our High Commissioner, the New Zealand High Commissioner, what are we going to do in return?
PM: Well the first thing that we have done with the Fijian military regime is say to them in loud and clear terms, that their military coup is unacceptable to every country in the region. That is why they are unhappy with us. This man, Bainimarama has undertaken a military coup, suspended the constitution, refused to hold fresh elections and sacked the judiciary and appointed his own.
We dont intend as the Government of Australia, and Australia now as chairman of the Pacific Island forum, to allow that to become some sort of norm for the pacific at large. That is why we have a hardline approach, that is why they dont like it, that is why they have announced the action that they are proposing to take against our high commissioner. If they proceed with that action during the course of the day, then the foreign minister and I will be in close discussion about an appropriate commensurate response to what the Fijians would do.
CARY: What kind of thing does that mean though, appropriate commensurate response?
PM: Well we will sort that out during the course of the day in a calm and measured way. But lets just put it into context, why have they, why are they angry with us? Because we have drawn a very hard line, not just as Australia, not just as New Zealand but through the pacific Island forum, with every other Island democracy. We belong to a family of democracies in the south pacific with the exception of Bainimaramas military rule.
CARY: Does Bainimarama care though? Is he getting help from other major powers around the place?
PM: We believe that the process of diplomatically isolating the Fijian regime is effective. Of course, he will seek to go elsewhere for assistance and he does get some assistance beyond, probably. But you know the last thing we can do is produce a situation in the south Pacific where anyone concludes that it is normal and an appropriate way to conduct your politics to walk in one day and conduct a military coup.
Imagine the implications of that if it spread across the region. So we will take an appropriate response to this. I will be discussing it with the foreign Minister during the course of the day. As of when I came into your studio this morning, my advice was our acting High Commissioner in Suva had not been called in to the Fijian foreign Ministry at this stage. So we will be monitoring developments closely on the ground.
CARY: OK, been looking at some polls around the world and some from Australia as well, suggesting that there is less emphasis on the issue of global warming amongst the public.

With that in mind and more scientists even casting doubt on the modelling being used for these various systems, why the rush to legislate in Australia, our response before we know what the rest of the world plans to do in Copenhagen – and are you having second thoughts about that?
PM: Firstly you go to the science, the international panel of climate change scientists is made up of 4,000 scientists from around the world, all humourless guys and girls in white coats, who just sit around and measure stuff. Ok they are not politicians, they are just scientists. This crowd have reached conclusions over the last decade or so, that global warming is happening and is caused by human activity.
Therefore, we have a responsibility to act for the planet and for your kids and for our grandkids. And can I just say it is nearer-term than that as well. The second point about Australia.

This is one of the hottest and driest continents on earth. The impact of climate change will be felt here fastest and hardest. Look at the Murray Darling, for the last 10 years, we have had less than 50 per cent of the normal rain inflow, normal inflow into the Murray Darling system, compared with, you know, any historical norm.

The impact on Australian agriculture, the impact on Australian jobs, the impact on jobs on the barrier reef through coral bleaching, the impact of coastal inundation, in terms of beachfront property right around the country – the economic cost of not acting on climate change is phenomenal. Therefore, our judgement is we must act as Australia, at home, and globally – to produce an agreement which can bring greenhouse gas emissions down and to deal with it in a responsible way.
CARY: You raised so many points there. We dont have a huge amount of time. So when you say, do it in a responsible way, what is responsible with respect, about doing it when our emissions are so small, even if you believe the scientists running around in the white coats, before the major-
PM: -You mean those 4,000 guys dont know what they are talking about?
CARY: Well, I could find you 4,000 who disagree with them, or who are sceptical about the modelling, or disagree-
PM: -Governments from around the world, lets go back to this. You can always find someone out there, who, like theres bloke in the Liberal Party who reckons the way to solve this is whack up a shade cloth in space.
Someone else suggested in the Liberal Party we should stick a shade cloth over the Barrier Reef. I mean, there are a lot of wacky ideas out there, but Governments around the world, all of them, have appointed 4,000 scientists, and these are governments which range from the sceptical end of the spectrum through to the climate change supporting end of the spectrum. And their consensus is the one I have described. Therefore, if you are Prime Minister of Australia, what would you say? Oh I am just going to ignore all of that.
Instead I have got to look at the economic cost to Australia of not acting, impact on agriculture, impact on tourism, impact on jobs, as opposed to the economic cost of acting, and the overwhelming advice to this government is to get in there and act.
When you say, why should we act when we represent less than two per cent of global emissions?, well, just imagine you are sitting around the global conference table and saying, OK guys, were only small, it is all over to you. Can you imagine what the response is, it is either one in – all in, and that is the attitude right around the developed economies of the world.
We have an agreement whereby we will bring the developing countries in, particularly China and India, all these negotiations however will be very tough and hard. It is called common but differentiated responsibilities between the richest economies and the poorest.
But the alternative is to sit on your hands and do nothing. Responsibly, you cant look your kids in the eye, or your potential grandkids in the eye and say, we failed this test for our generation.
CARY: It is nearly an argument for another day, or a discussion for another day, you would like to think as a nation, we could have the discussion though.
You mention the IP-
PM: -Weve been having it for the last two years mate.
CARY: I know on that but not on nuclear power, which is where I am going. IPCC, who you place so much weight in, all the other leaders say the IPCC (inaudible) Well the IPCC and leaders such as President Sarkozy, Gordon Brown a colleague of yours in the UK of course, they are saying that any part of future energy needs must include nuclear power. We are sitting on the last percentage of the uranium that we are happily exporting to other nuclear players. How do you reconcile us not at least having that discussion?
PM: Well firstly in Australia we have a whole range of energy options which the countries you just mentioned dont have. Seriously, this is the largest coal exporting country in the world. We have a vast array of renewable energy possibilities here in Australia. Because of the vast possibilities of sunlight, why are we investing so significantly in solar, and wind and tidal and the vast array of LNG possibilities including bringing that on shore.
That is what Australia has. If I was to put that question to the President of France, the Chancellor of Germany or the Prime Minister of the United Kingdom, they couldnt answer like that. So why do we sell uranium to them? Its because they dont have the same range of energy options that we do. That is why these two approaches are entirely consistent and therefore, thats the approach we will be adopting into the future as well.
CARY: So no discussion at all?
PM: Well, weve just got all these other energy options.
CARY: This is the cleanest, demonstrably the cleanest.
PM: If you want to go into the economics, in this country of the nuclear option, I would draw a series of reports to your attention about one, how much it would cost, leaving aside all the environmental consequences in terms of Australia and how you store waste, and all the rest of it. The cost of nuclear power, the fact that is has to be proximate to water, which means put close to the coast, or near to water outlets or river outlets.
And thirdly of course, the challenge which also lies in terms of how much therefore, of our total energy generation could actually come from it. And even the modelling done by the previous Government when they were banging the nuclear drum suggested it would be very modest indeed.
Our challenge is investing in clean coal. We have a clean coal initiative as a Government. We have been doing this globally through the Global Carbon Capture and Storage Institute, we are investing in renewable energy, we have increased the renewable energy target by 20 per cent. We are investing also in the largest solar project the world will see in terms of generation – something up to around 1000 megawatts. This is the future for Australia. Other countries will reach their own decisions.
CARY: You nearly need to go, just before you do, well done on the initiatives related to organ donation – Donate Life, doing great work, great to see your support of that. You would say about organ donation?
PM: Donate Life, you know, if you are listening to the program this morning, it is really important to sit down with your wife, your husband, your partner, your kids, and decide what you would do if one of your family was in a tragic accident and the decision came about organ donation.
In Australia something like only 54 per cent of the people who sign up for organ donation, the actual retrieval actually occurs because families object. It should be taken as a family decision. Please go to the website, Donate Life, look at what you can do. Therese and I have signed up, I think as the first family to do so in the country, did so at the Lodge last weekend.
And I would just recommend it to all Australians. 1,700 people in Australia today are on organ waiting lists for transplant and we are losing several of those each week because there are not enough donations.
CARY: Well, Prime Minister Kevin Rudd, with whom we will speak the day before the Melbourne Cup next year.
PM: Thanks very much Greg, and it has been a Shocking day.
(ENDS)

Australia PMO