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Prime Minister John Howard talks to Lateline -

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Prime Minister John Howard talks to Lateline

Broadcast: 25/07/2007

Reporter: Tony Jones

Tony Jones speaks to Prime Minister John Howard on the latest political developments.


TONY JONES: Well, the Prime Minister turns 68 tomorrow and he plans to spend the day with
Australian troops in East Timor. Expect to see lots of images of a vigorous leader surrounded by
diggers, and barely a moment for the sentimental trappings of an ageing man's birthday. Well,
beyond the issue of his age, there was plenty to talk about when I caught up with him in Perth late
this afternoon, shortly before he jetted off.

(to John Howard) Prime Minister, thanks for joining us.

JOHN HOWARD, PRIME MINISTER: Always a pleasure Tony.

TONY JONES: Now, do you have a strategy of how to explain to voters it's not your fault if interest
rates go up before the election?

JOHN HOWARD: Well, I'm not going to speculate whether they're going up or not, so therefore the
answer is, it's a purely hypothetical question. But I will point out the interest rate now is still
historically quite low. They're much lower than they were under the former government, the former
government's housing interest rates averaged about 12.75 per cent.

Over the 13 years under us they've averaged about 7.5 (per cent), so that's 5 percentage points
difference. Now, as to what happens in the future well, if something changes, I will deal with that
then, but I don't know that it's going to change and if you're talking about today's inflation
number, I'd point out that the headline inflation rate and the underlying inflation rate are
respectively 2.1 per cent and 2.7 per cent, both of which are well within the target range set by
the Government and the Reserve Bank. But as to what happens with interest rates, that is a matter
for the Bank, and the Bank will make its own decision.

TONY JONES: But the problem with that analysis is that it's looking backwards at the previous
quarters, whereas the Reserve Bank will be looking forwards, and the analysts are saying that all
the pressure is on the upside. To put it in their parlance, they're actually now factoring in an
interest rate rise, and particularly when there's only one opportunity for the Reserve Bank to do
that before an election.

JOHN HOWARD: Tony, I'm not going to get into speculation about that.

TONY JONES: Let me put it this way. If there were an interest rate rise, it would put much more
pressure on working families, and you told Parliament in March that working families in Australia
have never been better off. I mean, if rates go up, it will be harder to maintain that line, won't

JOHN HOWARD: Tony, I'm not going to speculate. It's a good try. I will make this observation
however about the pressures on interest rates: what governments can do is not add to pressure on
interest rates. We're not adding to pressure on interest rates, because we have a healthy surplus.
The governments that are adding to pressures on interest rates at the moment are all Labor

The states have got large debts. Many states now effectively using the same accounting measures as
we use for the Federal Budget are in deficit and that is putting pressure on interest rates. We're
not adding any pressure to interest rates because we have no net debt, and I would therefore state
it as a fact that the only level of government that is exerting upward pressure on interest rates
at the present time are Labor state governments, many of which have gone into deficit and therefore
they are aggravating the pressures on interest rates.

By contrast, the Commonwealth has long since paid off the net debt we inherited and is not out
there borrowing in a way that puts upward pressure on interest rates. Now, that is a statement of
current fact. As to what might happen in the future, I am simply not going to speculate.

TONY JONES: All right, but look at the main indicators that are putting pressure on inflation.
Rural incomes are rising again, exports are up, there's a very tight jobs market, petrol prices are
still spiralling. Once again, I point out that the Reserve Bank only has one more chance to put up
rates. If they do, it's going to be terrible for your political fortunes, isn't it?

JOHN HOWARD: Tony, I'm not going to get into a bit of speculation about the future, ok?

TONY JONES: All right. Do you agree though that if rates did go up, that it would hit hardest in
the outer suburbs where mortgages are biting whilst house prices are dropping?

JOHN HOWARD: Tony, I've indicated I'm not going to speculate. You are just asking me the same
question in a different way. Good try, but try another customer.

TONY JONES: Ok, would you agree that people in those outer suburbs where mortgages are biting
whilst house prices are dropping, don't quite get the formula that working families have never been
better off in Australia.

JOHN HOWARD: Tony, generically speaking, families are doing well because unemployment is low, wages
have risen and historically, interest rates are a lot lower than what they used to be. That doesn't
mean that there aren't some people who are missing out. I've always acknowledged that fact, I've
never asserted that every single person is enjoying to the full, in an equal way, the benefits of
today's strong economy, but generically speaking - and one does tend to talk in generics as well as
acknowledging the particular exceptions - working families are enjoying lower unemployment, lower
interest rates than in earlier years and historically very low rates of unemployment, and the
long-term unemployment rate for example, has fallen by about 26 or 28 per cent over the last 12
months. Now, they are current facts, but I don't pretend that every single person gets an equal
degree of enjoyment from those current facts, but you can't alter those current facts.

TONY JONES: Are you worried at all about this emerging phenomenon of the two-tiered housing market
in many Australian cities, which is actually hitting people who used to be known as the "Howard
battlers" hardest?

JOHN HOWARD: Well Tony, undoubtedly in some parts of the country, there are different pressures -
(coughs) excuse me - on house prices than in others. And I always think there's a danger in
extrapolating in a general way from particular situations, and it is undoubtedly the case that most
people in Australia have seen the value of their homes rise quite sharply over the past few years.
There are some who have not enjoyed that, and obviously those people wouldn't be as happy as those
who have seen their house prices increase. Once again, it varies.

TONY JONES: But are those people disproportionately in marginal seats?

JOHN HOWARD: Tony, I'm not sure that they are, but if you're asking me, do I take an interest in
marginal seats? Yes I do, I take a great interest in them, and that's only natural. And I take an
interest in all seats, but if you're asking me to give a commentary, as though I were detached from
the fray, you've got the wrong person.

TONY JONES: Let's move on to somewhere where you've certainly been in the fray in the past few
days, your planned federal intervention in the Murray Darling Basin. Is this just brinkmanship or
is this now irrevocable? Is this decision irrevocable, you won't have any negotiations?

JOHN HOWARD: Well Tony, I've been negotiating for five months.

TONY JONES: From now on I mean.

JOHN HOWARD: Well, if the Victorian Government were to say to me tomorrow, "Look, can we have
another discussion? We're prepared to have another look at what you put up", well of course I'd
listen to them. But I'd still go ahead and get the legislation ready because I have really been
strung along by the Victorians for five months. The day we had the discussion, on the 23rd of
February, I secured the agreement of Mr Iemma, Mr Rann, Mr Stanhope and Mr Beattie.

And Mr Bracks said that he wasn't going to agree, and I had a separate meeting with him in my
office. And effectively what Mr Bracks said to me was this: "John look, I need a bit more time to
bring my people around. There's a lot of opposition inside my cabinet to this and I need some more
time to bring them around".

And I said, "Do you think you can?" He said, "Yes, I think we'll be able to come on board, but I
need a few weeks". And I said, "Ok", and I accepted that in good faith. Five months later, nothing
material has changed. The reference of power Mr Bracks was prepared to make fell far short of what
the other states agreed to and it actually fell short of what we could achieve by legislating on
the basis of our existing constitutional power.

He effectively wanted an arrangement where you had a special Victorian clause, and Victoria could
pick and choose about how it would implement plans relating to things like water quality, salinity,
environmental issues and the like. Now that's just not the plan that I had in mind. It was a very
generous plan. We're providing all of the money, the whole $10 billion is being provided by the
Commonwealth, and the other states signed up, and I'm just saying that, you know, I respect
Victoria's interest and rights in all of these things, but this is something that goes beyond state
borders and we need a national solution to this issue. And Victoria...

TONY JONES: But Prime Minister, the fascinating thing out of what you've just said, for me, is that
negotiations are still possible.

JOHN HOWARD: Well, if Victoria is willing to come to the party on the original proposal.

TONY JONES: It appears...

JOHN HOWARD: But Victoria said to me yesterday that it would not sign, it would not agree to the
draft bill. And the draft bill is the one that the other states have been broadly happy with for
months. Now obviously if Victoria...

TONY JONES: But if you move a little more in their direction, they move a little more in your

JOHN HOWARD: No, no, no, no. But Tony, we've been, you know, we've been going along like this for
the last five months. And you know, I just feel that I have been strung along by the Victorian
Government. Now, I have been very patient because I would have preferred to reach agreement. I
mean, it would be more than reasonable. If I had have sort of given the Victorians a month to
agree, if I had said to Mr Bracks on the 23rd of February, you've got a month and if you don't do
so we'll unilaterally legislate, he could have criticised me for being uncooperative.

But this is the 25th of July and I had the discussion with him on the 23rd of February. Now, I have
been more than patient and I just feel that the tactic has been to string this out so that we run
into the federal election, and then the Labor Party runs around the country, saying Howard couldn't
get his water plan up. I mean, you'll forgive me for being more than a little cynical about the
game that is.

TONY JONES: You seem to be suggesting this has all been orchestrated by Federal Labor, yet they say
they back the deal?

JOHN HOWARD: Well, of course they back the deal. But conveniently one of their colleagues at a
state level frustrates it.

TONY JONES: It appears then inevitable that this will end up in the High Court, so what is the
soonest if it does that, the soonest we can get a decision out of the High Court and see a
resolution to this?

JOHN HOWARD: I'm not sure it is inevitable it will end up in the High Court. It all depends on what
happens in the election, Tony. If we pass this Bill of ours and the election is in favour of the
Government, well it may be that a different attitude is taken by the states after the election,
particularly by Victoria. I don't know. I don't think it's inevitable it's going to end up in the
High Court.

I think most people in Australia would be aghast at the idea than in the 21st century, we're still
persisting with a horse and buggy approach to water management. These rivers flow across state
borders. The Great Artesian Basin lies under state borders. This is overwhelmingly something that
ought to be dealt with at a national level, and we've tried this ramshackle cooperative approach in
the past but it has never worked because you would never get all of the states to stick to a deal.

TONY JONES: It does seem from what you're saying, we won't get a resolution of this before the
election, so it will be an election issue.

JOHN HOWARD: Well, whether it's an election issue or not I don't know at this stage because I don't
know exactly when the election is going to be and I don't know what other issues are around at
time. But I have been trying for five months to get Victoria to, in effect, keep faith with what Mr
Bracks told me on the 23rd of February. I mean, he knows what he told me. There were only the two
of us in the room, and he knows what he told me.


JOHN HOWARD: I mean, and I in good faith, have gone along with that. Five months later, I'm no
further advanced and I just felt that I was being played along. And I mean, we could go on talking
for a few more weeks, a few more months and then the election comes and he says "We're in the
caretaker period", you know, and behind, who knows, behind one's back he could say mission

TONY JONES: Now, the lesson that Bob Hawke learnt in 1983 when he proposed a federal intervention
in Tasmania over the Franklin Dam was that you override states' rights at your electoral peril. All
the seats in Tasmania went against him. Are you at all worried you may get a backlash in Victoria?

JOHN HOWARD: This is an entirely different situation, Tony, entirely different situation. I
remember the Franklin Dam issue very, very strongly and there was a sense within Tasmania at the
time that the state was being pushed around. I don't think that sense exists in Victoria. I think a
lot of people in Victoria agree with my position. That was in 1982, it's a long time ago, attitudes
have changed. And you're dealing here with something that everybody knows is not working. Everybody
knows that the current Murray Darling arrangement does not work. Everybody knows how desperate this
country is for a unified national approach to our long-term water security. They know that we are
willing to pay for things that were caused by the states. They know that we're willing to pipe and
line the irrigation channels of the nation. Now, that's an entirely different set of circumstances.

TONY JONES: Mr Howard, I'm just getting news as we speak, that the Commonwealth DPP, Damian Bugg
QC, has announced that he is going to review all aspects of the Mohamed Haneef case. Are you aware
of that, first of all?

JOHN HOWARD: Well, I was given some information a short while ago, indicating that that might be
the case, but I am not aware of the background of that, and of course that's a matter for him. He
is running the prosecution.

TONY JONES: He is examining matters which have arisen since the charges have been laid. Now,
presumably those are all the matters have been raised in the press, problems with the way that this
case has been handled.

JOHN HOWARD: Well, I don't know that, and you'd have to ask him because I have not been involved in
the prosecution. The prosecution is a matter for the Director of Public Prosecutions (DPP) and the
Federal Police. I have been at some pains to make that point over the past few days. It passes very
strange to me that people do not accept in this day and age that prosecutions are carried out
independently of the executive government. The first I knew...

TONY JONES: It could be because the executive government has played such a strong role in this,
including the Immigration Minister in deciding that Dr Haneef should be detained. But now we find
the DPP is stepping in. That's a pretty unusual step to take at this stage, isn't it?

JOHN HOWARD: I don't know that that is the case. You'd have to ask him that. I'm not an expert on
how DPPs handle cases. But I do defend the anti-terrorism laws and I remain of the view that if the
anti-terrorism laws need strengthening, then they will be strengthened. But as to this particular
case, you won't find anything on the record where I have expressed a view about the guilt or
innocence of Dr Haneef. As far as the Immigration Minister's behaviour is concerned, well that's a
separate thing. It has got nothing to do with the prosecution as such, and the two things have to
be looked at separately. But I don't know what motivates the DPP in these things. We were not
responsible for the taking into custody of Dr Haneef. That was done on the instance of the
Australian Federal Police. And I continue to defend their role and I continue to be of the view
that the attacks mounted on the Federal Police by the Queensland Premier, in particular, have been
quite outrageous.

TONY JONES: Now, Mr Howard, just moving on again, you plan to spend your birthday I believe, in
East Timor. We imagine the Army Catering Corps producing a large cake with 68 candles. Is that how
it is going to look?

JOHN HOWARD: I have no idea. I haven't asked for that. Tony, I don't stand on a lot of ceremony
when it comes to things like that, but nobody disguises their birthday. I've no reason to disguise
my birthday. And if I'm in East Timor working for the Australian people on my birthday, so be it.
But others make much of their birthday, but I'm like any other individual, I talk to my family and
we'll exchange greetings and celebrate it the way every other human being does, who has got a close
and loving family.

TONY JONES: It wasn't a deliberate strategy to be out of the country away from the domestic scene
on your 68th birthday?

JOHN HOWARD: Tony, I find that when I'm out of the country there is more focus on me than when I'm
in the country.

TONY JONES: Prime Minister it's...

JOHN HOWARD: I don't think I was being a very clever person doing that if that was the objective.

TONY JONES: Do you think that age will be a factor at all in the coming election?

JOHN HOWARD: Well, I think the Labor Party is endeavouring to make it a factor, there is no doubt
about that. They might say to the contrary and look, I accept that I will be 68 tomorrow. No man or
woman can mock the passage of the years and I'd be foolish to pretend otherwise. But people will
judge me on the contribution I've made to the country, on my capacity to continue to lead it. And
what really matters is the age and relevance of the policies and ideas that I put forward. And I
will challenge anybody on the other side of politics to argue effectively that the age and
relevance of their ideas for Australia's future are superior to mind and that of my colleagues. But
I'm not in any way walking away from my age and I deal with it as every person must in a very
factual way. I'm fit and healthy. The good Lord has been kind to me in giving me good health. But
it's for other people to make judgements about the age and relevance of my ideas.

TONY JONES: The problem is one of the people making those judgements over recent days is your more
useful deputy Peter Costello, your Treasurer who has made a whole series of rather unflattering
statements about you, which landed right before an election. That might have been pretty worrying
for you and rather damaging for your prospects.

JOHN HOWARD: Tony, this matter was dealt with by both of us last week and I don't have a syllable
to add to what I've already said on the subject.

TONY JONES: Prime Minister, we thank you once again. We will in fact wish you a happy birthday for
tomorrow and...

JOHN HOWARD: Thank you.

TONY JONES: And yes, thank you indeed, for joining us on the program tonight.

JOHN HOWARD: I look forward to talking to you many times into the future.