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Meet The Press -

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MEET THE PRESS

INTERVIEW WITH PRIME MINISTER JOHN HOWARD

August 6th 2006

DISCUSSION ABOUT LEBANON/ISRAEL, INTEREST RATES, PETROL PRICES, STEM CELL RESEARCH, PETER COSTELLO.

MEET THE PRESS PRESENTER PAUL BONGIORNO: Hello and welcome to Meet the Press. The marathon man of
Australian politics declares he's willing and able to lead the Coalition into the next election and
immediately runs into the hurdle of rising interest rates.

PRIME MINISTER JOHN HOWARD (Thursday): By acting now, it's very likely - I can't give guarantees -
but it's very likely that the bank has reduced the possible pain of future action in the future.

PAUL BONGIORNO: Parliament resumes, the PM is our guest. First, what the nation's papers are
reporting this Sunday August 6: In late breaking news, the 'Sunday Age' website reports - France
and the United States have agreed on a draft UN resolution for a cease-fire in Lebanon. The
resolution calls on Hezbollah and Israel to end hostilities. The 'Sunday Telegraph' reports -
Coalition MPs lead push for biofuels. Service stations may be forced to offer more ethanol and
biodiesel at lower prices and the Government confronts a looming crisis over petrol. The
'Sun-Herald' says - home buyers ready to swoop as sellers face more rates pressure. Vendors risk
longer sale times and a drop in house prices as Sydney's real estate market took a hit yesterday,
with less than half the properties up for auction sold. The 'Sunday Mail' reports - parents owe
kids $900 million in child support payments. The Child Support Agency says there are 224,000
non-paying parents across Australia. In his letter informing Liberal MPs that he was willing to
lead them into the next election, John Howard warned winning would be no pushover, and in a week
that saw rising petrol prices play a big part in pushing up inflation and interest rates, the
challenges ahead are formidable. And welcome back PM.

JOHN HOWARD: Thank you, Paul.

PAUL BONGIORNO: Well, before we go to those issues, what's Australia's reaction to the developments
in New York overnight with the draft UN resolution?

JOHN HOWARD: Australia wants the fighting to stop. But Australia also wants everybody to seriously
address the root cause of the problem and the root cause of the problem is still in the whole of
the Middle East, is still the settlement of the Palestinian issue. Until the entire Arab world and
other countries involved in this, such as Iran, are prepared to unconditionally accept Israel's
right not only to defend itself but to exist, and until there is a genuine reaffirmation of
everybody's commitment to a homeland for the Palestinians, I don't think we're ever going to have
lasting peace. And whilst I will welcome, everybody will welcome an end to the current bloodshed -
I mean, nobody wants to see women, children, soldiers on either side being killed as is happening
with increasing ferocity - if the resolution merely lays the groundwork for an outbreak of
hostilities again in the near future, it won't have achieved anything. We need a very strong
stabilisation force, a very big one, and we also need a commitment to effectively disarm Hezbollah,
because let's not lose sight of the fact that Hezbollah started the latest outbreak, not that just
disarming Hezbollah is a long-term answer either. The long-term answer is to fix the Palestinian
issue, is to make sure that the two-state solution is delivered.

PAUL BONGIORNO: It doesn't sound you're very optimistic?

JOHN HOWARD: No, I'm trying to be realistic. I mean, I want the fighting to stop. I don't want to
see people killed on either side, Israelis, or Lebanese people, and we have done our level best and
very successfully so far to get all the Australians out who want to leave. And can I just say
again, if any relatives of Australians in Lebanon are watching this program will you tell you
relatives if they're going leave to leave now? Because what has happened is some people have put it
off and they're making the evacuation task even more difficult. I think our people over there in
the embassy have done a fantastic job. To my knowledge, there's been no loss of life or no injury
through want of speedier facilitation of somebody being evacuated, and I think it's a bit
unreasonable to say, "I'll hang around for a bit to see how it goes", and then suddenly expect a
ship to arrive courtesy of the Australian Government to bring them out when the fighting gets even
tougher.

PAUL BONGIORNO: Going to interest rates, the Reserve Bank in its quarterly review on Friday listed
tax cuts as fuelling spending in the months ahead. I guess with hindsight do you think the $9
billion worth of tax cuts in the May Budget were maybe too big? Too generous?

JOHN HOWARD: No, I don't Paul. Remember, before the Budget Ian Macfarlane, the Governor Ian
Mcfarlane, said that we could afford to have tax cuts and bear in mind the tax cuts have helped
Australian households cope with the higher petrol prices and I think that's a very good thing. They
would have been a lot worse off, I mean, let's face it...

PAUL BONGIORNO: A lot of Australians agree with you on that, but the Reserve Bank Governor said
also it depended on how big the tax cuts were.

JOHN HOWARD: But nobody can suggest for a moment that we ran the surplus down. We've still got a
very strong surplus, we've got a very big future fund. And Paul, what the nation really has to look
at over the months ahead is not so much an individual movement here and there in an indicator such
as interest rates, important though that is, but the real thing is which side of politics in
Australia is the side of politics for the future prosperity of this country, which side of politics
has got the policies to not only maintain our current prosperity but to deliver it for future
generations? And that is really what the economic debate in this country is about. We're the party
that keeps surpluses, we're the party that's prepared to reform the industrial relations system, Mr
Beazley wants to damage the mining industry by getting rid of AWAs, which so vital to the mining
industry.

PAUL BONGIORNO: Your Labor opponents accuse you of betrayal of trust in light of the election
campaign promises to keep inflation, interest rates, low. Ten News around the country found
borrowers like Rebecca and Adrian Kennedy feeling a bit dudded.

REBECCA KENNEDY (Wednesday): Coming up to the last election, you know, Johnny did put it out there
and say that the interest rates wouldn't go up, so I suppose that was factored in at the time we
bought the property.

ADRIAN KENNEDY: You hear Costello talking about relatively low interest rates, well, you know,
that's fine if the borrowing amounts are the same.

PAUL BONGIORNO: PM, I guess this is a problem for the Government, that Adrian's right there, that
while in the last 10 years incomes have certainly gone up by a factor of three times, borrowing
levels have gone up by a factor of about five.

JOHN HOWARD: But Paul, so has the asset value gone up. I mean, let's - OK, your debt goes up, but
if your asset base goes up by an equal or a greater amount, the wealth affect is very positive and
essentially...

PAUL BONGIORNO: People are borrowing on that as well.

JOHN HOWARD: Of course they are, but one of the reasons they borrow, and many of them to the hilt
and some too much, but one of the reasons they do it is they feel secure, they feel they can take
the liability, assume the liability, take the risk. Now, that is a product of them feeling that
there are a group of people responsible who are steady and dependable and prudent, and although
there are going to be some ups and downs and some bad news along the way, the fundamental direction
is a forward direction, and if we are talking about comparative interest rates, nothing can alter
the fact, 13 years of Labor delivered 12.75% average housing interest rate, 10 years of us has
delivered 7.25%, it's a clear five percentage points difference. Remember, they think...

PAUL BONGIORNO: But the repayments...

JOHN HOWARD: The repayments are higher because the value of the house is higher.

PAUL BONGIORNO: But household debt's higher too...

JOHN HOWARD: Because, that is supported by greater household wealth. You can't look at the debt
without looking at the asset.

PAUL BONGIORNO: Is a take out of this week that the government is going to have to be fairly tight
in its fiscal policy, rein in spending?

JOHN HOWARD: The Government has been tight with its fiscal policy the whole 10 years. We have had a
record run of surpluses, we have paid off $96 billion of debt. We are a stellar performer around
the world as far as fiscal policy is concerned.

PAUL BONGIORNO: Do you...

JOHN HOWARD: The OECD said that. The OECD lauded our tight fiscal policy.

PAUL BONGIORNO: Do you hope to be able to offer more tax cuts?

JOHN HOWARD: Oh, Paul, I am not going to get into talking about next year's budget. It's only three
months since the last one. This is, what, August 6, and you're asking me about May of next year.
Gee.

PAUL BONGIORNO: (Laughs) We just wanted an indicator.

JOHN HOWARD: (Laughs) You're not getting one, brother!

PAUL BONGIORNO: Time for a break then. When we return with the panel - pain at the bowser, we ask -
has the Government run out of ideas on how to deal with surging oil and petrol prices?

PAUL BONGIORNO: You're on Meet the Press with the PM and welcome to our panel, Michelle Grattan,
the 'Age', and Steve Lewis, the 'Australian'. The Treasurer calls it an oil shock. For motorists
it's a pain they feel every time they fill up and there are signs that the record fuel costs are
feeding the inflation dragon.

JOHN HOWARD: The greatest worry of my political life, petrol, in terms of its impact on the average
Australian.

PAUL BONGIORNO: Michelle Grattan.

MICHELLE GRATTAN, 'THE AGE': Mr Howard, in view of what you were saying there, what can you do
about petrol prices, what are you going to do about any relief?

JOHN HOWARD: An individual country can only affect it a little bit at the margin. It is
fundamentally caused by the high price of crude oil. And by world standards, our oil price,
although this is no relief to Australian motorists, is lower than many other countries. I saw a
table in the 'Sunday Telegraph', today, which shows only Canada and the US amongst comparable
countries below us, but until the world price falls, we're not going to see any significant relief.
I know people are feeling it. I learnt from the very early age that when you fill your car up you
actually look at that 'click click click' and I remember that from very early age. We are all very
conscious of the fact that petrol prices are high, and we're going to have to, unfortunately, live
with higher prices than we used to have as recently as 18 months ago, but I hope, not indefinitely,
with the current very high prices, but I can't promise any immediate turnaround in the world
circumstances. But at the margin there are a number of things we are examining, but they're only
really at the margin.

MICHELLE GRATTAN: Some of your backbenchers are putting some hope on the biofuel front, and there
is work being done in Government on that. When are we likely to see that coming to Cabinet and what
sort of scope is there do you think? Just ethanol?

JOHN HOWARD: The scope is quite limited. It's at the margin. We have to understand in relation to
ethanol that you are talking here about something that has an excise advantage, and that's the
reason why people see some advantage in it. But the reality is that the great bulk of the cost of
fuel is still made up, and will be for the foreseeable future, with petroleum and spirit derived
from crude oil, and until the world price comes down in a big way it's not going to come down in a
big way here.

STEVE LEWIS, 'THE AUSTRALIAN': Prime Minister, your MPs in the bush are also basically asking for
some relief for regional communities, you've had people talk about equalisation schemes. Is there
anything the Government can do to try to lower the price particularly for regional communities?

JOHN HOWARD: Well, unless you get into very complicated and often highly inefficient subsidy
schemes, those are very, very difficult, and there are a lot of swings and roundabouts in relation
to what costs more in different parts of the country. City dwellers will argue that the burden of
interest rates is felt more keenly in the city because the cost of housing is higher and there are
swings and roundabouts. I have no doubt that country people feel the fuel cost because there is a
lot of transport involved in that, but we have to understand that many of these schemes can be very
complicated and also can end up being administratively more costly than they are worth.

MICHELLE GRATTAN: Are there any circumstances - any circumstances in which you might revisit
excise?

JOHN HOWARD: Well, Michelle, we've looked at this in the past, and we got rid of automatic
indexation five years ago. Our excise levels by world standards are not high, the take from excise
has not risen because it's fixed on the volume of the spirit, the motor spirit, it's not according
to the cost of the motor spirit, therefore we're not reaping a bonanza and I can't therefore see us
moving on excise, what, $250 to $300 million - one cent. To make any difference at all, you'd need
to cut it by 10, that's $2.5 to $3 billion. A lot of Australians might say if you've got that to
spend why don't you spend it on more for the army or more for this or more tax cuts, or just put it
away for a rainy day.

STEVE LEWIS: Are you essentially saying that Australians will have to get used to or stay with the
notion of petrol at $1.60 a litre?

JOHN HOWARD: No, no, no, no, no, I don't. I don't believe that. But I don't think we're going back
to 70 or 80. I would hope in the medium term you might see a fall back in the world price to
perhaps $US50, $US60 a barrel. That's a hope more than an educated prediction. What I'm really
saying to my fellow Australians is that the era of very low oil prices or petrol prices is behind
us. We hope that we're not in an era of ever-rising petrol prices, and perhaps somewhere in between
where that settles, $1.15, $1.20, there's some hope of that, but once again in the medium term.

MICHELLE GRATTAN: On another politically difficult issue for you at the moment, industrial
relations...

JOHN HOWARD: Mmm.

MICHELLE GRATTAN: ..is there any work being done or would you envisage any fine tuning of your
industrial relations measures to address some of the concerns that have come through?

JOHN HOWARD: Michelle, I'm glad you - I think most of the concerns that have been raised so far
have been phoney. Five out of six examples in the ACTU ad were blown out of the water by the Office
of Workplace Services and I read in the newspaper yesterday that apparently it's all right for a
union in Victoria, the Electrical Trades Union, was it, to use the unfair dismissal provisions on
the ground of a genuine redundancy with one of their employees but when the Cowra abattoir says it
has to let people go because it can't afford to do them, it's an outrage. I am unconvinced and my
view about the workplace relations changes is that they are needed. Mr Beazley's commitment to get
rid of AWAs will do immense damage to the most prosperous sector of the Australian economy at the
present time, and having spent 3.5 days in Western Australia a couple of weeks ago I cannot
understand how somebody who comes from that State would want to do such damage to such a vital
industry in Western Australia.

STEVE LEWIS: PM, we know that you're not for turning on IR, but is there...

JOHN HOWARD: I have said all along, a little bit of fine tuning, but if you're asking me is there
any serious work on fine tuning, no.

STEVE LEWIS: But there will be some fine tuning?

JOHN HOWARD: I haven't guaranteed anything in relation to that. Let's understand this. If you're
saying to me, are we looking at some significant changes to the Act, no, we're not, because we
don't believe any are needed, but if along the way here and there some kind of fine tuning with
such a big Act is needed, that will be done, but if you're talking about unfair dismissal changes,
any of those, no way, Jose.

STEVE LEWIS: What time frame are we putting on the fine tuning?

JOHN HOWARD: When you have a commitment to fine tune essentially sound legislation there is never
any time frame.

PAUL BONGIORNO: Coming up after the break - back in business but how damaged is the Howard/Costello
partnership. And Tanberg in the 'Age' has this take on the interest rates rise for our cartoon this
week. A hand up for the borrower's question - who's the best person to run the country? A different
response to who's responsible for the interest rate rise.

PAUL BONGIORNO: You're on Meet the Press. This cartoon by Nicholson in the 'Australian' has John
Howard saying "Costello in Treasury and Kim as Opposition Leader, the perfect team." But can the
winning team ever be the same again when one believes the other is either arrogant or untruthful?

JOHN HOWARD (July 11): The leadership of the Liberal Party is not my placing, it's not Mr
Costello's placing. And any member of the parliamentary Liberal Party who forgets that is indulging
hubris and arrogance.

TREASURER PETER COSTELLO (July 11): My parents always told me if you've done nothing wrong, you've
got nothing to fear by telling the truth.

STEVE LEWIS: Well, Prime Minister, after the blood-letting of the last couple of weeks, surely it
can't be business as usual between yourself and Mr Costello as parliament resumes?

JOHN HOWARD: Just watch.

STEVE LEWIS: So, you're suggesting there'll be no change in the dynamic, Howard/Costello?

JOHN HOWARD: I have no doubt that Peter will work determinedly and very committedly for the return
of the Government. I certainly will. And we will be in there from day one telling the Australian
people that if you want to maintain our current prosperity and build on it and hand it down to
future generations there's only one side of politics, ours, that's got the policies, the track
record and the commitment to do so.

STEVE LEWIS: You've also made a commitment to lead the Coalition to the election. Can you give a
commitment now that you would serve a full term if re-elected?

JOHN HOWARD: My answer to that question now is the same as it's been for ages. I will lead the
Liberal Party for so long as the party wants me to and it's in the party's best interests. But
please let us be humble enough to have a sense of perspective. My future and that of my Government
is in the hands of the Australian people. It won't be easy, but I am very committed and Peter is
very committed to winning the next election, because we think the alternative will be to remove the
prosperity that we now have and to go backwards. Everything Mr Beazley is about is the past. He
wants to turn back industrial relations, he's frightened to have a serious debate about Australia's
energy security, if ever anything proclaimed itself as relevant to Australia's future at the moment
it's energy and he won't have a proper debate. He thinks it's big time to get rid of the three
mines policy.

MICHELLE GRATTAN: Mr Howard, when you left for the winter break, the stronger border protection
bill was outstanding still because of backbench criticism of it. You suggested the other day you
were not going to make any more significant changes.

JOHN HOWARD: Mmm.

MICHELLE GRATTAN: Do you think you can get a deal on that bill, and what happens if you don't, will
you put it aside or will you put it to parliament and see how the numbers do fall?

JOHN HOWARD: It remains the Government's policy to go ahead with the bill in the form including the
amendments that I announced before the parliament broke for the winter. As to the to and fro of
when we have it and the handling of the debate, as you know, it's not my custom to speculate about
those things. I deal with issues as they come along, but the current intention is for debate on the
legislation in the House of Representatives to commence next week.

MICHELLE GRATTAN: And what happens if you see that the numbers are not there?

JOHN HOWARD: I don't indulge in that sort of speculation.

STEVE LEWIS: Prime Minister, the other big contentious issue facing the Government is the issue of
stem cells, embryonic stem cells and therapeutic cloning arising from the Lockhart review. You've
been quite strong on this issue, basically, rejecting the Lockhart review recommendations. Haven't
you in a sense pre-empted the debate within our own party room on this issue?

JOHN HOWARD: Well, doesn't over-personalise it. We discussed it in Cabinet.

STEVE LEWIS: And a number of ministers supported it.

STEVE LEWIS: You often have a range of views in Cabinet. But once you reach a decision everybody
supports the decision. There's a strong disposition out of Cabinet not to change the present
arrangement and I told the Premiers that, but I also said given the particular sensitivities of
this issue, that I wanted to have a party room debate on it, and I will have a party room debate.
It won't consume the special session tomorrow, but over the next couple of weeks we'll have some
time to have a party room debate on this issue. It's quite a hard issue, and I think people have to
be careful that they are not ultra-dogmatic on either side. It tends to cut across party lines. But
let there be no doubt the clear view of Cabinet is the status quo. My sense in the party is that
there could be a majority in that direction as well.

MICHELLE GRATTAN: If there is a strong call for a conscience vote...

JOHN HOWARD: I don't think it's the sort of thing at this stage that people are very disposed to
have a conscience vote about.

MICHELLE GRATTAN: Didn't you have one earlier on?

JOHN HOWARD: We did, but there's a limit in a sense to the willingness of a lot of people on these
issues to have decisive conscience votes.

STEVE LEWIS: So your sense is that the party room will be locked into a particular vote?

JOHN HOWARD: My sense is this is a difficult issue, but there's a clear cabinet view. I'm
interested to hear, obviously, what the party room attitude is. I have to have a cabinet view to
take to COAG and I'll wait and see what the party room view is. I am always very respectful of what
the party room thinks on these issues and let's wait and see.

MICHELLE GRATTAN: What about the States? A couple of States, Victoria, Queensland, talking about
going ahead anyway. What can the Government do about that?

JOHN HOWARD: Let us see what happens, once again I'm not going to speculate about something I don't
have to.

STEVE LEWIS: But you wouldn't be considering withdrawing funding or some sort of punitive measures
against the States?

JOHN HOWARD: I will handle it in a sensible fashion which recognises that this is an issue on which
people of good faith and good conscious can hold strongly different views.

PAUL BONGIORNO: Just going back to the migration issue - it does seem from reports and from what
some of the dissident Liberals, if I can put it that way, aren't happy with even the amendments
you've bought forward. I noticed for example Malcolm Farr in the 'Telegraph' on Friday said you'd
prepared to put your leadership authority on line over the migration issue?

JOHN HOWARD: I'm not going to admit - as much as I respect the wording of Mr Farr I won't comment
about those matters. I think we've moved on from all of that. Let me say, I don't regard my
colleagues who have a view on this as dissident, they're entitled to a view. Let's just see how the
discussion emerges.

PAUL BONGIORNO: Do you think there has been any movement at all?

JOHN HOWARD: I wouldn't speculate on that. You should ask them.

PAUL BONGIORNO: OK. Thank you very much for joining us today, Prime Minister John Howard, and
thanks to our panel, Michelle Grattan from the 'Age' and Steve Lewis from the 'Australian'. Until
next week it's goodbye from Meet the Press.