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Meet The Press -

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MEET THE PRESS PRESENTER PAUL BONGIORNO: Hello and welcome to Meet the Press. The Reserve Bank
keeps interest rates on hold but it's no holds barred in the arm wrestle for economic credibility
with the voters.

SHADOW TREASURER WAYNE SWAN (Wednesday): It's also clear from reading these documents that
Australian families with mortgages are paying the highest percentage of their disposable income in
mortgage interest in our history. Higher under Mr Howard - higher under Mr Howard than under Mr
Keating.

PRIME MINISTER JOHN HOWARD (Wednesday): What that document shows is that the repayment burden for a
new home buyer now is lower than what it was in 1989. Lower, not higher, lower. The Labor Paty has
completely misrepresented it.

PAUL BONGIORNO: Shadow Treasurer Wayne Swan is a guest. And later we'll speak with terrorism expert
Professor Clive Williams. But first, what the nation's papers are reporting this Sunday July 8. The
'Sun-Herald' reports "Plan to detonate from Australia by phone". Suspects linked to the foiled car
bomb attacks in London allegedly planned to blow up the devices using mobile phones in Australia.
And the 'Sunday Mail' has "Focus on bomb plot transfers." Australian authorities are investigating
whether Gold Coast doctor Mohammed Haneef is part of a national sleeper cell of foreign doctors
established to fund overseas terrorist activities. The 'Sunday Telegraph' says "Climate change
rocks the world". Sydney started the global concerts which have now moved to Europe, Africa and
America, all drawing attention to Al Gore's 'Inconvenient Truth' on global warming. And the 'Sunday
Age' reports "105 killed in Iraq village blast". A truck bomb has devastated a crowded market in
the village of Armili. More than 250 were injured in the terror attack. Labor's determined to join
the argument on economic management in the run-up to the election. The week saw a reprieve for the
Government with interest rates staying put. And there was a flurry of claim and counterclaim over
the release of Treasury documents that seem to have something for everyone on housing
affordability. And good morning and welcome back, Wayne Swan.

WAYNE SWAN: Good morning, Paul.

PAUL BONGIORNO: If we could go to those reports about terror cells in Australia and their possible
connections with Britain, there is no doubt that in an election year a terrorist attack in
Australia would tend to play to the Government's strong suits of national security, that voters
would be tempted to stay with a safer pair of hands.

WAYNE SWAN: Well, Paul I don't think it matters how it plays out politically. What's important here
is the national interest. The national interest is that we must fight fundamentalist terror and we
must track down the terrorists. I don't think anybody really doubts Kevin Rudd's commitment to do
that, or his national security credentials.

PAUL BONGIORNO: Well, during the week we saw the argument over why we're still in Iraq. The
Government now says that oil is not why we're there, democracy and freedom is. But I guess the fact
of the matter is that if there is instability in the Middle East, and energy in security, and for
that we read 'oil', that it could impact on our economy in Australia, petrol prices for example
could go even higher?

WAYNE SWAN: The debacle in Iraq is a perfect demonstration of why it's time for a change. Brendan
Nelson is either incompetent or he's told the truth on behalf of the Prime Minister, but what we do
know is that instability in the region and instability in Iraq has pushed up petrol prices, that's
certainly the case, and we need a political solution to that problem and that's why we need a
phased withdrawal from Iraq. Those are the facts and I think the Australian people are growing
very, very impatient with this debacle, the incompetence of the Government and their refusal to
tell the truth.

PAUL BONGIORNO: We saw an American general just two days ago say in his view that if the Coalition
pulled out of Iraq the whole place would be an even bigger mess.

WAYNE SWAN: Well, our position is that we need some stability in the region and we need stability
in Iraq, that's what the Baker-Hamilton report has called for. A phased withdrawal in Iraq and a
political solution is the only long-term solution at every level, both economic and in terms of
security and socially.

PAUL BONGIORNO: Well, during the week we also saw the Reserve Bank keep interest rates on hold.
That was a breather obviously for the Government. Now the Government is promising to keep interest
rates lower than they would be under Labor. What's your promise?

WAYNE SWAN: We've had eight interest rate rises on the trot and four interest rate rises since John
Howard promised to keep them at record lows. The most important thing we've got to do is put
maximum downward pressure on inflation to keep interest rates down. This Government has not been
attending to the productive side of the economy and what the Treasury documents have shown and what
other analysis shows is that their action, inaction and complacency when it comes to inflation,
will put upward pressure on interest rates. So, the risk lies with the Government.

PAUL BONGIORNO: Well, you said the risk lies with the Government, so are you promising that
interest rates won't rise exponentially under Labor?

WAYNE SWAN: My promise is to do everything we possibly can to keep downward pressure on inflation
and therefore downward pressure on interest rates. This Government has not attended to the skills
crisis, not provided political leadership on infrastructure, that's pushing up inflation and
putting upward pressure on interest rates, backing the Reserve Bank into a corner.

PAUL BONGIORNO: Do you believe that on the economic front that Labor's still has ground to make up
there given that the economy is booming along?

WAYNE SWAN: We're committed to very strict budget rules, we're committed to the independence of the
Reserve Bank, but we're committed to meeting the challenges of the future and this Government has
not met those challenges when it comes to the skills crisis or political leadership on
infrastructure. I think the people out there want a Government that will meet those challenges and
particularly a Government that can put in place prosperity beyond the mining boom and that does
mean attending to those inflationary pressures and lifting productivity growth which has been
faltering under Mr Howard and Mr Costello.

PAUL BONGIORNO: One of the things the Government says that Labor's plans for example on industrial
relations will actually harm the economy.

WAYNE SWAN: Yes, well, Mr Costello has been going with voodoo economics. One day he says that
WorkChoices will produce higher wages, the next day he says its abolition will produce higher wages
as well. We have to have an industrial relations system where wage rises are linked to productivity
at the enterprise level, and that's what we're putting forward.

PAUL BONGIORNO: I notice that Labor's calling again especially with the collapse of Bridgecorp as
an investment scheme where I think the figures that your colleague Nick Sherry put up, by now we've
had something like 80,000 investors lose a total of $1.3 billion. You've renewed your calls for an
inquiry into these investment vehicles. What could an inquiry do?

WAYNE SWAN: Well, I think we need an inquiry, but we also need some urgent action now and what
Peter Costello should have done is reform the disclosure regime. It is completely useless. People
are not appraised of the risk when they're making these investments. Peter Costello has known this
for a long time and he should have been on the job reforming the product disclosure statements so
people were clearly appraised of the risk involved in these investments, and I call on him today to
move very quickly in this area. I think the need is urgent.

PAUL BONGIORNO: Well, I know that 'Choice' is calling for a traffic light system, green, amber, red
or whatever, but if you do that no-one would ever invest in anything that got anything other than
bright green?

WAYNE SWAN: There's a lot of common sense in the argument that we need a much clearer and concise
appraisal of risk and we need a discussion about how we achieve that, because at the moment the
documents are completely useless. People have no idea of the risk, it needs reform and it needs
some action from Peter Costello right now.

PAUL BONGIORNO: When we return with the panel, the dream that's turned into a nightmare - owning
your own home. And the protester of the week was according to one of my producers more eye candy
than hot air. MAN: We're the ski team, climate change ski team. It's so hot in here. There's no
snow left any more, Mr Howard. Climate change ski team, climate change ski team.

PAUL BONGIORNO: You're on Meet the Press with Shadow Treasurer Wayne Swan. And welcome to our
panel, Fran Kelly ABC Radio National breakfast. Good morning Fran.

FRAN KELLY, ABC RADIO NATIONAL BREAKFAST: Good morning, Paul.

PAUL BONGIORNO: And Glenn Milne, News Limited Sunday papers.

GLENN MILNE, NEWS LTD: Good morning.

PAUL BONGIORNO: Kevin Rudd has released a thought bubble on ways to make houses more affordable,
especially for first home buyers. A key idea is saving accounts that would attract a lower rate of
tax to supercharge the ability of young families to save for a deposit. The housing industry was
impressed, the Treasurer less so.

TREASURER PETER COSTELLO (Wednesday): Well, it won't do anything to boost supply, you see. It would
give people more money, but if people with more money were just chasing the same number of houses,
the price of those houses will go up.

FRAN KELLY: Wayne Swan, it's undeniable, isn't it, that less supply means demand means higher
prices?

WAYNE SWAN: That quote showed Treasurer Costello at his worst. If he doesn't understand the
problem, he can't be part of the solution. His own Treasury documents last week said that the case
for increased supply had been overstated. Increased supply is part of the problem, but what
Treasurer Costello needs to do is admit that eight interest rates rises in a row have done much
more to make housing unaffordable than problems on the supply side. He ought to admit that, because
that's what his Treasury documents show.

FRAN KELLY: Don't you need to admit, though, when talking about this is the worst affordability
crisis ever, don't you need to admit too that there's actually more wealth creation within house
prices at the moment too. People's houses have actually been a bit of a boom for them?

WAYNE SWAN: They certainly have. I don't deny that for a minute. But debt levels are rising faster,
you see. As a percentage of disposable income mortgage interest rates are now higher under Mr
Howard than they were under Mr Keating and if you're a typical first-home buyer, it costs you a lot
more in terms of your mortgage repayments to get into the market now than it did under Mr Keating.
They are the facts. And John Howard and Peter Costello were exposed in that area last week by the
Treasury documents which put those forward.

GLENN MILNE: Let me take you up on the debt servicing question if I could. You said earlier on this
program "that we're now engaged in the highest repayments on mortgages in history." Let me take you
to the Reserve Bank Financial Stability Review of only a couple of months ago. I'll quote this to
you, this is from the Reserve Bank. "The repayments on an average new owner-occupier loan as a
share of average disposable income" - that's the debt servicing" - "are still below the previous
peak."

WAYNE SWAN: Sure, but Glenn that's not your typical first-home buyer, you see. They're splitting
hairs here. Your typical...

GLENN MILNE: The Reserve Bank is splitting hairs?

WAYNE SWAN: No, that figure is correct and that's the figure that John Howard is quoting, but he's
seeking to say that it's your typical first-home buyer and that is not your typical first-home
buyer. In the Treasury documentation that you saw during the week, your typical first-home buyer is
now paying the highest percentage of their disposable income in mortgage repayments in our history,
higher under Mr Howard than under Mr Keating. Both facts are right, but that fact is being used by
Mr Howard and Mr Costello to camouflage the fact that we have this affordability crisis,
particularly for your typical first-home buyer.

GLENN MILNE: Let's take the broader point and I'll quote from the Reserve Bank report again. "There
are few signs," the Reserve Bank says, "that the household sector is struggling to meet the higher
debt servicing cost." That's a repudiation of your position, isn't it?

WAYNE SWAN: No, it's not a repudiation of our position. There is now much more evidence of stress
out there, we saw the insolvency data come out during the week, admittedly it's coming off a low
base but those insolvencies have now increased very substantially, there is housing stress in
western Sydney. If you want to go back to the Reserve Bank report you'll see that they do refer to
that.

GLENN MILNE: But this is saying there are few signs that the household sector is struggling.

WAYNE SWAN: There are a quite a few signs that the household sector is struggling and you saw it in
the Treasury documentation during the week which talked about the exposure of Australian families
to high levels of debt and the expectation that that would go higher.

FRAN KELLY: But Wayne Swan that same Reserve Bank report finds that a relatively high share of
households report that their personal finances are more favourable than a year ago. You're on a
road to nowhere here if you're pushing the fact that people are worse off.

WAYNE SWAN: You can read the documentation however you like.

FRAN KELLY: Well, how else do you read that?

WAYNE SWAN: There is plenty of other evidence around including in that report which points in other
directions. You see, Mr Howard and Mr Costello want to go on and say that Australian working
families have never been better off. Certainly some Australian working families are certainly
better off, but there are plenty out there that are struggling. For example, if you want to be a
first-home buyer in this city, you need an income of $140,000 to service a mortgage, required to
buy a median-priced home. So, that means a lot of people in their 30s have no chance of getting a
deposit together to get into the housing market. That is a very big problem.

GLENN MILNE: Well, of course the other point, staying with the Reserve Bank, that they make, is
that you've got to consider the aggregate debt across the entire economy and the fact is that it's
mostly at the top end of income earners that are carrying the higher debt, that lower income
earners are not.

WAYNE SWAN: I don't think you can find anything in the Reserve Bank report which can say that low
and middle income earners in this country are a lot better off and are carrying less debt, if
that's the implication of what you're saying.

GLENN MILNE: It says here the survey also shows that the share of households with a very high debt
servicing ratio above 50% remain fairly low.

WAYNE SWAN: It is no surprise that people on higher incomes carry higher levels of debt but there
are plenty of people on modest incomes carrying relatively high levels of debt and struggling to
repay it and struggling to do it with increasing petrol prices, increasing prices for child-care,
and so on.

FRAN KELLY: Wayne Swan, can I ask you - change tack for a minute and ask you about Labor's IR
policy, because last week Kevin Rudd came clean essentially and said yes, Labor will stick with its
policy to rip up AWAs. As Shadow Treasurer are you comfortable with that, because many in the
business sector will be very disappointed to hear that. They were hoping there would be some
compromise.

WAYNE SWAN: Absolutely. We're determined to put forward a balanced, fair and flexible system of
industrial relations which is enterprise-focused, where wage rises are related to rises in
productivity. That's what we're talking about and that's what we'll put in place. We're out there
talking to the business community about transition, about implementation issues.

GLENN MILNE: When will we see that by the way?

WAYNE SWAN: I don't think you'll have to wait that long, but you'll see it well before the
election, unlike John Howard who didn't even put WorkChoices to the people at the last election.
You'll see ours well before the election.

GLENN MILNE: Back to the Reserve Bank again, but on industrial relations, we had the former
governor Ian Macfarlane say this week obviously it makes the job of monetary policy, that's
interest rates, easier the more deregulated the labour market is.

WAYNE SWAN: We are for a deregulated labour market that is enterprise-based and where wage rises
are linked to productivity. We're also on about fairness, because under John Howard there is no
fairness. He's taken fairness out as a guideline used by his so-called Fair Pay Commission. He has
ripped away penalty rates and basic working conditions from a lot of people, so we're determined to
have a system which is both fair, which has some decent minimum standards in it and which is
enterprise-focused and where wage rises are linked to productivity.

PAUL BONGIORNO: John Howard's put fairness back in with his fairness test, hasn't he?

WAYNE SWAN: (Laughs) You can drive a B-double through that fairness test. I don't think anybody
takes it seriously, Paul.

PAUL BONGIORNO: Thank you very much for being with us today, Wayne Swan. And coming up we talk with
terror expert Clive Williams about healers who want to be killers. It's a theme taken up by Bill
Leak from the 'Australian' in this week's cartoon. "I'm so proud of my young son. He wants to be a
doctor when he blows up."

PAUL BONGIORNO: You're on Meet the Press. The investigation into last weekend's terror attacks in
Britain came to the Gold Coast Hospital with one of their doctors still in custody for questioning.
Two years ago, London bomb victim Louise Barry told John Howard it was Britain and Australia's
involvement in the Iraq war that was making us greater terror targets. She's now repeating that in
a warning on a TV ad.

LONDON BOMBING VICTIM LOUISE BARRY (TV ADVERTISEMENT): Look, I'm no expert and I don't have all the
answers but I do know something about the real cost of terrorism. So two years later and I feel I
really need to ask the same question again - Mr Howard, do you think that these things keep
happening at least in part because of our involvement in the war in Iraq? This situation clearly
isn't getting any better and I don't want what happened to me to happen to any more Australians or
anyone else for that matter. Prime Minister, please, you got us into this mess. It's your
responsibility to get us out. That would make me feel a whole lot safer.

PAUL BONGIORNO: And welcome to the program, Professor Clive Williams from the Centre for Policing,
Intelligence and Counter-Terrorism at Macquarie University. Good morning, Professor.

TERRORISM EXPERT PROFESSOR CLIVE WILLIAMS: Hello, Paul.

PAUL BONGIORNO: Well, is Louise Barry right in your view?

CLIVE WILLIAMS: Well, I think there's no doubt that the threat has intensified since we got
involved in Iraq in March 2003. The Government of course will say that there was a threat before
2003, which is true, of course, but I think that if you look at the number of times that Australia
gets mentioned these days by Jihad sites and that sort of thing, I think there's no question we
have a higher profile.

PAUL BONGIORNO: Indeed, John Howard points out that the Bali bombing in fact pre-dated those
attacks.

CLIVE WILLIAMS: Yes, that's right. 88 people died in 2002 and if you go back before that, 10 died
in the 9/11 attacks, but nonetheless, there's still been significant number of people who have died
in ones and twos since 2003.

GLENN MILNE: Professor Williams, this morning, Paul O'Sullivan, the head of ASIO, is saying that
Australians now have to accept the fact that terrorists are just as likely to be highly trained
professionals like doctors and engineers, as anyone else. Is that right, and if that is right, how
do we deal with that?

CLIVE WILLIAMS: Well, it certainly is true that a number of people obviously involved in attacks in
the West have been professional people. In fact, I saw a figure recently which said something like
53% of them were post-graduates, so it's going to be a challenge and particularly since we need
these people often because we've got shortages, particularly in the medical area, of course. But in
many societies, they encourage their children to become engineers and doctors and to study in the
West and that's been a trend for a long time, so we are going to face the two issues of people
wanting to send their children to the West and our own shortage in this area.

GLENN MILNE: Just focusing on the issue of highly trained professionals for a moment, this is a
horrible thought, but I'd like you to contemplate it. Is it possible do you think that one day
we're going to see an airline pilot, a foreign-trained airline pilot who is also a terrorist?

CLIVE WILLIAMS: Well, that's possible. There's been some suspicions about the Egypt Air flight out
of New York that went into the ocean, that that was actually a suicide by the pilot taking the
whole airplane into the sea, because it's not been possible to come up with any other scenario
that's credible, because the plane was intact and there was nothing that indicated that it was
anything other than suicide by the pilot.

GLENN MILNE: Do we have many foreign-trained airline pilots in Australia?

CLIVE WILLIAMS: I couldn't say. I don't know on that, but it is a possibility. But I think there
are other scenarios involving aircraft that are more credible. For example, an attack on an
aircraft on the ground before it's about to take off, given that perimeter security at airports
isn't very good.

FRAN KELLY: Another horrible thought, Clive Williams, is a report today suggesting that the British
attacks were set to be detonated by a phone call from Australia. Now that not only puts us front
and centre in this thing but also that would be impossible to detect and prevent, wouldn't it?

CLIVE WILLIAMS: Well, it's certainly true that an IED could be set off from anywhere in the world
if it's connected to a mobile phone, but I think in this particular case the bomb was apparently
built by Kafeel Ahmed, who was the driver in Glasgow, and I would have thought if he was the
bombmaker he would be the one that would try and set it off.

FRAN KELLY: There's talk today of the a sleeper cell here of these doctors to finance attacks
overseas. Any evidence or thoughts about whether these people might come here, be radicalised here
or radicalised before they come, even perhaps set up in medical school as part of a long-term plot?

CLIVE WILLIAMS: There certainly is a danger of people becoming radicalised when they go to a
western country, because they might feel isolated or might sort of seek solace with people who have
a radical view and so on, but I think in the case of the doctors, I think the Ahmed brothers were
actually radicalised in Saudi Arabia when they went there with their parents, and then they
returned to India and they were living in Bangalore and the local mosque actually said that they
weren't welcome because they were trying to promote the Wahabi form of Islam in Bangalore at the
mosque, and so I would say that the radicalisation of the Ahmed brothers took place a lot earlier
than their arrival in the UK.

FRAN KELLY: The med school was not a part of the grand plot? These people didn't all sign up to
learn to be doctors with a dastardly long-term plot?

CLIVE WILLIAMS: No, I don't think so. I think that Kafeel is probably the one I had the most
concern about. He seems to be the sort of activist guy. Where they actually met up with people like
Bilal Abdulla, who's the one who's just been charged under the explosive ordinance in the UK,
that's a matter for question at the moment. I think probably that was an association that occurred
in Cambridge.

PAUL BONGIORNO: What sort of checks can we have? You say that people radicalised in Saudi Arabia,
but how, for example, will a medical board in Australia know that they're actually radicalised and
weren't just going, say, to Saudi Arabia for genuine religious reasons?

CLIVE WILLIAMS: That's the difficulty, because there's not much transparency once you go to
somewhere like Pakistan or Lebanon, as examples, there's not really, it's not very clear what
you've done while you were there and that's the problem. There's also the issue of checkable
backgrounds. If you're getting a chance in defence for example we would do a security check on you,
but if you were needing a higher level clearance we would need 10 years of checkable background.
Well, that pretty much excludes people from many parts of the world. If they come from India or
Pakistan or those sort of places, you simply can't check the background.

GLENN MILNE: Do you think there's been a bit of class prejudice here Professor Williams in the
sense that if you're a doctor you get in more easily? And do you think there's a case for
tightening those checks on professions like doctors?

CLIVE WILLIAMS: Well, I think because we need doctors I think we maybe sort of at times are more
receptive to people from that profession, but we still face the same sort of problems with checking
their backgrounds, unless they've had a substantial period in a western country, and even then,
clearly the security intelligence at times is not very good, particularly if those people are being
maybe inspired by al-Qa'ida but have no connections with anyone in that organisation, that becomes
a problem as well.

PAUL BONGIORNO: Thank you very much for joining us today, Professor Clive Williams, and thanks to
our panel, Fran Kelly and Glenn Milne. Until next week, goodbye.