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Leader of the Democrats and Prime Minister aim to build a more cooperative relationship; discusses the forthcoming Budget

JOHN HIGHFIELD: Well, Prime Minister John Howard and Cheryl Kernot have agreed to build a more cooperative relationship between the Government and the Australian Democrats in the Senate. At a meeting lasting almost an hour and a half in Sydney this afternoon, they discussed matters including funding for the environment, Aboriginal reconciliation and the needs of rural Australia. And while the meeting was described as constructive, the two leaders say they recognise their differences. Senator Kernot remains convinced that the Government's wrong to pursue its $8 billion deficit reduction target and says she'll argue the Budget on the Senate floor with the single goal of fairness in mind. The Democrats Leader has been speaking to P.M.'s chief political correspondent, Fran Kelly.

FRAN KELLY: Cheryl Kernot, Green Senator Bob Brown came out of his meeting with John Howard this week saying that there's an enormous gulf in the approach to shaping Australia's future between the Greens and the Government. Do you feel the same way after your talks with the Prime Minister?

CHERYL KERNOT: Well, not an enormous gulf, but I do think we have quite different starting points in relation to how the Budget should be framed. We say that $8 billion over two years is too strict, that the pace of the change, the severity of the change, is causing huge anxiety and has the capacity to leave a huge social deficit. So we'd have to agree to disagree on starting points.

FRAN KELLY: That's a fairly big disagreement, given the season we're just about to go into.

CHERYL KERNOT: Yes, but I think there are some realities here and one of the biggest realities is that the Government's able to lump a lot of the nasties, like a reduction in operating grants to universities, into the Appropriations Bills. They know that the Senate won't muck around with those Bills. They know that a lot of those nasties will get through and head towards their deficit reduction strategy.

FRAN KELLY: So what things will you be trying to do?

CHERYL KERNOT: Well, I mean, I raised with the Prime Minister .. I suppose, in terms of new issues that haven't been canvassed so far, I was very interested in finding out what I could about funding for public schools because I think that's an issue that's been neglected in recent years. I raised the issue of operational subsidies for family day care because I think there are so many Australian families out there reliant on that. He said he would take that on board, give that serious consideration. Also had an important discussion about the future of Australians who live in the bush and why I think the measures the Government's taking in terms of cutbacks in regional areas are counterproductive to the long-term future of people in the bush. And, in terms of ongoing issues, we talked about environment funding, we talked about ABC funding, and I raised my concern that the reconciliation process is pretty well finished in terms of cuts to ATSIC.

FRAN KELLY: I'll come back to that in a moment, but just if we can stay on the Budget for a moment - you say the Democrats believe that the Government's deficit reduction target of $8 billion is too strict, too steep, too much. Today, the Reserve Bank Governor, Bernie Fraser, said that he thinks the Budget should be brought back into balance as quickly as possible and that $4 billion worth of cuts a year are not draconian measures. Doesn't that weaken your argument?

CHERYL KERNOT: Well, he also said - I hope you'll acknowledge - that it's how you get there that's important, and he reiterated the importance of targeting unemployment, and I think he has said all along that if we had a really credible strategy to halve unemployment and if we could just do that, say bring it back from 8.5 to around 7 per cent, we could slash $4 billion out of the Budget deficit. Bernie Fraser has made a big point about that all along.

FRAN KELLY: But he also agreed with the Government, to some sense, that the best way to get employment growth is to get economic growth, and the Government says that's what the whole Budget deficit reduction strategy is all about.

CHERYL KERNOT: Well, there's a growing chorus of economists who are also saying that if you insist on taking $8 billion out over two years, you run a huge risk of slowing growth by half a per cent and creating between 50 to 80,000 unemployment places. So, I mean, you know, six of one, half a dozen of the other, and you want to get an opinion, Fran.

FRAN KELLY: Yet the Reserve Bank Governor does have, as part of his charter, to boost employment growth. We've seen, in very recent moves from the bank, that that is a major consideration of the bank. He also has interest rates at heart, and he's saying very clearly that $4 billion worth of cuts a year is not too much for our economy to take. I mean, isn't he pretty well placed to make a judgment?

CHERYL KERNOT: I think you need to put all of his speeches into context. He said how you get there is as important as where you get. He also said the key to it, in my view, is unemployment. I mean, I ask you to go and look at some of his previous comments. He also said, in terms of economic growth and the health of the economy, that there is a tenuous link between this Budget and short-term interest rate cuts.

FRAN KELLY: Well, I understand the Prime Minister told you today that his Budget would be fair and, when seen in its totality, it should attract your support. Given what you already know about the Budget, what's coming on Tuesday night, can it be fair? Is it fair?

CHERYL KERNOT: Look, we've already seen so many of the nasties, haven't we, and some of those certainly are not fair. What's fair about cutting ATSIC's funding on the same day as you maintain a subsidy to miners? I mean, I think that says something about Government's priorities. I think you'll find it's a very cleverly-crafted Budget which has acknowledged the realities of the Senate, which has tried to manage the damage by getting some of these extra nasties out the way now and, on Tuesday night, the centrepieces of the family tax package and the health rebates package will be highlighted, and people may have a feeling that this is fair. I can only take the Prime Minister's word for it. We'll all see on Tuesday night.

FRAN KELLY: Cheryl Kernot, you're a member of the Reconciliation Council. You just mentioned then that the ATSIC cuts won't have helped reconciliation. Is the reconciliation process dead because of these cuts, as we heard from some ATSIC commissioners yesterday?

CHERYL KERNOT: Well, at the last Council meeting, there was massive dissatisfaction at cuts just to the Council, so I think if you add on top of that the cuts to ATSIC, the just general tone approach to indigenous Australians since the change of Government, I think that there are a huge number of Council members who will wonder about the worth of keeping ongoing, in this kind of context. Reconciliation is an incredibly hard task and I think, when you appear to take sides, as you are, against indigenous Australians, that you make it even harder because the really important task is to assist non-indigenous Australians to understand the enormity, the enormity of the budgetary impact of cuts, the fact that there's 200 years of disadvantage to address, and when you ask: What does ATSIC have to do? - when you look at what it has to do, then $148 million may not seem like much to some people - if you're a miner, for example - but if you live in a community without sewerage, for example, it's everything.

FRAN KELLY: Well, when you raised this matter with the Prime Minister today, did he mount any credible defence of the cuts to you?

CHERYL KERNOT: He has a different view; it's, I suppose, a fairly entrenched Coalition view about waste, and I suppose it comes from 13 years in Opposition and storing up anecdotal evidence of particular instances around the country.

FRAN KELLY: Coming up to this next session of Parliament, there's a lot of important or key legislative matters to discuss: there's the Budget Bills, there's also Telstra, industrial relations and some others. There'll be a lot of focus on the votes of the minor parties in the Senate, including the Democrats. Most of the analysis focuses on the Democrats as a bloc of votes, but are you convinced that all Democrat Senators will vote as one? Can that bloc be split?

CHERYL KERNOT: Absolutely not. I'm perfectly convinced that we have the same views on all major policy. We talk about it at length. I would have identified by now if anybody had a different view.

FRAN KELLY: And just finally, relations between the Democrats and the Coalition haven't been good so far in the term of this Government. Do you expect that to change following today's discussions with the Prime Minister?

CHERYL KERNOT: Well, I actually think one of the best things out of today's discussion was the opportunity to tell him, first hand, of some of the nonsense instances that have happened, the very immature things that have happened, you know, where Ministers just don't even bother to speak, and I just can't believe how you can say that there's no dialogue when no one will pick up the phone and actually take an opportunity to speak with you about something that's on their mind. So what's come out of it, I think, is that we both agreed that we need to concentrate more on ideas rather than personalities. I really expect there to be an improvement in the relationship because I expect the Prime Minister to show some leadership on this matter, and that will be better for all of us.

JOHN HIGHFIELD: Democrats Leader, Cheryl Kernot, with P.M.'s Fran Kelly.