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Transcript of interview with Jon Faine: 774 ABC Melbourne: 9 October 2009: Australian economy; Rudd Government's reckless spending; interest rates; Ross Garnaut; ETS; human rights legislation.



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Fri, 9th October 2009

TURNBULL INTERVIEW WITH JON FAINE (774 ABC MELBOURNE) - AUSTRALIAN ECONOMY, RUDD GOVERNMENT’S RECKLESS SPENDING, INTEREST RATES, ROSS GARNAUT....

The Hon Malcolm Turnbull MP

Leader of the Opposition

Subjects: Australian economy; Rudd Government’s reckless spending; interest rates; Ross Garnaut; ETS; human

rights legislation.

E&OE

JON FAINE:

Malcolm Turnbull welcome to 774 ABC Melbourne.

MALCOLM TURNBULL:

Good to be with you.

JON FAINE:

Who is undermining your leadership?

MALCOLM TURNBULL:

Who knows? You have a lot of critics in my line of work and ideally they are limited to people outside your party

but obviously we have had a few internal critics. But I think people are starting to realise now that our job is to

focus attention on the Government. The public are not terribly interested in politicians talking about themselves.

They want to know what is going to happen to the economy, their job, their ability to service a mortgage. We see

on the front page of The Australian today the very distinguished economist - normally more on the Labor side

than our side, very much so in fact - Ross Garnaut echoing exactly the same criticisms I have been making for

months now, which is that the Rudd Government’s reckless spending and borrowing is going to drive up interest

rates, result in higher taxes and over time lower living standards.

JON FAINE:

We’ll come to that in detail in a moment. The issue of leadership, we can’t avoid it and someone said yesterday

it’s the elephant in the room, which Joe Hockey didn’t take personally, which I thought was to his credit. But there

are people who are trying to pull the rug out from under your feet, aren’t there?

MALCOLM TURNBULL:

Well that’s what I read but, again, it’s not something that I can waste a lot of time on, frankly.

JON FAINE:

Where does it stop? How do you put an end to it?

MALCOLM TURNBULL:

Well I think that political parties, as I said yesterday, often go through periods of disorderly conduct, let’s say that

- and where people snipe at each other and so forth. Dissent and debate is natural but the reality is that politics

is a team business and we have to work together, and while we may disagree, be that on policies or

personalities, we have to come to a common view. There has to be a leader, there has to be a policy, there has

to be a whole platform. So we’ve got to reach agreement. And I think when these outbursts occur after a while

people realise the damage it’s doing to the party, the damage it’s doing to their colleagues’ prospects of getting

re-elected and…

JON FAINE:

I think they already know that and they seem not to care. Isn’t that the issue?

MALCOLM TURNBULL:

No I think what happens is it bursts out and then the penny drops and then people focus on reaching a united

position. So I think that’s what will happen and that’s certainly what I have called for and what, I must say, every

leader of a political party where this has occurred, be it Labor or Liberal, has always said the same thing - we’ve

got to stick together, and invariably we do.

JON FAINE:

You can’t buy unity, you can only create it. You can’t demand loyalty, you can only try to inspire it. So what does

Malcolm Turnbull do to reach out to people who seem to have irreconcilable differences on policy grounds with

where you’re taking the party?

MALCOLM TURNBULL:

The question is, are they irreconcilable? Probably it’s better to talk about specific policies and policy differences. I

mean, do you want to talk about another elephant in the room, the climate change issue? I’m very happy to do

that.

JON FAINE:

I am, as someone who keenly follows the debate, I’m completely puzzled about what these amendments that are

so delicately poised for negotiation, what they actually are. We’ll come to it in a moment but just still on the

question of leadership and your tenure on the job, which is being so openly questioned in the press this morning

- what do you do, how do you, Malcolm Turnbull, talk to someone like Wilson Tuckey or Cory Bernardi or others

who are doubting your credentials?

MALCOLM TURNBULL:

I talk to my colleagues all the time.

JON FAINE:

But what do you say to them that you haven’t already said, what appeal can you issue that you haven’t already

issued?

MALCOLM TURNBULL:

Well all I can do is continue to make the case for the position I’m putting to the party and it’s up to the party room

whether it agrees with it.

JON FAINE:

The media seem to be having a field day.

MALCOLM TURNBULL:

Apparently. Well, here we are, we’ve been in the studio for 10 minutes and we’ve gone on and on about

leadership and we haven’t actually got on to any policy substance. There will people tapping their toes in

frustration listening to us saying, when are Mr Faine and Malcolm Turnbull going to talk about the substance of

the policy? Why is Mr Faine so obsessed with personalities?

JON FAINE:

Well because everyone else is. It’s not just me as I’m sure aware.

MALCOLM TURNBULL:

But you’re a leader - you should be a leader not a follower, you see. So you’re just being dragged along by the

media tide.

JON FAINE:

Last question on it. Is it a self-fulfilling prophecy? Does it become in itself the game, the issue - you become he

issue rather than the policies?

MALCOLM TURNBULL:

I don’t think so.

JON FAINE:

Alright, well let’s see whether or not the other issues are able to get you back on track. On stimulus spending.

Ross Garnaut, Ken Henry, everybody is now saying that the economy is over-stimulated, at the same time…

MALCOLM TURNBULL:

Has Ken Henry said that yet?

JON FAINE:

Well he’s giving evidence today - it’s widely expected. Plenty of people are saying though that at the same time

there’s a lot of people suffering and a lot of people unemployed and you’ve got to do something for them.

MALCOLM TURNBULL:

Well that’s right. Look, it’s always a balance, you know, there are always unemployed. We’ve never had zero

unemployment. The challenge for policy always has been to achieve a low level of unemployment - that is to say

a high level of employment - with low or manageable levels of inflation. If the price of getting unemployment

down to very low levels is inflation takes off of course it’s self-defeating, because ultimately that then causes an

economic crisis which produces even more unemployment. So that’s the balance.

Now our concern has been that the Rudd Government’s stimulus package is too big and poorly targeted. In other

words, they are borrowing and spending too much money and they are not spending it effectively enough -

they’re not getting enough bang for the tax payers’ buck.

And you see this with the debacle with some of these schools programs, the Julia Gillard Memorial Assembly Hall

program where perfectly good buildings are being knocked down only to replace them with another perfectly

good building but this time with a plaque from Julia on it, and of course a couple of million dollars in additional

debt for the taxpayer.

JON FAINE:

But a couple of dozen jobs for local builders.

MALCOLM TURNBULL:

Well, Jon, that’s why they said they wanted to do it. We said they should proceed more cautiously - spend

money on schools, by all means, but spend less money and spend it in a more targeted way.

The fact is that what they call fiscal stimulus - and just bear with me here - when governments go out to

stimulate the economy and borrow and spend a lot of money that will create employment. If they build schools or

roads - they should always aim to build things that have got real value. So in other words you don’t suspend the

laws of economics just because there’s a downturn; focus on building infrastructure that’s going to have real

value. So we say they’re not doing that.

But the problem with fiscal stimulus, and it’s inherent, is that you may start spending money on infrastructure

today when you think the economy is going down and so what you’re spending is counter-cyclical - it’s working

against the downward trend, the economy is going down so you spend money to lift it up. But what happens if

you get it wrong and in fact the economy is not going down and is coming up, suddenly you’re spending becomes

pro-cyclical. In other words, the economy is starting to rise, there’s increasing demand on labour, forcing up

costs…

JON FAINE:

And you’ve still got your settings for when times were bad but they’re not bad anymore. But the rest of the world,

the rest of the world is looking at Australia and saying, gee, I wish we could have a bit of that. Don’t you look a bit

silly saying we shouldn’t be doing what we’re doing when the rest of the world is applauding?

MALCOLM TURNBULL:

No, what the rest of the world wishes they could have had was eleven and a half years of Coalition government.

Because I was just over in England the other day and they had, roughly over the same period, they had a Labour

government and we had a Liberal government, and had a boom - a different type of boom but a lot of

government revenues, prosperous times etc. The Labour government over there just kept on spending and

borrowing and they went into the downturn with massive debt which of course has become much more massive.

We went into the downturn courtesy of John Howard with no debt and in fact with cash out the bank and we…

JON FAINE:

Peter Costello will bristle at you leaving him out in that then.

MALCOLM TURNBULL:

Well of course I pay deference to the retiring member for Higgins who was the greatest Treasurer Australia has

ever had.

JON FAINE:

Too late. But either way the rest of the world…whatever the last decade was about it doesn’t matter. Here we are

in 2009 and the economists and leaders of the rest of the world are sitting around saying Australia has handled

this in perfect fashion and you’re criticising it.

MALCOLM TURNBULL:

What I’m saying is that Australia has had a better experience in this downturn than just about any other country

because we went into it in better shape, courtesy of the member for Higgins and his leader, John Howard, and

the rest of the team and also because of better regulation put in place by the Coalition in government. And also of

course we’ve had the benefit of Chinese demand for our resources.

Now our criticism of the Rudd Government’s stimulus is not that there should have been no stimulus, we’ve never

said that. We said spend less, make it more targeted. This was the point I made back in February and I reminded

people last night in the Menzies lecture. I said at the time, look, the Parliament is not closing down, if you feel you

need to spend more money we can come back and vote some more but for heaven’s sake…

JON FAINE:

There’s a lag effect you understand, and Wayne Swan and Lindsay Tanner time and time again have said you

have to factor in the lag, you have to build it in and the jobs they announced in April are only just starting to

actually happen now in October. So it’s not a matter of just flicking your finger.

MALCOLM TURNBULL:

No but this is the point. This is why you need to be judicious when you are using tax payers’ money and you need

to have stimuluses that are better targeted. Look the headlines from the economists over the last few days are

confirming exactly the criticisms we made in February and are confirming the wisdom of the advice we gave the

Government back in February about having a smaller and better-targeted stimulus.

JON FAINE:

Thirteen minutes to nine. Malcolm Turnbull is my guest in the studio and although time is moving fast I’ve still got

quite a list of things.

MALCOLM TURNBULL:

Good.

JON FAINE:

So one more question on just the economic aspects before we move on to emissions trading. If interest rates are

going to be up another couple of per cent within a year and we’re going to have parity with the US dollar, what’s

that going to do to the Australian economy?

MALCOLM TURNBULL:

Well it’s obviously going to hit everybody who’s borrowing money very hard. It’s going to make money more

expensive for businesses and in particular for home buyers. The fact of the matter is that were it not for the

Government’s reckless spending and borrowing interest rates would be lower. Wayne Swan tries to argue the

toss about this but you don’t suspend the laws of economics just because there’s a financial downturn or

because there’s a Labor government.

If governments borrow and spend money excessively it puts upward pressure on interest rates and of course the

bigger the debt of course the higher the taxes they’ve got to levy in order to pay it off. So there is no good coming

out of the Rudd Government’s reckless economic management and Ross Garnaut, who is very much on the

Labor side - he was the man of course who did the big study for their climate change legislation - Ross

Garnaut’s remarks in The Australian today confirm it.

JON FAINE:

Have the big banks rorted the global financial crisis? The saying in the top end of town is, ‘don’t waste a good

crisis’.

MALCOLM TURNBULL:

Well that saying, you shouldn’t waste a good crisis, I first heard from was Barack Obama’s chief of staff. So he’s

at the top end of another town, in Washington.

No, I wouldn’t. If you’re talking about the big Australian banks, they’ve done very well out of it and again that was

something we predicted earlier in the year. The big four have had a good war. Their share of the mortgage

market has dramatically increased. Their competitors in the non-bank sector have been eliminated in large

measure..

JON FAINE:

Should they give something back now that interest rates are creeping back up? They’re quick to put them up and

as the Consumers Association are pointing out this morning, they had all sorts of reasons why they shouldn’t cut

them when they were going down but they simply argued the exact opposite case now as they’re going up.

MALCOLM TURNBULL:

Well they would, wouldn’t they? I mean, look, they’re in business.

JON FAINE:

Should government do something about it?

MALCOLM TURNBULL:

I think what the Government should certainly do is start winding back the unprecedented guarantees it has given

the banks. Now there are two types of guarantee that they’ve given the banks. One is for deposits which has a

million dollar cap. I’ve always felt that was too high. Of course it started off being unlimited. It should be brought

down to about $100,000, which is the standard around the world.

JON FAINE:

Academic now anyway, isn’t it?

MALCOLM TURNBULL:

Well no I don’t think it is academic because this puts an enormous contingent liability on the taxpayer, you know,

a guarantee.

JON FAINE:

Should it be lifted now?

MALCOLM TURNBULL:

It should be reduced to a level comparable to other countries.

JON FAINE:

Why not remove it altogether?

MALCOLM TURNBULL:

Well there is an argument… I don’t think you would remove it all together. I think that would be a bad policy

outcome. I think there is a strong argument for having what you could call a retail deposit guarantee but I think it

should be at a lower level - $100,000 is what we recommended last year and I think most of the industry believes

that’s where it should have been. The Government went over the top and made it unlimited and that of course

contributed to wiping out a lot of the non-bank institutions such as mortgage funds who then of course had to

freeze their assets, or freeze withdrawals and of course ended up freezing a lot of Australian’s assets.

JON FAINE:

Nine minutes to nine. Malcolm Turnbull with me until nine o’clock and looking at human rights legislation

proposals in just a moment but the emissions trading scheme.

I said in my introduction, Malcolm Turnbull, I’m a keen follower of politics in the media. I have heard endless argy

bargy and all of our leaders, you, government, everybody, industry leaders, farming leaders, energy industry

leaders, talking about the need for negotiations and amendments but I’m no the clearer, I’m none the clearer

about what those negotiations and amendments that you’re insisting upon might be. What do you want to amend

and what affect would it have?

MALCOLM TURNBULL:

Well we’ve actually set out in writing nine principles that our amendments will be based on in July. And without

going through them exhaustively, the main principle is that we should provide no less protection to Australian jobs

in Australian industry than the American legislation is going to provide to theirs.

And what follows from that is a number of things. Firstly, we believe emissions from agriculture should be

excluded as they are excluded both in the United States and in Europe. That would relieve farmers of a lot of

anxiety.

JON FAINE:

Emissions from animals and machinery?

MALCOLM TURNBULL:

Well emissions from the business of agriculture, so from land use and from livestock. The emissions from the use

of fuel of course come in a different category. In Australia we’re really talking particularly about livestock. We

believe that offsets - that is to say when farmers can create carbon sinks, whether it’s by planting trees or more

efficient use of their land or biochar - they should be allowed. At the moment they’re basically, in large measure,

not allowed.

We believe coal mining is being treated in a very unjust way under this scheme. Fugitive emissions, which are

the greenhouse gases, mostly methane, that are emitted from the business of mining the coal, as opposed to

burning it, are excluded from the US proposed scheme and are in fact excluded from Europe. In fact they’re not

included anywhere else in the world.

JON FAINE:

So why are they included here?

MALCOLM TURNBULL:

Well that’s a very good question to ask Mr Rudd.

JON FAINE:

Because it’s best practise.

MALCOLM TURNBULL:

But the problem with that is that if you do that you will end up exporting thousands of Australian jobs in coal

mining and close a lot mines, stop a lot of new projects coming online. Will that do the planet any good? No,

because they will simply mine more coal in Columbia, South Africa, Indonesia and elsewhere.

JON FAINE:

But if we’re going to call on other countries to have a better scheme we have to have a good scheme ourselves.

MALCOLM TURNBULL:

We do have to have a good scheme but this is the point that I made when I was in government as environment

minister. We’ve got to make sure, we’ve got to have a very effective scheme, correct, but we’ve got to make sure

that it is in line with and does not disadvantage Australian industry relative to other countries, because the risk

you run there is that you simply end up exporting not just the jobs, although they are of primary importance, but

the emissions as well.

You see if the consequence of a poorly designed Rudd scheme is that 20,000 jobs are lost in Australia and

millions of tonnes of carbon dioxide are no longer emitted in Australia but are then emitted somewhere else, it’s a

disaster.

JON FAINE:

It’s an own goal.

MALCOLM TURNBULL:

Well a complete own goal.

JON FAINE:

You still end up with the emissions but none of the offsets and you lose the jobs as well.

MALCOLM TURNBULL:

Bingo. That’s exactly the point. And that is what the amendments that we are putting into a very detailed form at

the moment, that we’ll take to the party room in a week or so, will be addressing.

JON FAINE:

On AM Greg Combet yet again said, well if it’s take it or leave it on these amendments that’s not how it works.

He’s saying come to us with your amendments, we’ll look at them but it’s a process of negotiation not ultimatums.

MALCOLM TURNBULL:

Well we’re not giving anybody ultimatums. Let me quite clear and if I may just say this - there’s a story in The

Age today suggesting that I’ve changed my position on the climate negotiations. That is completely untrue, with

great respect to Michelle Grattan.

Our position has been the same from the outset and I’ll explain it very carefully. This is what we’re proposing to

do. We are preparing amendments in detail. The principles we laid out in July. So Greg Combet knows what

we’re coming up with, he’s a smart guy, he knows exactly what we’re going to be coming up with in principle. We

take those detailed amendments to our party room. Assuming the party room gives their consent to them, which I

believe they will, I’m very confident they will… We then sit down with the Government and we negotiate. We

imagine that we will get agreement somewhere in the middle…

JON FAINE:

Does your party room give you room to negotiate or do they box you…

MALCOLM TURNBULL:

Let me just go on. So let’s say the best we can do from the Government is a particular point. The Shadow

Cabinet will then consider it and then we will take that back to the party room with the recommendation. Now we

are not guaranteeing or intimating or indicating that we’re going to support whatever the Government proposes to

us. Quite the contrary. We will vote on the bill in the light of the extent to which our amendments are accepted -

and obviously the more that are accepted the more likely it is that we’ll agree to it - and in the light of other

developments at the time.

JON FAINE:

If you don’t have room to negotiate, you go to the Government, you say here’s what I have been given license to

negotiate with you over and they ask for another change or a shift or a movement an amendment to an

amendment, you go back to your party room and they bounce, you end up with the double dissolution.

MALCOLM TURNBULL:

Well if we decide to vote against the bill then obviously that would give Rudd a trigger for a double dissolution.

But if I may just say this, the importance of the amendments - and I just want to stress the importance of the

amendments - we go to the Government with reasonable proposals to protect jobs and ensure the scheme is

environmentally effective. If the Government rejects those amendments, and if as a result of that we vote against

the scheme, the Australian people will be under no doubt as to what our policy on emissions trading is because

they will see our amendments. The Government will have plan A, we will have our plan B.

JON FAINE:

A double dissolution would be a disaster for you now, wouldn’t it?

MALCOLM TURNBULL:

Well, again, I think that’s been overtaken. A double dissolution is just an election with two features. Firstly, all of

the senators are elected instead of half of them and legislation which has triggered the double dissolution after

the election comes back to a joint sitting and can be passed or not. Now…

JON FAINE:

If the opinion polls are a guide it would be a disaster from your side of politics.

MALCOLM TURNBULL:

If there was an election held this Saturday and the opinion polls were right we would obviously do very badly, yes

that’s true.

JON FAINE:

So you’re back against a wall, aren’t you?

MALCOLM TURNBULL:

Not at all. I mean you cannot be in the business of politics and be afraid of elections, double dissolutions or

otherwise. I mean we have to have an election every three years so elections are the business we’re in.

JON FAINE:

Malcolm Turnbull, just finally, two minutes until the news - a human rights act proposed yesterday and a

landmark report handed to the Government by Father Frank Brennan, does the Liberal Party support it?

MALCOLM TURNBULL:

No, as George Brandis said, well the core recommendation that there be a statutory bill of human rights we do

not support. It will transfer legislative power from the Parliament, where it belongs with the elected

representatives of the people, to the judiciary who are not elected. And if Mr Rudd wants to have a bill of human

rights then, as George Brandis has said, he should have the courage of his convictions and propose it as a

constitutional amendment. He’s not doing that because he knows it will be roundly defeated.

JON FAINE:

You seem to be missing your usual exuberance. Are they wearing you down?

MALCOLM TURNBULL:

Alright I’ll be exuberant! No, no, certainly not. You seem a bit off colour today. In fact, the reason why I’ve been

less than exuberant is because I’ve been concerned about your timid and quiet demeanour.

JON FAINE:

You see, that’s much more the Malcolm Turnbull that we’re used to, isn’t it? And it took my provocation, there you

go.

MALCOLM TURNBULL:

Well you should be more provocative.

JON FAINE:

Or on the other hand you can be too provocative and then you don’t get any substance. It’s a matter of trying to

find a balance.

MALCOLM TURNBULL:

Exactly right. Anyway, it’s good to be with you.

JON FAINE:

Well thank you very much for your time this morning and we’ll certainly I’m sure on the talkback find out exactly

what people think of what you’ve been talking about this morning both to do with leadership, the economy,

interest rates, the emission trading and human rights legislation as well.

Thank you for joining us this morning.

MALCOLM TURNBULL:

Great to be with you.