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Transcript of interview with Alan Jones: 2GB, Sydney: 30 June 2010: [Kevin Rudd; self-funded retirees; mining tax].



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The Hon Julia Gillard, MP

30 June 2010

Transcript of interview with Alan Jones 2GB

JONES: Prime Minister, good morning.

PM: Good morning, Alan.

JONES: Congratulations.

PM: Thank you very much.

JONES: You've given a tiny Welsh mining village a bit of a flutter in the last week. How do you pronounce C-W-M-G-W-R-A-C-H?

PM: Well, you can tell it's Welsh when you see that many Cs and, you know, Ws and Ms in a row. It's pronounced 'Coom-grack'.

JONES: Cwmgwrach, in the hills east of Swansea. Is that where you were born?

PM: No, I was actually born in Barry, but that's my father's village. That's where he grew up, and that's where many of the Gillards are still in residence. My father was one of seven brothers and sisters and apart from him coming to Australia and his younger brother, Terry, going around the world and settling next to London, basically everybody stayed, so, they went mining or they married miners, Alan, and so there are many generations of Gillards bred in that village.

JONES: So the red hair and the pale skin and they say raw determination are the signposts of a working-class Welsh heritage? One of your neighbours in the village, a Mr Basil Baker, was quoted this week as saying that when you were 16, quote, 'I remember asking her what she wanted to do with herself, supposing she probably wanted to become a wife and mother. She said to me 'I don't know what I want to do, but I know I want to be something I can work at and rise from the bottom to the top.'' You're at the top now, it's fair to say. Is the view flash?

PM: Well, the view is full of challenges and pressures, but obviously it's a tremendous opportunity to be able to outline a vision for the nation and to make a difference and Alan, I'm driven today by the things I've been driven by all of my adult life. Closest to my heart is making sure that every kid gets a fair chance at a great education. If you look at my life and say 'what's been different

from the life that my father has led or my mother has led?', and they've lived long and happy lives and they're still with me, Alan, which is terrific, but the difference is I got a great quality education and great opportunities when I was young, and I'd really like us as a nation to be able to turn to each other and say 'every child, no matter what the circumstances of their birth, gets a great education in this country.'

JONES: Well, let me ask you this - when I spoke to you on 6 May, I could see all this on the wall and I asked how could your Government be happy-

PM: -Nostradamus Jones.

JONES: No, but I did, no, but I did. I said, I said to you 'how can your Government be happy', I said, 'with a leader who's taking you into polling territory which demonstrates that on the last poll you wouldn't have won a federal election?' You said this:

PM CLIP: Alan, I'm very proud of the efforts that Kevin Rudd has made to save this nation from recession and to set this nation up for a stronger and fairer future. Kevin's obviously developed and driven his personal plan to improve our health care system and put it on a sustainable footing for the future. All of these are the important things that the nation wants to see done. I'm very proud of what Kevin's achieved and he's certainly, I believe, going to put before the nation plans to achieve so much more.

JONES: Now, Wayne Swan said the same thing to me. How do you reconcile that with your current position?

PM: Alan, I believe that we've been a good Government, but in recent times we have lost our way, and so when I reflect on the period of the Government and what Kevin Rudd achieved, I think he has achieved some remarkable things.

JONES: But did he lose his way between May 6 and last week?

PM: Well, I think in recent times the Government's lost its way. Alan, I'm not gonna canvas, kind of, private conversations I had with Kevin Rudd or concerns that I expressed, you know, in Cabinet meetings and the like.

I do believe there are things that we can be proud of and Kevin Rudd can be particularly proud of, and leading this nation through the global financial crisis, bringing the budget back to surplus in 2013, an unemployment rate of 5.2 per cent - these are things we can be proud of, but there are things that we need to do to get the Government back focussed on strengthening the economy, giving people the services that they need. I think we had lost our way, there were things that needed to be fixed and as the new leader I'm setting about fixing them.

JONES: Do you understand the irony of this, that in a Party which is supposed to be the champion of working families, it has given itself the option it refuses to give other employers. In other words, you can take away the job, and rightly, of a perceived non-performer - he's gone - but an employer can't under your legislation.

PM: Alan, you and I are going to have what's been a constant debate for us. Under the Fair Work system, of course, if an under-employee is causing a problem in a business than they can ultimately be dismissed. You've got to be fair, you've got to be reasonable. That's the difference between the fair work system and Work Choices.

Now, political parties, being-

JONES: Kevin Rudd was gone in a day. Kevin Rudd was gone in a day. No employer in this country can get rid of a person in a day if they are ineffective and inefficient, which was the reason Kevin Rudd went, but no employer who's got a Kevin Rudd on his books can get rid of him as you got rid of Kevin Rudd.

PM: I think the position of Prime Minister, being in politics, is a bit different from working in the local shop or at the local factory. People can get rid of us in a day on election day if they choose to, Alan. That's the life we've chosen. It comes with special obligations, special risks, but it also comes with amazing benefits because if you're passionately driven to deliver change, to make things better for the country, then, of course, politics is the way to do it, so, I'm not sure the analogy holds up.

JONES: OK, well, let's take, just take, I just want to, because this is what's concerning people in relation to, now, your Prime Ministership, because every issue that's brought Kevin Rudd alienation from the electorate was rubber stamped by you. I mean, there were things like the batts in the ceiling, the Grocery Watch which didn't work, the Fuel Watch which didn't work, the solar panel rebate scheme that had to be called off, an emissions trading scheme whose abandonment you promoted and now this mining tax. Now, you're a powerful woman. If you'd wanted any of those to not proceed you would have only had to prosecute your case in the Party room or the kitchen cabinet the way you do in Parliament every day, but you defended them. Mr Rudd goes and you stay. How do you reconcile that?

PM: Alan, once again, I'm not going to go to internal conversations within our Government, but I can say this to you: I take my fair share of the responsibility for the decisions of this Government - the good things and the bad things. I'm not seeking to walk away from that. I was vice captain of the team. Now I'm captain of the team I think that gives me the ultimate responsibility for the decisions that we make from here, and I am going to freely say to you, Alan, you're not going to have to push me to get me to say this, there are things that went off track. There are things that need to be corrected, and I'm here, I think, with a style that people would acknowledge is fairly methodical. I'm here to make sure we get back on track on those things that have caused community concern, and we're going to do that day by day and Alan, if I just can say I've

got a little bit of good news for you this morning on things that I know have caused you concern.

JONES: Yes.

PM: I know you've been very concerned about the position of self-funded retirees and how much they have to draw down out of their superannuation-

JONES: -And they've suffered capital losses.

PM: Yeah, when they've suffered capital losses, which has of course been the story of the global financial crisis. You would be aware, Alan, we halved the amount they need to draw down for two years. I can tell you this morning, Alan, I'm going to extend that by another year. I know this has been a significant issue for you and your listeners and I want to take some pressure off by announcing that.

JONES: Right, the draw down relief will be in the form of a 50 per cent reduction in the minimum payment amounts for account-based allocated market-linked pensions. Thank you for that. I mean, Nick Sherry did do an excellent job on all of that. He's still in charge of that portfolio area, isn't he?

PM: Yes, Nick is still there, working away for us. Nick and Chris Bowen actually look after these areas. Nick Sherry, obviously, has had a passionate, long-term involvement in superannuation. Chris Bowen is the relevant Minister today, but, clearly, we all work together on these questions.

JONES: OK, well, let me just come to this big, big issue - the mining tax. Wayne Swan, who's now your deputy and has played a hard line in the development of this tax that's caused the Government so much grief, he argued the design of the tax was right, he prosecuted the war against the miners with some really rough verbal assaults. Now, when every man and his dog around the world was telling us what a super profits tax was doing to Australia's international reputation, and that it would make Australia uncompetitive as a place for investment by global miners, you were nodding your head in agreement with Wayne Swan and with Kevin Rudd.

PM: Alan, I think you would see from my public statements that I have been concerned that the tenor of the public debate had got a bit fast and furious and we needed a bit more light and a bit less heat. When I was in Western Australia in the last few weeks I did say at the Western Australian Chamber of Commerce and Industry that, actually, there's a bit of agreement here: a bit of agreement that Australians are entitled to a fairer share; a bit of agreement that the mining industry can pay more tax, so let's build on that.

JONES: No, people don't understand what that means. You see, people pay tax, companies pay tax. The more profit they make the more tax they pay. The more mines, more stuff that comes out of the ground, the more royalties they pay, so they pay their tax, so the argument out there that you've got is with these

people going to have to pay a tax under a system that doesn't apply to other business. Now, my understanding is if you don't resolve this by the end of the week this advertising campaign by miners is going to start again. Is that your understanding?

PM: Alan, we've got a period of goodwill here. I'm not, you know, obviously the mining industry will make decisions for the future, but we've shown goodwill, got the advertising off the TV screens, the Government advertising. They've shown a gesture of goodwill in return and got their advertising off the TV screens, but Alan, there's something special about mining that we should recognise and it's the foundation stone of this debate - companies pay tax, absolutely right. They pay 30 per cent tax, so the more they are profitable the more tax they pay.

The difference with mining is the key resource is our resource coming out of the ground and we've got to price it properly because we only get to dig it up once. Now, that is not the same as other businesses. If you and I decided we'd open a clothing store we'd have to pay a manufacturer for the clothes that we sold in our store-

JONES: -Hang on, these mining companies pay pretty healthy dividends for the right to go down and the high risk involved in finding the stuff. Look-

PM: -What they pay, Alan, now, for the use of the resource, what they pay now is State-based royalties, and those State-based royalties-

JONES: -So you're in favour of a mining tax, a super tax?

PM: No, Alan, what I'm in favour of is a profit-based tax that properly values the mineral wealth in our ground-

JONES: -All company tax is profit-based, Julia. All company tax is profit based.

PM: Yes, but Alan, Alan, let's just, absolutely right, I'm agreeing with you, we're not having an argument about that. What's different about mining? The key resource us a resource that is owned by everyone and we've got to work out what that's worth. Historically-

JONES: -That's not quite right, either. Constitutionally, what's under the ground is owned by the States.

PM: Well, you know, Australians, Alan - whether they're sitting in their States or sitting in their nation, it's owned by Australians.

JONES: I just attended a meeting in London of investment bankers. They asked me to attend a luncheon. We are in a state of utter disrepute here. They're laughing at us and advising fund managers not to put their money in Australia as a result of what the Rudd Government did. Now, the entire reason for having this resource tax one week before the budget was to get $12 billion into the

forward estimates so you, not you, Kevin Rudd and Wayne Swan when they were there could boast to the electorate economic responsibility, figures in the black. Now, you're saying-

PM: -Oh, Alan, Alan, let's just, I agree you've got a passionate view about this, but let's just unpack the facts a little bit.

JONES: Well, it's true!

PM: Let's unpack the facts. Look, we're having a respectful conversation with the mining industry and we will continue to work with them and hopefully work our way to a conclusion about the Resources Super Profits Tax.

Why is mining different? Well, because it's relying on a resource we all jointly own. At the moment, that is valued through State-based royalties. They tend to apply tonne by tonne. We believe it would be better, and the mining industry believes it would be better, if that was profit-based.

JONES: This is a 40 per cent tax, Julia. Look, why don't you-

PM: -When, well, Alan, we're obviously talking through questions associated with the tax, but the concept here is actually a concept that the mining industry and the Government agree on, that it would be better that what they effectively pay the Australian people for the resource was based on profits, and so that's the conversation we're having.

JONES: All company tax is based on profit. Can I just say-

PM: -Yeah, but the difference with mining, Alan, and I really think this is the absolute nub of it, if you and I started a dress shop or a restaurant we would be paying someone-

JONES: That is wrong.

PM: For the raw materials. You'd be paying for clothes or for food.

JONES: Julia, Julia-

PM: The mineral wealth is there-

JONES: PM-

PM: And it's got to be valued and priced.

JONES: PM, they pay you an inadequate amount to be Prime Minister. So if you want to make a big quid, go out tomorrow and become a mining developer and a person in the mining industry, and take all that risk if you want. But you don't

factor any of this in business, none of you in your Government, with the high risk involved in even finding the stuff. And surely if you were going to be fair dinkum about this, you'd say we'll take the $12 billion out of the forward estimates, and we'll start again. So let me ask you simply, will you give a

commitment in the starting of it again and the good faith and the renegotiations, will you give a commitment that you'll take the $12 billion out of the forward estimates before we decide where we go next?

PM: The commitment I'll give, Alan, is I'm going to continue the good conversation and negotiations we're having with the mining industry now. And they have not said to us that a pre-condition for those discussions is what you've said to me now. So we'll keep working with the mining industry. The money in the forward estimates is money that is there to support things that would also help us grow our economy.

JONES: But you don't have the money.

PM: Alan, Alan of course, of course-

JONES: But you see, if you leave the business as it is now Prime Minister, leave it as it is now, you get $12 billion. You're saying we're going to compromise. We must therefore have in your mind the notion that eventually less than $12 billion will come in. Otherwise, the mining industry will be all over the top of you. If there's less than $12 billion, what are you going to take out of the expenditure to accommodate the fact that you don't have the revenue?

PM: Alan, I'll keep working through with the mining industry. The agreement that has been expressed generally by the mining industry is they would prefer a profits-based tax rather than volume related royalties. So that's, there's agreement on that. We can build on that agreement when we have worked our way through, and obviously Alan, the conversation is continuing. But we will, we will continue, having respectful negotiations-

JONES: But Julia, it's a dishonest, it's a dishonest-

PM: And if we strike an arrangement, then of course all aspects of it will be public, including the Budget aspects.

JONES: But it's a dishonest Budget. You've got $12 billion in the Budget in forward estimates and you don't have that money. Now, you-

PM: Well Alan, just- I think we need to just take a little, a little bit of a breath and settle down on words like dishonest. I mean, obviously, the Government's Budget is its projections for revenue and expenditure. I mean, we don't sit here, we don't sit here, you know, with a kind of a magic pile of cash. Of course money is raised through tax. You pay tax, other Australians pay tax, companies pay tax. And there is the proposal for the Resources Super Profits Tax.

JONES: But you-

PM: That's what's in the Budget-

JONES: But you put $12 billion-

PM: And then of course we spend money on things, you know, we spend money on pensions. We spend it on health. We spend it on education. And we have put in the Budget-

JONES: $12 billion.

PM: The Resources Super Profits Tax will be spent on infrastructure-

JONES: But you didn't discuss that with the industry.

PM: Supporting the super changes-

JONES: But you put $12 billion-

PM: For working Australians-

JONES: PM-

PM: Company tax and small business breaks.

JONES: PM, you put the $12 billion into the Budget without any discussion with the industry about whether that was a legitimate amount to expect from the industry. And you've also put in the Budget that the Australian economy will grow at a rate of three and three quarter percent. Now, in the past two months, we've seen profit warnings from companies like Toll Holdings, Elders, Perpetual Holdings, Primary Healthcare, Virgin Blue, Insurance Australia Group- how the hell do you get three and three quarter percent economic growth, and what is that going to do to the Budget?

PM: Well Alan, on the projections for the economy, we obviously rely on Treasury advice and forecasting. And that is the way that Governments have done their Budget since Adam was a boy. So nothing has changed about that.

JONES: And you know that they've mostly been wrong rather than right.

PM: Well, but Alan, I've had conversations with people- you know, the-

JONES: Ken Henry? Is he your principal economic adviser? He says there should be a super profits tax on more than the mining industry. Do you agree with that?

PM: Well, can I say this Alan, I don't believe in public debate that one should go after the public servants. They are there providing the best of their advice, and the best of their intelligence. And Governments of course over the ages have relied on official Treasury forecasts and projections to put Budgets together. We're doing no more or no less in that regard than Mr Howard did, than Mr Keating did, than Mr Hawke did, than Mr Fraser did, and so the list goes on. So that is the foundation stone of the growth projections and other things in the Budget. Alan, we've been criticised every which way on this.

There was a time when the Opposition was coming at us and saying the Budget forecasts, they're all too optimistic, things are going to be worse. And then they started coming at us and saying the Budget forecasts, they're all too optimistic. I mean, they're all, all round the place. Now, what we do, day after day, is we get the best advice from Treasury about Budget forecasts and we rely on it. Now the decisions about the Resources Super Profits Tax, Alan, I can understand you've got your strong criticisms about the past. What I'd say to you is that let's look at the future. We're having a respectful conversation, a genuine negotiation in an environment of goodwill, because people have got their ads off the radios and TV screens. I think building on that is the best way forward.

JONES: Okay, in your former portfolio, education, 112 complaints on behalf of aggrieved school communities. And the fellow Orgill, Brad Orgill, in charge of this inquiry, wouldn't accept them because he couldn't guarantee the anonymity of the principals. Principals are intimidated to the extent that they have to remain anonymous. Can I just ask a simple question that the public are saying- what sort of show are we running where people are being frightened into telling, away from telling the truth?

PM: I don't think we're running that kind of show. I've met with a lot of school principals as Minister for Education. And they've always been the most forthright of people. I've had principals forums around the country where principals have sat with me and said front-up, very clearly, you're doing this well, you're doing this badly, we'd like to see this change.

JONES: So is that not right? Is that not right that they feel intimidated?

PM: Well, I don't believe school principals feel intimidated. They are-

JONES: Why wouldn't Brad Orgill take their complaints, he said he couldn't guarantee their anonymity?

PM: Well, I can explain that. This was a set of complaints coming through third parties to Brad Orgill. What I can absolutely say for Brad Orgill and his taskforce, is if there is anyone listening today, a school principal or anyone else who wants to directly approach the taskforce on the basis that their name is kept out of it, they can do that Alan.

JONES: Alright, just let me ask you this. Given the published discrepancies between Catholic schools and public school building costs under the BER-

Building the Education Revolution- will you be seeking legal advice as to whether there's been any attempt to defraud the Commonwealth by any of the contractors? And if so, commence proceedings for recovery of any sums that have been overcharged?

PM: Well Alan, let's be a bit careful about this. If I got advice in any area of Government expenditure- whether it was Building the Education Revolution, what we spend on pensions, what we spend on health, what we spend on defence- if I got any advice from anywhere that someone had defrauded the Commonwealth then of course I'd be there doing everything possible to get that taxpayers' dollar back. On Building the Education Revolution, the reason I appointed a leading Australian businessperson to look at value for money, to look at the whole system, is because the Government wants the benefit of his advice. That advice has already led to us withholding some payments, and his report, first report, is due in August. Now of course it will go to Simon Crean as Minister for Education. And we will respond to it. But we've got Brad Orgill on the job deliberately, shirt sleeves rolled up, in schools, and if people want to approach him and say, you know, my name's Suzie, I think this, but please don't mention my name to the school or to anybody else when you investigate it, then of course that can happen.

JONES: Okay, well I'm going to go back to some principals and check that assurance that you have given. Just Ken Henry- let's take the mining tax. Forget everything else that I think Ken Henry's made a mess of. But look at just the mining tax. He and Wayne Swan- and Wayne Swan only took his advice- is the architect of all of this. What does this say about Henry's judgment and to the extent that you are now being forced to investigate how you can change the whole thing, is Henry going to continue on as Treasury Secretary, and principal economic adviser to the Government, given that he's presided over so many programs that have cost you enormously in terms of political capital?

PM: Yes, Ken Henry is continuing as the Secretary of Treasury. And Alan, let's just get a bit of context and a bit of fairness into talking about Mr Henry. Ken Henry is also the Secretary of Treasury that provided advice to the Government as we've gone about dealing with the global financial crisis and global recession. And here we are as a nation getting back to surplus in 2013. Wayne's just been to the G20 as Treasurer and Deputy Prime Minister. In the G20, all the other nations are sitting round the table going 'I know, what about we try halving our deficits by 2013'. We will be in surplus in 2013.

JONES: Well I'm not too sure, hang on-

PM: And we've got an unemployment rate-

JONES: You say you'll be, but these are forward estimates based on growth rates of three and three quarter percent which you'll get advice shortly, I'm sure, aren't sustainable.

PM: And Alan, we're comparing ourselves with nations that rely on their own Treasuries for forecasts. And when Wayne Swan sat at that G20 table looking at the other developed economies of the world, there they are saying to themselves 'gee, it'd be nice to halve our deficit by 2013'. We'll be in surplus. And then you look around that table and you say, well, who's got a 5.2% unemployment rate? It's not America. It's not the UK. It's not the European zone. They're all struggling with figures over 7, some of them with figures over 9, here we are, 5.2%, Australians in work. You started off by saying to me you doubt, you doubt the veracity of Mr Henry's advice. I just think, Alan, in weighing that up, you should also be weighing up the advice he gave us and the work he did with the Government-

JONES: We should talk about employers in this country.

PM: As we responded to the global financial crisis-

JONES: Mr Henry doesn't create jobs, employers create jobs.

PM: And we've got great employers in this country Alan. They played their part. And we've got great, you know, employees. We've got unions in the country who responded well to the challenge of the global financial crisis. Look at Holden, in my home town of South Australia. Union employees work with management, short-time arrangements, and you know what, we've still got a car industry as a result. Now, these are important things.

JONES: One final question. There are many jurisdictions around the world which have an inheritance tax. Now people call it a death duty. If you didn't get the money from the mining taxes- $12 billion in the forward estimates, which is going to dramatically affect the credibility of the Budget- if you couldn't get that money, and it's quite clear that even if you get some, you're not going to get the 12, otherwise you wouldn't be negotiating to reduce it, would there be any circumstances in which you would consider an inheritance tax or a death duty?

PM: Absolutely not, no.

JONES: Okay, good to talk to you. Thank you for your time. We'll talk again.

PM: Thanks Alan.