MEET THE PRESS INTERVIEWS WITH SHADOW TREASURER MALCOLM TURNBULL AND FORMER NSW PREMIER BOB CARR 4th May 2008 DISCUSSIONS ABOUT INTEREST RATES, INFLATION RATE, BRENDAN NELSON, NSW ELECTRICITY PRIVATISATION DEBATE, BOB CARR’S RECORD AS NSW PREMIER. MEET THE PRESS PRESENTER PAUL BONGIORNO: Hello and welcome to Meet the Press. In nine days time we'll see the colour of the Rudd Government's money in its first budget - and already the battle lines are drawn. And it's personal between the Treasurer and his Shadow. SHADOW TREASURER MALCOLM TURNBULL (Thursday): All we've had from Mr Swan is a continued campaign to egg the Reserve Bank on to raise interest rates. he has been the cheerleader for higher interest rates. It's an extraordinary performance. TREASURER WAYNE SWAN (Wednesday): Malcolm Turnbull doesn't even recognise there's an inflation problem. He wouldn't have a clue what it's like to sit around a kitchen with that family from Penrith the other night and try and make the bills add up. PAUL BONGIORNO: Malcolm Turnbull steps back into the fray as our first guest. And later former premier, the bookish Bob Carr, joins us to talk about his reading life and what he's left behind. But first - what the nation's press is reporting this Sunday May 4. The 'Sunday Telegraph' has, "Iemma humbled as party rejects sell-off." State Treasurer Michael Costa was left to keep up the fight when Premier Iemma departed after Labor Party delegates rejected selling off the NSW electricity system by an overwhelming 702 votes to 107. The 'Sunday Mail' reports, "Bid to slash food bills." Supermarkets could be forced to display costs per measure on products under a radical new grocery pricing plan being considered by Kevin Rudd. The 'Sunday Age' says, "Lost tax revenues deepen Rudd's cuts." Share market turmoil and rising interest rates have torn a six billion dollar hole in federal business tax revenues forcing the government to inflict deeper than expected budget cuts. The 'Sun- Herald' reports, "Tax cuts will entice mums to work longer." Sharp boosts in tax incentives and a fifty percent child care cash rebate will be a centrepiece in Labor's first budget. Malcolm Turnbull, according to Newspoll, is not only the preferred Liberal leader but he's also the preferred treasurer ahead of Wayne Swan. He's certainly not shy in offering the incumbent free character analysis and advice. Welcome back to the program Mr Turnbull. MALCOLM TURNBULL: It's great to be with you. PAUL BONGIORNO: Let's go to the power dispute, electricity and political in NSW. Kevin Rudd the Prime Minister has backed the sell-off. Where does yesterday's decision leave him? MALCOLM TURNBULL: Well, it's a massive rejection, isn't it? You have to ask how in control the State Government is to be beaten 700 to 100 votes, wasn't it, a huge margin? Why call it on if they didn't know what the numbers were going to be? Morris Iemma seems to have lost the confidence of much of his party room and the vast majority of the Labor Party. He is a - he's a broken Premier and the tragedy for NSW is he's in office until 2011 or at least the Government is. PAUL BONGIORNO: The Prime Minister addresses those delegates today. What should he be telling them? MALCOLM TURNBULL: (Laughs) Well, I don't know. Who knows? I mean Kevin Rudd - Kevin Rudd has a real problem, because he's gone out there and backed Iemma. Backed him very strongly. The rejection of Iemma is as much a rejection of Rudd, because this was - you see this, is something that has been a work in progress for a long time. Given the strength of the opposition in the Labor Party, you would think that Mr Iemma would have backed off at some point. I mean politics is the art of persuasion, if you can't persuade your own constituency to support you, you have to think again. PAUL BONGIORNO: If Mr Iemma and his Treasurer defy the party and bring this legislation into the house, will you be urging state Liberals to back it. MALCOLM TURNBULL: I'll leave it to Barry O'Farrell to determine what the State Liberals should do. He's the leader, it's really up to him to form the judgment. PAUL BONGIORNO: But as a NSW resident do you believe selling off the electricity in NSW will make your electricity bills cheaper rather than dearer? MALCOLM TURNBULL: It's hard to say. Look, as a matter of principle, looking at this at a high-level, generality, I believe these businesses - businesses should be owned by the private sector rather than by government. The Liberal Party in government, as, indeed the Labor Party in government, has privatised many government-owned businesses. My concern as a citizen and taxpayer of NSW, therefore a shareholder in these businesses, is that Morris Iemma looks like a distressed seller. If I owned these businesses I wouldn't be selling the businesses at the moment, if I owned them. Jeff Kennett distinguished himself by selling his electricity businesses right at the top of the market. I fear that Morris Iemma is planning to sell them at the bottom of the market and that's never smart. PAUL BONGIORNO: On your return from the United States you cautioned Wayne Swan against swingeing cuts in the budget. He's not sure it's good advice. WAYNE SWAN (Thursday): We do have to take the axe to irresponsible spending, we have to have some spending restraint in the budget. Because if we don't it will put further pressure on the inflation and further pressure on working families that entitled to a fair go. PAUL BONGIORNO: Do you agree with him, how much do you believe he should cut. MALCOLM TURNBULL: The problem is that Wayne Swan is not good at saying what the irresponsible spending is. Only a few days ago he was indicating that they were going to means test the baby bonus. Now, his own leader Kevin Rudd not long before the last election on November 15, was asked by Neil Mitchell, on Melbourne radio, "Are you going to maintain the baby budget?" "Absolutely!" said Kevin Rudd. He repeated in March he'd stick to his commitments in social welfare including the baby bonus. Now, is the baby bonus irresponsible spending? Are we really saying that powerful statement that says that children as a social good is irresponsible. PAUL BONGIORNO: Do you accept that they do need to cut, and can you put, if you like, a global figure on it? MALCOLM TURNBULL: No, I don't think there's any economic need to cut it. There's always a good argument to cut programs that aren't working. In the best-run government, Paul, some programs turn out not to be effective. PAUL BONGIORNO: There's no economic need to cut? In other words, the Federal Government doesn't need to do its bit to take pressure off inflation? MALCOLM TURNBULL: My reason for saying that is firstly, if the Federal Government is going to make cuts that will have an impact on inflation, it has to make a significant reduction in overall demand, aggregate demand, meaning a cut of something at least of half a percent of the GDP. $5 billion, more like $6 billion in one year. I think it's too big at the moment. Because We are living in a very uncertain, very dangerous financial world at the moment. There is a lot of grief coming in from overseas, we are already seeing that in much higher interest rates over and above what the Reserve Bank has increased banks by. Does Wayne Swan really think that a prudent Treasurer should be imposing additional hardship on Australian families? What's the, you know, does he really understand the pain that Australian families are suffering because of that? PAUL BONGIORNO: The Reserve Bank board meets on Tuesday. It will be looking at the situation. Do you believe it should cut from rates or leave them where they are? MALCOLM TURNBULL: No, I think they should leave them where they are, and the market, which is not always right, of course, certainly feels they'll do that. PAUL BONGIORNO: When we return with the panel - according to one senior Liberal, the Archangel Gabriel couldn't cut through Kevin Rudd at the moment. We ask Malcolm Turnbull for his assessment. And a whiff of scandal in the west, saw Liberal Leader Troy Buswell lampooned after he finally fessed up to a very tacky chair-sniffing incident that severely embarrassed one of his female staff members. WA OPPOSITION LEADER TROY BUSWELL: It's hard dealing with these matters and having to face up to your responsibilities behaviourally publicly. It's harder to do it privately. You are on Meet the Press with Shadow Treasurer Malcolm Turnbull. Welcome to our panel - Jennifer Hewitt 'The Australian' and Glenn Milne, the 'Sunday Telegraph'. Last week Tony Abbott admitted to being despondent over the Liberals' chances with Brendan Nelson as leader. But he has had second thoughts and now he doesn't think it would be a good idea to switch to Malcolm Turnbull or anybody else. SHADOW MINISTER TONY ABBOTT: I think the Archangel Gabriel would have difficulty cutting through at the moment. Inevitably we would be struggling at the moment. We have just lost an election. The new government is having a long and deep honeymoon. The cult of St Kevin is alive and well. JENNIFER HEWETT, THE ‘AUSTRALIAN’: Mr Turnbull, if Tony Abbott is right, aren't you lucky that you are not leader at the moment? MALCOLM TURNBULL: (Laughs) That's for you to judge. I think my days as a political commentator were long ago in my youth when I was a political journalist and I'll leave you to do the commentary. JENNIFER HEWETT: Isn't it another way of saying Brendan Nelson is having no impact at the moment? MALCOLM TURNBULL: Again, that's up to you. Brendan Nelson is the leader, he has all of our support, he has my support. He is working very hard. How much impact he has, I think he's made some very strong hits against the Labor Government, notably on the carers, you remember the backflip on carers that Kevin Rudd had to do. There's one example of a hit. Whether you regard that as effective enough is up to you. GLENN MILNE, THE ‘SUNDAY TELEGRAPH’: We have the Gippsland by- election coming up, Mr Turnbull. How well does Brendan Nelson have to do in that by-election to make sure his leadership survives? MALCOLM TURNBULL: Again, the people in the commentary box, you and Jenny and others, Paul, it's really - we should hold that seat, our aim is to hold the seat, certainly the Government is going through a honeymoon, but nonetheless it is a - I think there's a 6%-7% margin after the last election, it's a National seat, of course. GLENN MILNE: The Liberals have to win it. MALCOLM TURNBULL: We expect the Nationals... The Liberals will be running to win, of course, but one would expect the Nationals would be more likely to win than the Liberals, as it's been a National seat forever. GLENN MILNE: Just off the leadership and on to the mechanisms of electing a leader, your colleague Christopher Pyne put out a model for a direct election of the Liberal leader giving grassroot members a direct say rather than the parliamentary party. What's your view of that? MALCOLM TURNBULL: It's something worth discussing, I would like to hear what the grassroots membership says about it. It's not something proposed by the membership, at least in my experience in the Liberal Party. But one of the issues with the membership of political parties is what sort of say, what kind of influence do the members get, and I commissioned a study years ago when I was the Federal Government Treasurer of the party, before I was in parliament, looking at that, and it's very important to empower the grassroots membership. GLENN MILNE: Give them ownership. MALCOLM TURNBULL: Of course, they have that already in choosing candidates. Do you want to give them the say in choosing the leader? A lot of people would say if you look at a club or a company we give the members or the shareholders a right to choose the board, but then we let the board choose the chief executive, and so - that's the debate. I think it would be a very healthy debate to have, I thank Christopher for raising it. JENNIFER HEWETT: Turning back to the economy, how can you say with inflation running over 4% that inflation is not a problem? MALCOLM TURNBULL: I've never said it's not a problem. JENNIFER HEWETT: You certainly downplayed it as a problem. MALCOLM TURNBULL: Not at all. Jenny, I can read the numbers as well as you or Glenn or Paul or Wayne Swan, we all know what the inflation numbers are. It is - whether you call it a problem, a challenge, an issue is a matter of semantics. It's there, it's part of our economic landscape and we have to manage our economy so that we meet our inflation targeting objective, which is that inflation is kept, on average over the cycle between 2%-3%. Over the 47 quarters of the Howard years, inflation was over the band, sometimes under it, other times the average was 2.5%. JENNIFER HEWETT: But you are turning, aren't you, into the good news politician, there's no need to raise interest rates, or make big cuts in the budget? MALCOLM TURNBULL: There's a lot of people that agree with me about interest rates. I think if you - the economic community is probably more now on the side of saying that we don't need to tighten monetary policy in Australia, tighten interest rates in other words, partly because of the fact that there is so much unofficial tightening, if you like, that the banks are putting up their rates independent of the Reserve Bank, because the credit squeeze has resulted in their costs of borrowing going off. If you are an Australian paying off a mortgage today your rates have gone up, since the election, nearly as much by reason of the credit crunch in the US as they have by the Reserve Bank. So there's a lot of tightening coming in the system anyway, and we looking at the world's largest economy, 28 per cent of GDP going into recession. Is that the time where a cautious or responsible, a sensitive Treasurer, sensitive to the concerns of families, would be egging the Reserve Bank on to put up rates? That's what Wayne Swan has done. GLENN MILNE: Going bang to the budget for a second, Wayne Swan talks constantly on bearing down on inflation through spending cuts. When the budget comes out on that night, what is the number in terms of the spending cuts that will have an impact on inflation in your opinion? MALCOLM TURNBULL: Most economists would say you have to have an additional 0.5% of GDP in tightening. The budget last year was 1.6% of GDP in surplus. That was last year. If you add into that the earnings from the Future Fund which, for an accounting reasons were not included, but strictly probably should be, that's another 0.2%. So 1.8% of GDP. If Wayne Swan wanted to make a real impact on inflation, he would have to tighten fiscal policy and have the surplus well over 2%. Now I don't think it would be a prudent thing to do at the moment. That's my judgment. But you know, I a am very concerned, look, I'm very concerned, Jenny, about the pressures on Australian families. JENNIFER HEWETT: I'm sure you are. MALCOLM TURNBULL: We have to be cautious. GLENN MILNE: Inflation is a pressure on Australian families too. MALCOLM TURNBULL: Yes, it is, Glenn, there's no doubt about that. But, we have to recognise that a lot of the pressures on inflation are coming from outside Australia, they are oil prices, food prices, and a big factor, the single biggest factor in the last set of numbers - were housing, rents. Now, why are rents going up -we are not building enough houses. Do we think jacking interest rates up is going to encourage people to build more houses? It's a very complex problem, and Wayne Swan, you know, he is so a political about it, he has got a political strategy... JENNIFER HEWETT: Unlike you? MALCOLM TURNBULL: ..but no economic strategy. Look, I'm a relatively new politician. I look at this problem as a businessman, and I look at it from a very cautious perspective. PAUL BONGIORNO: Mr Turnbull, the saga sure to continue today, tomorrow and into the next few weeks, thank you very much for being with us, today. Coming up - Bob Carr on reading, writing and politics. In the cartoon in the week, Moir in the 'Sydney Morning Herald' smells a rat trap in the promised tax cuts. You are on Meet the Press. There was a view at one time that the bookish Bob Carr couldn't succeed in politics because football and meat pies weren't his go, but he proved the critics wrong. When he quit politics in 2005, he had been premier for 10 years and a very hard act to follow. Welcome back to the program, Bob Carr. FORMER PREMIER NSW BOB CARR: Great pleasure to be with you. PAUL BONGIORNO: In your latest book you take us on a journey through your library. In a chapter headed 'A Quick Political Education' you reveal a $3 book you bought as a young Labor activist. It contained a fine summary in your view of a politician's task. Among other things, the author wrote, it's largely a matter of judging occasions when to stand firm, when to give way, when frankness will bring rewards when a little bit of hypocrisy will save a lot of trouble. I can't help asking this. Should Morris Iemma have read that book? BOB CARR: (Laughs) It's terrible to talk about a book with someone who's actually read it. My advice for Morris is simply to stand firm on this one. I think the - the Labor rank and file, and I love them like brother and sisters - are very attached to an old-fashioned Soviet-style model of a government electricity monopoly producing all the energy we need and distributing it. We have got something different now. We have national electricity market. You wouldn't know where the lights are coming from, whether they are reflecting power generated from a private-owned station in Victoria, or South Australia, or a gas fuel station somewhere. It's all changed. In that national context, privatisation is not only beneficial, but essential. JENNIFER HEWETT: Mr Carr, the Premier is dealing, of course, with a problem you squibbed back in 1997. Do you regret doing that now? BOB CARR: No, I was blocked by my party conference, by a vote and a screaming mob like the one he faced the yesterday. GLENN MILNE: Michael Costa was doing some screaming too. BOB CARR: I say that with a great deal of affection and respect for the supreme governing body of my party. Again - love them like brothers and sisters. But I would have been voted down on the floor of the House. I had a majority of one, and there were Labor Party members of the caucus would have blocked it. Opposition would have concocted a motion to have blocked it. Morris is stronger in his caucus, and I would advise his colleagues to back the Premier on this one, and I'm pretty confident they will. GLENN MILNE: Why bother joining the Labor Party in that case? You hold a conference, doing down 7:1, go back to the caucus and push it through the partnership. Why not tear the membership ticket up? BOB CARR: Glenn, You win on a lot of other things, but as part of a sprawling democratic party you have to be prepared to accept losses. The Labor rank and file have seen a State Labor Government in NSW that has protected work conditions and been a bastion against the changes in industrial relations coming out of Canberra. That's good. They welcome that. But you have the staple state Labor Government saying, we need new capital to invest in the new public goods for the people of this State and we don't want it tied up in assets whose value will continue to go down, especially as we get a new regime of carbon trading. GLENN MILNE: That's the economic argument. But surely politically if Morris Iemma and Michael Costa can't get it through their position is untenable. BOB CARR: I'm confident they will get it through. I'm confident the Premier standing firm will see the parliamentary party support him. It's a classic case of a government having to make decisions for all the people, for the entire community, and the party conference having a narrower political focus. In the interest of the people of NSW, it's in their interest that power be privatised. You have a national electricity market, privatisation in Victoria and South Australia. When it comes to the retailers in Queensland, we'll keep all the billions of dollars of public capital tied up in an area where public ownership has achieved its objective. You can liberate that capital, getting new goods, for example, public transport and hospitals for the people, through privatisation. JENNIFER HEWETT: One of the other issues bedevilling the NSW Government is political donations. Do you think political donations should by banned? BOB CARR: I think you can do what Morris Iemma suggested and do nationally and that is to ban private donations. In the United States, in the presidential elections, you are seeing candidates raise money, doing it inventively, over the Internet, doing it spectacularly well in the case of Barack Obama, but with people limited to $2,300. An individual can't give more. You can do that - or go all the way and say that the only funding for election advertising will come from the budget. JENNIFER HEWETT: That's what you recommend. No individual donations or company donations. BOB CARR: No, I'm open-minded as to whether you let individuals donate with no more than $2,300, as in the US. GLENN MILNE: Doesn't it weight the game in favour of the unions? JENNIFER HEWETT: Should they not be allowed to do that. BOB CARR: They'd be covered by the same ban on institutional giving, and they'd have to persuade individual members to give money as candidates do in the US. JENNIFER HEWETT: One of Mr Iemma's problems has been obviously that he's been seen as a government that's got to deal with a lot of the problems that you bequeathed, that there was not substance to many of the decisions you made in government, despite the fact that you were very good at politics. BOB CARR: That's simply wrong. I left a NSW with a cleaned up police force, because I forced a Royal Commission in NSW, and implemented its recommendations. We used to have a police force in this State, taking this as one example, that had world-class, to take that term, corruption, and now we have a corruption-resistant police force. I took an education system encroached upon by political correctness. We ended up with the most rigorous curriculum in Australia, and one of the best in the world -higher literacy as a result. I took a budget that had always been in deficit. We achieved the first debt retirement and budget surpluses in the State's history. JENNIFER HEWETT: What about rail and hospitals? BOB CARR: On hospitals, the highest paid nurse, the death rate from heart disease and cancer halved, because of the money we pored in oncology and cardiac care, and every major teaching hospital in NSW either rebuilt, comprehensively rebuilt as a result of a massive capital works program, or on the path to being rebuilt. The headlines about hospitals in NSW are exactly the same as the headlines about hospitals in every other State - it is part of not a national crisis, but part of severe pressure produced by an ageing population on the hospital system. The same in NSW as anywhere else. But world-class outcomes in education, environment. I throw this in - NSW had the first carbon trading scheme, not just in Australia, but in the entire world, January 2003, and I'm very, very proud of that. PAUL BONGIORNO: So when Tony Abbott says that Kevin Rudd is another Bob Carr, you think he's praising him? BOB CARR: I think he is, and I hope Kevin Rudd and I believe Kevin Rudd will have 10 years in government and will write a terrific book on his favourite books when he retires. (All laugh) PAUL BONGIORNO: Thank you for the plug and thanks very much for being with us, Bob Carr. And thanks to the panel Jennifer Hewitt and Glenn Milne. Until next week, goodbye.