LAURIE OAKES: Good morning. Mr Beazley welcome to the program.

KIM BEAZLEY: Good to you with you, Laurie.

LAURIE OAKES: Do you agree with the Reserve Bank that budget tax cuts contributed to inflationary pressures and, therefore, had an impact on interest rates?

KIM BEAZLEY: The tax cuts were necessary. There is no question about that. The households of this nation were feeling enormous pressure from petrol price rises. They are also feeling a bit of pressure I might say in many of those households now from the Government changes in industrial relations. So the tax cuts were necessary. They are for middle Australia in particular though, they were necessary. But there is no doubt at all that we ought to be is listening seriously to the Reserve Bank about what they have to say about interest rates. Howard has preached...

LAURIE OAKES: What should John Howard do now?

KIM BEAZLEY: Think what John Howard should do now in listening to the Reserve Bank is put in place a mini budget. The Reserve Bank has made clear a number of things, and they have been making it clear, I might say, for the best part of five years. We are chronically underdone on skills and, in particular, traditional trades in this country, chronically underdone on national infrastructure. I would say too we are chronically underdone on innovation so that manufacturing and services can start to contribute to net exports. The Government has got to change direction. Accept what the Reserve Bank is saying, and go for the sorts of things that will preserve our prosperity by improving our productivity. A mini budget is needed to do that. We have been talking in the Labor Party about these issues for 10 years. The Reserve Bank has been talking about it for five. Howard has ignored it with complacency, and as a result, the circumstances have led to him breaching his trust with middle Australia on interest rates.

LAURIE OAKES: But those are very long-term issues — skills and infrastructure. What should the mini budget contain, in your view?

KIM BEAZLEY: Well, some aspects of them are long-term, Laurie, but some of them are quite short-term. You see the propositions we have put forward to improve, for example, the completion of apprenticeships from something like about less than 60 percent of starters through to a figure more in tune with the historical average of 80 percent to 85 percent. We have suggested incentives that would be able to achieve that, and not terribly expensive either, I might say. It is better to spend on that than on Liberal Party Government advertising. I mean these sorts of things actually would improve our trade — the performance in our traditional trades — numbers in our work force, by about 10,000, almost straight away. Within this year. So there are things you can do short-term. There are things you can do long-term. But the point is you need to start to act on this. We should have been acting ages ago. In a sense, it's too late. But nevertheless action should be taken. Now you cannot do it off the existing budget. You will need a mini budget to do it.

LAURIE OAKES: If you had a mini budget and cleared the way for a whole lot of infrastructure spending, that would be expensive. And wouldn't it also contribute to inflation in the current climate?

KIM BEAZLEY: I think the point about this is that what the Reserve Bank has identified as capacity constraints are creating the inflationary pressures. The poor performance of our infrastructure is creating inflationary pressures. The absence of the required number of skilled tradesmen is creating inflationary pressures. The threat to our productivity that emerges from all this is creating inflationary pressures. We cannot afford to keep ignoring this, and fail to address it and that is the point of a mini budget. If you have a mini budget based on those considerations, then I think you will have the respect of the Reserve Bank and they will take that into account when they subsequently deliver — deliberate on further interest rate rises or not, as the case may be. The point is you cannot afford Howard's complacency. This is poor economic management as well as breach of trust. We need to get to be a bit — we need some economic responsibility here and economic responsibility means addressing the capacity constraints identified by the Reserve Bank.

LAURIE OAKES: The Prime Minister says the issue has not one interest rate rise. He says the issue is still which side of politics best guarantees future prosperity for Australia. The polling would indicate people don't see you as providing that guarantee, wouldn't it?

KIM BEAZLEY: I think more and more Australians, when asked the question who is most capable of governing in the interests of ordinary working Australians, are starting to say the Labor Party. They are beginning to note Howard's breaches of trust. Many of them are beginning to say things to me like this — John Howard has changed. He used to be focused on middle Australia. Now he's obsessed with his own ideology, he is obsessed with his own prejudices and obsessed with his own leadership. He is not thinking about me any more. Now I might have had a view about whether John Howard ever did think about it, but they certainly thought he used to be supportive of them and now they think he's turned against them.

LAURIE OAKES: Are they saying it to you, or are you saying it to them?

KIM BEAZLEY: Yes, they are saying it to me, Laurie. And they are not just saying it to me. They are saying it to a lot of other people. They think there's a new arrogance, hubris, out of touch sentiment, clouding John Howard's judgment and relationship increasingly with the Australian people. It will take them a while for that fully to flow through to direct public responses, but they certainly want a better performance out of him. Frankly, to have the Reserve Bank telling you for years now about these capacity constraints and you, in this case, John Howard, refusing to act on them, that is not economic responsibility. That is just hubris, arrogance, out of touch.

LAURIE OAKES: The Prime Minister says that anyone who has got the answer on how to reduce petrol prices should ring him at the Lodge and he'll talk to them happily for an hour. Have you placed a call?

KIM BEAZLEY: No, I haven't placed a call to John Howard on that because I don't think he takes any notice of anything anyone says to him any more. I do say things to the public and hope that he picks up a bit of that on the way through. See we have got a major issue here in relation to petrol prices and their impact long-term on the Australian economy. We must get ourselves uncoupled from a dependency on Middle East oil. Now we do have solutions. I put out a very good blueprint on fuels, not quite 12 months ago, but towards the end of last year, which had some very constructive suggestions for John Howard. They included going down the road of ethanol and biofuels but they also included, importantly — I think this is vital for the long term - that we have in this country a gas to liquid conversion industry such as being developed in some countries in the Middle East and Africa now. The technology is there. It makes commercial good sense at $26 to $30 a barrel for oil. It will be a long time before we see those figures again in terms of Middle East oil. We have to start to act on this, Laurie. We have to start to get in place the long-term solutions to our problems. In the short term, we have got to start to get the ACCC riding shotgun on the oil companies and on petrol prices. The Government says it has got a responsibility there. It hasn't unless it is directed to act on it effectively and routinely by the Government. They ought to get about doing it.

LAURIE OAKES: What about excise, petrol excise? The Prime Minister says it is too expensive to cut excise by a significant amount. Do you agree?

KIM BEAZLEY: You can deal with this problem and be economically responsible. Quite frankly, I think the focus now has to be on the effective monitoring. There is no excuses for the Prime Minister in that regard. He can call in the ACCC and demand that they ride shotgun on the oil companies. There is no doubt about that, and secondly, you have got to act for the long term. We are going to have to deal with high priced oil for a very long time. What we have to do is to get ourselves unhooked from the worst excesses of the international market here and we can only do it by domestic self-sufficiency but self-sufficiency demands a bit of innovation here. So ethanol, biofuels and gas to liquid conversion. That is the way we have got to go. We can over a period of years get ourselves that level of independence and bring prices here more under control.

LAURIE OAKES: Let me ask that question again more specifically. Do you believe petrol excise should be cut?

KIM BEAZLEY: No, Laurie, I would not go down that road because the issues of economic responsibility demand we take a different direction. So I hear what people have had to say about that. I also know that to produce from that action alone anything that was even remotely felt in the pockets of the average Australian motorist would require a substantial change in the budget, which if you're going to do, you might find better things to do it with. But everybody goes to that very short-term proposition. What we need in the short term is proper monitoring of those prices. What we need in the long term is a solution. We have put forward the solution.

LAURIE OAKES: It's a week tomorrow since the Prime Minister and the Treasurer buried the hatchet and agreed Mr Howard would stay as leader and Peter Costello as Treasurer. Do you think they are capable of working together on a mini budget or anything else?

KIM BEAZLEY: Well, they have got to be capable of working together on a mini budget. You live in hope as an Australian patriot that they will be able to work on everything else. I think the truth is that they are - their relationship is terminal. Whatever gloss they put on it over the course of the next few months in the interests of the Liberal Party, it is in the interests of the Liberal Party, the last group of people on their minds are the Australian citizens. This is a Government played out. Costello, though weak, said one thing absolutely correct in his challenge. He said to Howard, "It is not about the last 10 years. It is about the next 10 years." He put his finger right on the Howard weakness. Howard has no plans for the long-term future of this country. You can see it in the suggestions I am making for what ought to be incorporated within a mini budget. You can see it in other things as well. You know, he is into reactors. That is a 1945 modernist agenda when what we need is renewables, which is a 21st century modernist agenda when we're looking at things like energy security in this country. He is do not doing child care right. Child care is a complete mess. The consequences of his not doing it right because he cannot see clearly the situation of women in the Australian work force these days, is we have participation rates that are too low and so on. He just has no modern agenda.

LAURIE OAKES: That is a fair way from the leadership issue, though. Could I ask you about, since we are talking about the allegedly poisonous relationship between Mr Costello and Mr Howard, what is your reaction to reports that Simon Crean may run for the job of national president of the Labor Party?

KIM BEAZLEY: Look, I hope we have a lot of candidates running for national president of the Labor Party, and I am sure we will. Simon is a member of the party and has been a member in good standing for a lengthy time. I have heard others who have suggested they might throw the hat in the ring like John Faulkner and Mike Wran from South Australia. A lot of people who interested in the presidency of the party — I say let's give the party a good choice, get in there, give them a chance to vote — but the one thing I know is this, and I've had a lot to do with the party for a very long type, but particularly over the last few months. There is a hunger in the Labor Party now to defeat John Howard and this Government. They are absolutely focused on the view that if we do not succeed in doing that, life will be materially worse for the people whom we hold most dear, the people of middle Australia. There is a demand in the party now for a focus on that.

LAURIE OAKES: Will the Labor Party's chances be improved if the president of the party is someone with a poisonous relationship with the leader of the party? I mean we saw you and Simon Crean at daggers earlier this year. Before that you tried to real him as leader. How can you possibly serve with him as president?

KIM BEAZLEY: The president of the party is vitally important in election year. I absolutely agree with you on that. And I also know of all the candidates, including Simon, their intention would be to be absolutely devoted to our political success. I have total confidence that the party will produce a president that will do that and also that the people who are in offer would be capable of performing such a role. So look, as I have said to you just a little bit earlier and I have said repeatedly, there is a different atmosphere inside the Australian Labor Party now. There is an atmosphere of determination. They are absolutely determined to get the right policies in place to defeat John Howard. That is what we will do. This bloke is out of touch. He is complacent and he has breached his trust with middle Australia. He is vulnerable. We are determined to defeat him.

LAURIE OAKES: Mr Beazley, we thank you.

KIM BEAZLEY: Good to be with you, Laurie.

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