LO: Morning, Jim, it is deja vu all over again. For the benefit of the Prime Minister, it is an old Sunday insider joke when Jim used the line once before many years ago, he was bagged in a newspaper by some ignoramous who had never heard of Yogi Barer. But Mr Rudd, could I ask ..

KR: Well, good morning Laurie. It is déjà vu all over again

LO: You're here to bury Sunday, but we don't mind if you praise it if you feel so inclined. A long silence.

KR: Well I think all Australians are feeling a bit sad about today. You usually start the interview by saying "Welcome to Sunday" and it is kind of farewell to Sunday. And I think most Australians are interested in the big challenges that Australia faces for the future. They like to have an informed basis for debating those challenges and this has been one of those platforms for a long, long time. I cut my political teeth watching this program. I joined the Labor Party about the time this program began so it has been part and parcel of my political formation, so I think most Australians whether they're avid Channel Nine viewers or not would say this is a bit of a sad day. I certainly think it is.

LO: Sunday, or the disappearance of Sunday seems to be another indication of the changes that are happening in the media. Are you concerned about what's happening and how newspapers for example, are declining and perhaps serious journalism is declining. Do you think this is going to affect democracy, and who you conduct politics?

KR: The truth of it is that any democracy depends, and its lifeblood and its health depends on a free press and how that free press operates. And I'm not going to sit and tell journalists how they should do their job, but what I am concerned about is making sure that we've got adequate and widespread coverage of current affairs and politics into the future. This program has been one of the staples. Of course, the national broadcaster is part of that. The mainstream newspapers are a part of that, but we seem to be in one of those great transformations at the moment. I mean some time ago, half a century ago was the move from prints exclusively into the new media of television. Of course, radio had come along sometime before that, and now we're at another point of great transformation it seems from television and different types, including pay TV as well as what's happening with the new media and the digital revolution. What that means is that we now have all these quite difficult platforms to have a common basis for a common conversation with the Australian people and for them to tell us what we're doing right and then what we're doing wrong. I think that is going to present new challenges. I wish I had the solutions to it but we're in a period of enormous flux and this program going the way in which it has now gone is I think evidence of that.

LO: Let's talk about you a bit. After the first six months of almost frenzied activity I suppose in which you've really been criticised for never stopping, you known as 24-7 in some quarters. It seems to be ...

KR: It’s like you asking me to come on the program this morning!

LO: And ruined your day off! That's true. But are you deliberately …

KR: That's what they say by the way about your interviews, Laurie. That's what they say. It's good that they're held on a Sunday because then you need a full sabbath day's rest afterwards to recover!

LO: Are you deliberately slowing things down. Have you changed to that extent?

KR: No, not at all. I mean we've got a big program for the future and we've been elected to Government at a time of extraordinary global economic difficulty. You know the global financial crisis, the global oil shock. It means that if you add that to the challenges we inherited from our predecessors, including inflation running at 16-year highs and interest rates with ten rises in a row and the second highest in the western world, this is a big and complex environment that we're operating in, quite apart from our commitments to the Australian people for the future in education, health and climate change. It's a big agenda. I've never made any apology for therefore working the Government hard and will continue to work hard into the future.

LO: You'd certainly work hard but there's an irony here, there’s a story that you tell I know, about when you were a much younger man and the moral of the story is - don't rush. Tell us that story.

KR: Oh, this is a story which came up when I was speaking at a charitable fundraiser in Melbourne I think, a couple of nights ago. Look, I was just a bit of a kid - well not exactly. By this stage, I think I had been a diplomat for some years and just started to work for Wayne Goss. Anyway I went to the Philippines to a conference which was hosted I think from the Asia Australia Institute from memory on young Asian political leaders. I was there to give a speech. Anyway, trying to do a whole lot of different things, I was running just a little bit late to the point that I had to give the speech at this particular conference resort. And so, I thought being very clever that I would take the short cut and it was pitch black to the conference venue from the actual place that I was staying. Striding purposefully in the direction of the conference venue, mobile phone in one hand. In those days they were bricks, remember them. And the brief case in the other, carrying speech in suit, and then walking at great pace and purpose to the conference venue when I walked directly into the deep end of a swimming pool - boof, gone!

LO: Two morals, don’t jump in at the deep end. Very useful in politics.

KR: I was talking to Therese at the time back here in Australia and it is very difficult to maintain your dignity and composure when you've just gone underwater in a suite and a briefcase, and a mobile phone. But you learn from these things. I’m not quire sure what the moral of the story is.

LO: Talking about going under water, that brings up Brendan Nelson I think. His condition is obviously terminal, they're just waiting to deliver the last rites. But are you frightened of facing Peter Costello if he decides to come back?

KR: Well, the question with the Liberal Party is not one of personalities, it is really just one of policies, like WorkChoices, like climate change denial, like leaving Australia with the second highest interest rates in the developed world. That's the problem which the Liberal Party faces. Personalities I think are secondary to it.

LO: Well you didn't say that when you were knocking Kim Beazley off. I think the same applies to the Liberal Party. Are you afraid of facing Peter Costello?

KR: As I said with the Liberal Party, you're dealing with not a question of personalities, it is policies. I mean, look at the three big policy challenges that we're wrestling with at the moment. On the economy, the Liberal Party left us with interest rates the second highest in the developed world. Inflation at a 16-year high and ten successive interest rate increases and beyond that, on climate change, 12 years of neglect and denial, and the only thing they believed in WorkChoices. I've got to say, their problem is one of policy, of being locked so far into the past they've lost their way. Personalities I think are secondary to it.

LO: I'll ask the same question in a different way then. Let me put this to you, now the economy is starting to go a bit pear-shaped, don't you believe that Peter Costello after 11 years as Treasurer with a pretty good reputation as Treasurer would be a very formidable opponent for you?

KR: Look Laurie, the key question on the future of the country is, are you fair dinkum about long-term economic leadership, and what we've inherited from 12 years of Mr Costello as Treasurer are the facts and figures I ran through before including the second highest interest rates in the world, together with his being part and parcel of a Government which was engaged in climate change denial and WorkChoices, and Mr Costello among others, wanting to take WorkChoices further. So on that score, I’ve got to say it is quite clear cut to me that the Liberals, whoever their leader is, has a real problem with their policy direction fore the nation’s future because of the legacy they left us from the past.

LO: Let's talk about the economy. On Friday, you didn't argue against the proposition that Australia could be facing a recession. Do you think it is a serious possibility?

KR: Well, I think if you go back to our budget papers, what we've said is there will be a slowing of economic growth in the year ahead and that comes off the back of what we've seen in the global economy. The IMF, the International Monetary Fund has said that growth will slow into the coming year, and also if you look at the other major global economies, the United States and the European Union and Japan, you see growth now being revised down to somewhere between one and two. Our own projections are also contained in the budget papers and show a slowing of growth, but we believe that we have a strong economic course of action to take Australia through these difficult global economic times and that's why we've anchored that in a very strong $22 billion surplus.

LO: But things have changed quite a lot since the Budget haven’t they? Those figures would be out of date now, wouldn't they?

KR: Well, we believe that if you look at the period ahead and the difficult global economic circumstances in which we operate, it just requires us all to be prudent and careful. And that's why the nation needs a clear direction, that clear direction has to be based on responsible economic management, and responsible economic management remains anchored in the $22 million budget surplus, a buffer for the future. But also fighting the fight against inflation which the Liberals left us, 16-year high, 10 interest rate rises in a row and the world's second highest interest rates, at least among the developed economy.

LO: But inflation no longer seems to big the challenge. The big challenge now seems to be the economic slowdown. How are you going to explain when unemployment starts going up, as it will, that it is not your responsibility?

KR: Well, I think everyone recognises that we're dealing with very tough global economic times, world financial crisis, the global oil shock, but compounded in this case by the legacy of 12 years of neglect by our predecessors on this key question, keeping inflation under control. Remember, when we took office seven or eight months ago, inflation was running at a 16-year high. You said before about the challenge between inflation and recession. The truth is, other western economies are dealing with both these challenges simultaneously. We however are in a strong position to see Australia through this with a clear direction based on responsible economic management. That $22 billion budget surplus gives us a buffer for the future. It also helps deal with the inflation challenges as well. This won’t be easy, it will be tough, but we have a clear course of action ahead to see Australia through these very difficult times brought about in large measure by the global economy.

LO: You recently held a community cabinet meeting out bush in the NT. Now I gather you're getting together with Australia's richest man to try to do something about jobs for indigenous Australians. Can you tell us a bit about that?

KR: Well, our challenge as a Government is to make sure that we are building a more secure Australia, a stronger Australia which can weather these difficult global economic circumstances, but also to have a way of how to build a fairer Australia as well and deal with some of the big challenges, the hard challenges of the future. One of those challenges of course lies with the huge gap between indigenous and non indigenous Australia. That's why we've committed ourselves to a program called ‘Closing the Gap’. That is, how do we reduce the gap in infant mortality, literacy and numeracy as well as Year 12 completion rates between indigenous and non-indigenous communities. And what we've been talking about is apart from what Government can do, what can Government do in partnership with the leadership of the more than 400 remote Aboriginal communities across Australia and those in urban Australia, together with corporate Australia. And that's I think the key link here. The key missing link.

LO: And what's the answer?

KR: Well, many, many corporates have been doing great things with their employment programs for indigenous Australians but what Andrew Forest has done from Fortescue Metals has come up with his own proposal that corporate Australia, our major companies should lead a drive to create 50,000 real jobs for indigenous Australians. That's what he wants to do and he's asked us in Government if we can support that. What I've indicated and I'm indicating today is that the Government will and will do so in a practical way by providing the necessary training places to support those indigenous Australians to make them training-ready to go into those companies which Andrew Forest will help us bring about. It's a practical program, it's a big plan on his part. It's a big initiative on his part, very tough goals that he set for himself, but we're prepared to support his enterprise by assisting with the training places.

LO: And what sort of training programs are they? How long will they last?

KR: Well, Andrew Forest has set himself a very ambitious goal of some 50,000 jobs over two years. I think that's very, very tough but he's an ambitious man. As soon as these companies which will be co-ordinated in part by Andrew Forest and other companies already active in the field and there are many, bring these jobs or preparedness to establish the jobs online, we'll support them each step of the way with training places. It will be hard and tough. We know the degree of entrenched disadvantage which exists in so many of these communities, but we as a Government believe in this. A welfare-only response to the communities is precisely the wrong way to go. We have got to get housing right, we’ve got to get education right, we have to get health right, but we've also got to get jobs right. And that's where corporate Australia comes in and I'm looking forward very much to partnering with the Australian corporates in what is their initiative and we'll seek to bring that about through some detailed planning with Andrew Forest and a steering committee which will involve the likes of Noel Pearson, Warren Mundene, and Sir Rod Eddington as well, over the next three months.

LO: I'm getting the wind-up, but there's something else I wanted to ask you. You're off to the opening of the Olympic Games in Beijing this week. Australia’s Olympic chief John Coates, has thrown down the gauntlet to you over future funding. Are you going to come to the party, will you provide more money for future Australian Olympic teams?

KR: Absolutely. I mean, part of Australia's global standing lies in the fact that we have such an enormously competitive nation on the international field of sporting endeavour, and the Olympics and other elite sports as well. It's part of who we are as a country. When I meet world leaders one of the first things they talk about is how we’ve gone in X event or Y event, therefore the Olympics are part of that. I can say to the AOC that this Government will be their strong financial partners into the long-term future. This is important for all Australians and we wish all of those athletes all the very best up in Beijing, it is going to be very tough.

LO: And yet you're cutting back on everything else, even the work of the Federal Ombudsman, you think that's less important than providing money for sport?

KR: You know something Laurie, Government has a difficult exercise in setting priorities. As I said before, what's the underlying objective here when it comes to the funding of elite sports? It is part of our national identity. It is part of who we are perceived to be in the world - I think that's a good thing. It's not just that we're tough and competitive and seem to be such, but we also adhere to the rules of fair play. But there's another advantage as well, you provide this great motivational opportunity for young Australian kids to strive for something higher. Now these things may not be as tangible or as measurable as other things that the Government seeks to do but I think it is really worth while, and that's why we're putting our shoulder to the wheel together with what Kate Ellis, the sports minister, has planned with a large scale expansion of community level sports as well to get all of our kids involved, including indigenous kids.

LO: Prime Minister, we thank you.

KR: Thank you, Laurie and farewell to Sunday and to all of the gang there, part and parcel of the national fabric. Sorry to see you go and hope we'll see you back in some other form.

LO: Thank you, and back to you, Jim. It's been like old times.

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