SARAH FERGUSON, PRESENTER: The Opposition Leader has just delivered his budget-in-reply speech in the Parliament. Bill Shorten called the Prime Minister a liar and Treasurer Joe Hockey a coward and likened them to the American Tea Party Republicans. But it's still not clear how his party will vote on the crucial legislation of the deficit levy. The Opposition Leader joins us now from our Parliament House studio.

Bill Shorten, welcome to 7.30.

BILL SHORTEN, OPPOSITION LEADER: Good evening, Sarah.

SARAH FERGUSON: Now, you've just said in your speech, you asked the Government, "Where is the honesty?" Well here's your chance, show the way: will you support the deficit levy or not?

BILL SHORTEN: We are determined and we've already stated that we are going to oppose the petrol tax, the attacks on pensioners and Medicare. Tonight I added to that list specifically the attacks on young people under 30 and also higher education. We will prevent there being a wall which prevents people from modest backgrounds being able to go to university. In terms of the ...

SARAH FERGUSON: What's the answer to my question on the deficit levy?

BILL SHORTEN: That's alright. But in terms of the deficit levy, we think it is a broken promise. We are critical of people who have to go to work being taxed more by Tony Abbott when he said before the last election there'll be no new taxes. However, we haven't arrived at a final position on that deficit levy. Our priority is to defend low and middle-income earners who are feeling the brunt of Tony Abbott's blueprint to divide Australia and to create a permanent underclass.

SARAH FERGUSON: Alright, let's come to that in a moment. But you've had two days to think about this; what's the delay? Why don't you have an answer yet?

BILL SHORTEN: Because we've been looking at what we think are the more important priorities. Remember, Joe Hockey and Tony Abbott have had the longest run-up of a new government to prepare their budget. They've had 75 days longer even any other government in history to prepare their budget, but what we - first term government, that is. So we will look at this question of the deficit levy ...

SARAH FERGUSON: I'm just going to hold you there for a moment, Mr Shorten.

BILL SHORTEN: We haven't made a decision.

SARAH FERGUSON: I appreciate that. But can you give us some understanding why? It's not a complicated policy, we know the amount, we've known about it for a couple of weeks now. Is there disagreement between you and your colleagues as to whether or not you should support it?

BILL SHORTEN: No, not at all. The disagreement and division is within the Government ranks. Our view though is that we're committed to a sustainable budget. We think it's a cheap trick of the Government to sling a tax on a - increase the highest marginal rate of taxation.

SARAH FERGUSON: Well if it's a cheap trick, why would you support it? That's bad policy. Or is politics more important to you than policy?

BILL SHORTEN: Not at all. It's because there's even worse decisions, far worse decisions. $5 billion cut in higher education; we see a massive attack in terms of $80 billion over the next 10 years being taken away from the states for hospital and schools funding. We do believe in corrective action, but what we'll also do is we will prioritise fighting for pensioners, fighting for middle and lower income families who are losing family payments, paying an increased cost of living and we're also going to fight hard to keep Medicare universal.

SARAH FERGUSON: Alright, let's talk about some of the family benefits. Do you agree now that families earning $150,000 a year should not be receiving government welfare?

BILL SHORTEN: Well first of all, I don't believe that Tony Abbott should be breaking his promises and no amount of people talking about anything else is going to divert me from the purpose of reminding Australians that Tony Abbott lied before the last election. In terms of where the means test or the threshold should sit, Labor's always been up for a sensible conversation over time of reducing thresholds and having a look at means test. But this idea for a family payment that all of a sudden a single income family, the age of their child where they were eligible for payments was up to 16; now it's going to go down to six? Families need this money and you can't just pull a rug out from underneath them without consultation and discussion. I think Aussies are up for change and they're up for hard decisions, but you don't do it in a way which is just hit 'em over the back of the head.

SARAH FERGUSON: Does that mean that in government these are all measures that you would restore?

BILL SHORTEN: Well, first of all, we've got to see what this government gets away with and what they can or can't do. What we will do is we are going to fight like you've never seen a Labor Opposition fight before to make sure that the pensioners don't get done over, to make sure that petrol tax, which'll hit every motorist, every family. I mean, I laugh when I think about what Tony Abbott used to talk about with "great, big, new taxes". This guy's just won the Olympic gold medal of great, big, new taxes and he has completely misled the Australian people. And Medicare's a big issue. That's where we're going to fight the first fights.

SARAH FERGUSON: I appreciate that, Mr Shorten, but you said there, "It depends what Mr Abbott's going to get away with," as if you have no control over that. Clive Palmer is already offering you a sort of unity ticket. If you join - if he joins with you, you can oppose Medicare co-payments, the fuel excise, pension changes. Have you spoken to Mr Palmer about that?

BILL SHORTEN: We haven't had extended - we haven't had extended discussions and we haven't had negotiations yet about any of these matters. We're watching what the minority party senators say and do with great interest.

SARAH FERGUSON: Why not just pick up the phone to Mr Palmer? It's that simple, isn't it?

BILL SHORTEN: Well, we speak to him. But what I'd also say to you and I'd say to all your viewers is that Labor tonight, through my Budget Reply, has outlined what we believe. We do believe that we have to have a sustainable budget over the medium term. But what we also believe is that Medicare and attacking universal health care, free and affordable, is a line which we won't let the Abbott Government cross. We'll summon up all the energy we can possess to stop that. The other thing is: this pension age, increasing it to 70 or cutting indexation rates in the future, this government's out of control. They want to create two Australias and we will fight them.

SARAH FERGUSON: You have talked this evening about - in your speech about creating - the potential for creating an underclass, for a meaner Australia. There is a very quick way to stop a lot of this discussion and that's with a change to the GST, to stop a lot of the pain that you say is going to be inflicted on ordinary Australians. Why not now support a raising of the base of the GST or a raising of the GST?

BILL SHORTEN: Sarah, there's an even quicker way to stop the creation of an underclass. Get rid of the Abbott Government. Vote them out. In terms of the GST, this - at least John Howard had the courage, the intestinal fortitude to proselytise, to argue for his case for the GST. We know that the Abbott Government's created a Trojan horse. They're using the states as a cat's paw by advancing unconscionable cuts to hospitals and to schools, forcing the states to lead the case for a heavier and broader GST. There are better ways to run this nation than to sting the bottom earner - the people at the bottom, the middle class. This government hasn't tried to engage with Australians. It got into power by deceit. It argued, "No changes to pension, no changes to health, no changes to schools, no changes to taxes." They've broken every promise. This is the character of the Government.

SARAH FERGUSON: And yet when you were in government you made some beginnings to change some of these welfare arrangements yourselves. You were heavily criticised for taking money away from single mothers. Isn't this government just continuing what you started yourselves?

BILL SHORTEN: There's a world of difference. Labor has always been up for the discussion about how we can decrease outlays and how we can improve revenues. Be it from the Hawke-Keating era with the changes they made with lowering marginal rates of tax, through to a better deal on Medicare, through to the Gillard and Rudd eras where we saved - we decreased the prevalence of family payments. But we never did it through this axe handle to the back of the head of ordinary families and we never did it by - we didn't ask Tony Abbott to campaign in the last election, make himself the saint of never breaking promises. Boy, oh, boy, his halo's fallen fast.

SARAH FERGUSON: Well let's have a look. The total of the changes that you're proposing tonight, by our calculations at this stage, are around $10 billion worth of cuts. You accept and your senior colleagues accept that this is a budget that needs long-term fixes. What are you going to do instead to make up that $10 billion?

BILL SHORTEN: Well you're right: we do accept that budgets always require constant work, but they've got to be done ...

SARAH FERGUSON: Not always require constant work; this budget in particular, as Chris Bowen has acknowledged, does need a serious effort from both sides of government to arrest the future deficits.

BILL SHORTEN: Yeah. You're right: it always has to be worked on. But I just need to perhaps - not in the words you said, but perhaps some of the tone of the debate - Labor didn't leave this country in a total budget emergency, as this government would use to justify their terrible cuts to basic services in this community. We had a triple A credit rating. Only eight countries in the world have a triple A credit rating from the international credit-rating agencies. Where is the budget myth of the - which warrants this government's ugly blueprint for the future of Australia?

SARAH FERGUSON: Mr Shorten, just to go back to that question: $10 billion worth of cuts that you have taken out of the Government's attempts to reform the budget; what are you going to do instead?

BILL SHORTEN: Here's a couple. I wouldn't have given $9 billion to the Reserve Bank. We wouldn't have a $22 billion paid parental leave scheme. This is a government with the wrong priorities. Since they've come into power they've doubled the deficit; then heroically, the Treasurer's got up and announced, "Well, I've halved it!" He doubled it and then he's halved it! That's not - that's not hard work.

SARAH FERGUSON: So you don't actually have an answer to the question on the other - the changes, those $10 billion that you're opposing here?

BILL SHORTEN: Sarah, there's not an election on Saturday. We will work on our policies, but I promise you and everyone watching one thing: when we work on how to restrain health care costs, it won't be by barring sick people or discouraging them from going to the doctor. When we work out how to grow jobs, it won't be by setting employee against employer. We'll work out how we reduce taxes for small business, how we encourage startups, it'll put innovation in the middle of policies. We'll have infrastructure which improves productivity, we'll support public transport, not just road. There are a range of measures and we will work on them over time and we will do so in a way which brings people with us, rather than lies to people before an election and then ambushes them afterwards with unbelievably tough cuts and cruelty.

SARAH FERGUSON: Alright, Mr Shorten, that's all we've got time for. Thank you very much indeed.

BILL SHORTEN: Good evening, Sarah.