LEIGH SALES, PRESENTER: Joining me in our Sydney studio is the Prime Minister, Kevin Rudd.

Good to have you, Prime Minister.

KEVIN RUDD, PRIME MINISTER: Thanks for having me on the program.

LEIGH SALES: The first week of this campaign is clearly establishing already how important the economy is going to be. If voters and business leaders believe that past behaviour is the best predictor of future behaviour, then isn't another three years of Labor going to be signing up for policies chopping and changing, broken promises on return to surplus and instability in leadership?

KEVIN RUDD: Well, you go to the question of economic record. Number one, this country has enjoyed positive economic growth for the period the Government has been in when the rest of the world tumbled into recession - point one. Point two, interest rates are lower now by a considerable margin than they were during the period under the Howard Government. Number three, inflation is lower as well. Number four, the unemployment rate is on average pretty good compared with where it was and brilliant compared with the rest of the world. Number five, wage growth: four to five per cent, good for working families. And on top of all that, with still among the lowest net debt and net deficit levels of any other developed economy in the world. So ...

LEIGH SALES: But you not haven't addressed anything that I've raised there which is - you've said at certain points that you'll return to surplus and then you haven't. You've had policies chop and change ...

KEVIN RUDD: No, you said - you talked, Leigh, about our economic record. No, you talked about our economic record. Hang on, you said we're measured on our record. I'm directly answering that question.

LEIGH SALES: I didn't say anything about your record. I said that ...

KEVIN RUDD: I'm sorry, you did.

LEIGH SALES: .. that you have had policies chopping and changing, you have promised at certain times you would return to surplus and then not and there's been great instability in leadership. If voters look at that and think, "Well, is that an indicator of what lies ahead?," it's going to be hard for them to vote for Labor, isn't it?

KEVIN RUDD: What you talked about before was how we had performed. I'm going to the most basic, constant measures of the economy. They are growth, they are employment, they are unemployment, they are interest rates, they are wage growth, they are measures of net debt and deficit. And against all those measures, the performance of the Australian economy is robust and strong. We hear a lot of shrill commentary from Mr Abbott on these questions - very shrill commentary. But I would say very positively, strongly and I think based completely on the facts that our economy, compared with anything else going on around the world at the moment, is in strong working order.

LEIGH SALES: Let's take interest rates, which you raised. It's simplistic, isn't it, just to say, well, low interest rates is a good thing, because a lot of economic commentators have said this morning that the Reserve cut interest rates yesterday because it's concerned about various economic indicators?

KEVIN RUDD: Well, the bottom line is if the Reserve Bank was deeply concerned about the Government's fiscal policy settings, then we would have heard about that a long time ago. In response to the Government's fiscal policy settings, you have in fact all three global credit rating agencies saying that these are strong, sound, conservative, heading and trending in the right direction. Only eight such countries in the world with a triple A rating. So ...

LEIGH SALES: But the Reserve has been cutting rates for quite a long time and some may suggest that that means that monetary policy's having to do the heavy lifting for fiscal policy.

KEVIN RUDD: I think the Reserve - and if you look at their public statements over time - are concerned about changing global economic circumstances, which actually is the framework we bring to bear in our approach to the economic management task ahead. And what they are looking at in particular and what we are as well are the new circumstances arising from the slowing of the Chinese economy, the China resources or mining boom coming towards an end as well as the sluggish nature of the global economic recovery. And the point I make is this: the real economic question for this election period and for the next three years is, is given these changes in our international economic circumstances - and they are big and they are profound after a 10-year long China resources boom - then because of the terms of trade we are going to have a big and negative impact on jobs, and on top of that, on living standards unless we manage this transition well over the period ahead. And our plan to do that is to diversify the economy, not have all our eggs in one basket and drive that through a new national competitiveness agenda on seven strong pillars. That is the core economic management question of the future, not Mr Abbott's preoccupation with debt and deficit because the credit rating agencies have answered that question.

LEIGH SALES: Alright. Let me come in there. Late today I interviewed the BHP CEO Andrew MacKenzie, but after that your office rang to say you were available tonight so we can't run his interview. We just don't have time tonight. But, I do want to play you one clip of what ...

KEVIN RUDD: You have been inviting me on the program.

LEIGH SALES: We have, of course! Of course we have!

KEVIN RUDD: I wasn't just elbowing my way onto the program.

LEIGH SALES: No, no. Of course, but we have had to hold ...

KEVIN RUDD: I think that's fair to say and important to say.

LEIGH SALES: Absolutely. Of course. But we have had to hold his interview over. I do want to play you one clip of it though.

KEVIN RUDD: Sure, sure.

LEIGH SALES: Do you think that Australia is transitioning out of the resources boom?

ANDREW MACKENZIE, CEO, BHP BILLITON: Not at all. I think maybe some of the best days are ahead of it. I believe obviously, as you're hinting, that the resources industry has been pivotal to Australia, but as we go forward, demand continues to increase and everything is for Australia to play for.

LEIGH SALES: That obviously is a different view to what we're hearing from the Government at the moment with them saying that they believe that the resources boom is basically over, that China is over in terms of the big days of China's growth and that we're now transitioning to a new phase.

ANDREW MACKENZIE: Well, I mean, China is going through its transition as well. I mean, it is slowly moving from being entirely investment-driven to being more consumption-driven. It's rebalancing its economy in a way that I think is more sustainable in growth for the longer term. I'd also say that for many of the commodities that Australia's resources industry produces, you know, we're looking at the possibility of an increase in demand of about 75 per cent in the next 15 years.

LEIGH SALES: So Prime Minister, we've heard there the CEO of BHP, the world's biggest mining company, say that the best days of the resources boom ahead. That directly contradicts what you and Chris Bowen have been telling us.

KEVIN RUDD: It doesn't contradict us at all.

LEIGH SALES: You say it's over; he says the best days are ahead.

KEVIN RUDD: It doesn't contradict us at all in this sense: the investment phase, as anyone will tell you, is coming to a close, and it's the investment phase which has actually brought in a huge amount of capital. As the investment phase fades and the production, expanded production phase kicks in, there's going to be continued benefits from it. But if you want a clear indication that things are changing, just look in the change of our terms of trade. The bottom line is this: for a decade plus - and I keep going back to this - we have had in this economy an enormous addition of our national wealth coming out of - let's call it the China mining boom. That is beginning to change. Intelligent economic policy says, "Let's look around the corner, see that happening and adjust accordingly," hence why I say we must diversify the economy, hence why I say the important way of doing that is through a national competitiveness agenda, seven strong pillars to do with infrastructure and skills and the rest which you might find ...

LEIGH SALES: OK. We've made that point. No, but you have already spoken of the seven pillars and there is a lot that I would like to get through. Let me ...

KEVIN RUDD: Well, you might find that tedious, ...

LEIGH SALES: No, but you've already made the point.

KEVIN RUDD: That you might find that tedious, but is the core frame for the economic debate.

LEIGH SALES: OK.

KEVIN RUDD: The one that we face in the public all the time, particularly through certain newspapers, is about debt and deficit, which is global credit rating agencies have answered.

LEIGH SALES: Let's zip through some other issues. I mentioned consistency earlier on. In 2010, Labor supported a two per cent cut in the company tax rate (clears throat) - excuse me. Therefore do you welcome the Coalition's promise today of a 1.5 per cent cut in the company tax rate?

KEVIN RUDD: Well I think we all know the history of what occurred there in terms of Coalition responses to that proposal at the time. As for this one, I find it quite remarkable that on the one hand Mr Abbott is coming out with this proposal, which he's kicked around for quite some ...

LEIGH SALES: I'm just asking if you back it.

KEVIN RUDD: No, I don't. And the reason I don't back it is on the other hand he's giving a 1.5 percentage point levy onto business for to pay for what might be his paid parental leave. Secondly, ...

LEIGH SALES: But broadly, do you support a cut in the company tax rate?

KEVIN RUDD: Our economic circumstances at present do not permit that and we are dealing with the fundamental (inaudible) of how do you manage our finances in a responsible manner over time given the sluggish nature of the global economy without cutting jobs and without seeing large-scale cuts to basic services and health and education. Therefore you've gotta get these things in balance.

And the other thing I noticed today, apart from the fact that no-one really seems to be scrutinising the $70 billion absent in terms of any detail on cuts to jobs, health and education by Mr Abbott, is we now see floated up in the pages of the Fin' Review an increase to the Goods and Services Tax and on top of that an expansion of its base, and I presume that only means expanding it to food. So that's their approach to how you manage "tax policy". I think that has a huge impact for cost-of-living pressures for Australian families.

LEIGH SALES: If we can turn to asylum seeker policy, the Opposition Leader Mr Abbott held a press conference tonight just an hour or so ago where he pointed out that today marked the 50,000th arrival by boat since you changed the Howard Government's border protection policies. How would you describe that record?

KEVIN RUDD: The Government, when it was elected in 2007, was elected on a series of commitments which we then proceeded to implement. And as we discussed during our last interview, external circumstances changed, particularly in terms of instability in a number countries, not least the civil war in Sri Lanka in the period 2009-'10. And what we saw was an enormous change in terms of the number of people wanting to come to this country. Therefore you must adjust policies over time. There is nothing fixed in stone about a particular policy setting as the facts around you change.

LEIGH SALES: But that answer presumes that in the Howard years, that there were no external factors that came to bear, when we know there were wars in Iraq and Afghanistan that were displacing tens of thousands of people. There are always international external forces.

KEVIN RUDD: Which is why they constantly changed their policy.

LEIGH SALES: There are always external forces at play. The difference was the change in the domestic policy.

KEVIN RUDD: No, the frame in your question, Leigh, is that - about policy consistency. Mr Howard changed policy on asylum seekers on multiple occasions in response to changing circumstances. Guess what? So do we. That's what the national interest demands of the government of the country. And as for our challenge today, it is this: how you get the balance right between a humane approach to dealing with asylum seekers, to dealing with refugees and to ensure that we are honouring our international obligations on the one hand, but not allowing a set of policy circumstances and international circumstances to result in hundreds and then thousands of people drowning at sea and that's why we attack the core of the people smugglers' business model.

LEIGH SALES: What yardstick are you using to evaluate whether your PNG and Nauru policies are working?

KEVIN RUDD: Well, over time - and remember when we launched this policy only three or four weeks ago, we said that this would take some time to take effect, that people smugglers would challenge the business model and we see lots of evidence of that in recent times as well - that over time we expect there to be a reduction in the number of people smugglers seeking to bring people to Australia by boat.

LEIGH SALES: Do you have benchmarks in terms of timeframe, numbers ... ?

KEVIN RUDD: And parallel to that - no, and parallel to that, as I've said, and particularly for your audience's benefit, that as this policy is successfully increased - implemented, you would see then an increase in parallel terms in the number of refugees we take from the official humanitarian program from camps all across the world. We've increased it from 12,000 to 20,000 so far. 20,000 to 27,000 in the future, if we get this policy properly implemented, and therefore we're dealing with the humanitarian dimensions, the practical questions of maintaining our border security and making sure that we're doing everything possible to stop people in their thousands drowning at sea.

LEIGH SALES: When you announced the election, you unveiled Labor's slogan "A New Way". You've been in government for six years. The public has had six years of your way. Why would voters accept that now you're gonna have three years of a new way? They've had your way.

KEVIN RUDD: Well, can I put it to you in these terms: I've just, in our discussion on the economy, put to you pretty clearly what I see to be the new set of economic challenges we face.

LEIGH SALES: But it's the same people dealing with it.

KEVIN RUDD: Hang on - the new set of economic challenges which we face, which requires a new set of policy approaches to deal with them.

LEIGH SALES: But it's the same ...

KEVIN RUDD: This is a decade long boom, this is a decade long boom which is coming to an end and it would be irresponsible of me to say to all people watching your program that therefore we should simply continue policy as it's been given the changing circumstances.

LEIGH SALES: But Prime Minister, it's the same party, it's the same MPs ...

KEVIN RUDD: A new way to deal with the economy ...

LEIGH SALES: It's the same party, it's the same MPs in the Parliament, it is the same donors who fund your party, it's the same unions who back you. It's not a new way.

KEVIN RUDD: You just referred then to the Australian Labor Party, and a new way of managing the Labor Party is to change the rules for the election of the leader. We did that in the last few weeks. On top of that, we need a new way also of dealing with the proper funding of our schools long term - hence the Better Schools plan. We also need a new way for dealing with people with DisabilityCare, hence what we are doing with DisabilityCare Australia. This is what I talk about as a new way.

But there's one overall point about a new approach to politics in this country, and it's this: Australians are sick and tired of wall-to-wall negativity. They want people to be positive, and you know what else they want? On the economic agenda I put forward before, which you weren't keen for me to run through again, the seven pillars of our new national competitive agenda ...

LEIGH SALES: I'm not keen for you to run through it again now either. For the third time.

KEVIN RUDD: No, I haven't actually gone through it at all in this interview, Leigh, and you know that. Is for it to be brought about effectively, the new way is this: business, unions and government round the table working together, instead of at each other's throats. That represents old politics and an old and negative approach.

LEIGH SALES: If the public's tired of negativity and division, would you invite Julia Gillard to join you on the campaign trail to try to sell Labor's record and policies in the same way that you helped when she was Prime Minister?

KEVIN RUDD: Julia would be welcome to participate in the campaign in any way she chose fit. And as you know, and when I've been asked about Julia in recent days, I've been very direct and very frank about the positive role she's played in our party and the contributions she's made to disability care policy, education policy and the measurement of academic standards of schools. Great achievements.

LEIGH SALES: Let me ask you one final question. On your stoush with Rupert Murdoch this week, I don't recall you complaining about bias or corporate agenda when he backed you in 2007.

KEVIN RUDD: If you look carefully at the events of 2007, what you will see, Leigh, written right across the newspapers at that time was a whole series of negative attacks, negative articles, including the most personal attacks on me and my family in the years leading up to that election. You seem to have forgotten those in this discussion. I could list those for you one by one, which went to my wife, her business and the rest of our personal affairs as well. So let's put that into a bit of context.

The second point is this: I have not said anything about Mr Murdoch doing X, Y and Z. What I've said is he owns 70 per cent of the print media in the company - fact one. Fact two, day one of the campaign, through his principal masthead in Australia, they say "This government must go". Thirdly he says through his own direct statements that he wants Mr Abbott to replace me as Prime Minister. That's fine. That's his democratic right. It's a free country. But the question that I've posed through this is simply as follows: what is underneath all this? Is it to do with the National Broadband Network representing a commercial threat to Foxtel? I've seen some commentary on that, and I've only just been looking back on the files today and discovered that in fact Mr Abbott's NBN policy was launched at the Fox Studios here in Sydney. I would like to hear some answers as to what discussions Mr Abbott may have had with Mr Murdoch on the future of Australia's National Broadband Network.

LEIGH SALES: Prime Minister, thank you for your time tonight. Hope to see you again in the campaign.

KEVIN RUDD: Thanks very much, Leigh.