LEIGH SALES, PRESENTER: The Australian Prime Minister Malcolm Turnbull joined me in Sydney a short time ago.

Prime Minister, thank you for joining me.

MALCOLM TURNBULL, PRIME MINISTER: It's very good to be here.

LEIGH SALES: What is the Australian Government's response to Britain voting to leave the EU and the subsequent resignation of the British Prime Minister David Cameron?

MALCOLM TURNBULL: Well we respect the decision of the British people and we know that we will continue to have in the future the very closest relations with the United Kingdom. At a personal level, I'm sorry to see David resign, but I can understand his reasons for doing so. The - but our relations with Britain are as close as two countries' relations could be and nothing will change there. Equally, in terms of the European Union, we have strong relations with all of the countries of the European Union, but particularly the two biggest economies, France and Germany, and we have strong support in both those countries to the negotiation of a free trade agreement with the EU, which is one of our next export trade deals that we're seeking to achieve, building on the success of others that we achieved over the last few years.

LEIGH SALES: I'll come to that big picture in a second, but firstly, have you spoken to Prime Minister Cameron?

MALCOLM TURNBULL: Yes, I spoke to Mr Cameron a few hours ago before he announced his resignation.

LEIGH SALES: And what did you say to him?

MALCOLM TURNBULL: Well it was a private conversation, so ... . But I - naturally, I consoled him on the defeat in the referendum and we discussed his next steps and what he announced did not come as any surprise.

LEIGH SALES: Australia would have preferred Britain to remain within the EU, so therefore, I assume we think that this is not an optimal outcome. What do you think that the impact on the Australian economy will be?

MALCOLM TURNBULL: Well, I think the immediate impact is going to be a period of instability in markets and we've already seen that. We've seen the pound sold off. The Aussie dollar was sold off too. We've seen big fall in equity markets. These events unsettle markets, they undermine confidence to some extent. So there - and there is a process that has to be gone through. So, I think it would be difficult to say precisely how long it will be before equanimity is restored, but I think we could be looking at a period of some uncertainty. And it's a reminder, Leigh, of a point I often make: that we are living in a period of rapid economic change, we're living in a period of volatility and we have to embrace that. We have to recognise that we've got to make sure that we have stable leadership, an economic plan, stable government, so that we are able to deal with the unforeseen. As Margaret Thatcher would've said, expected the unexpected. We've got to be able to deal with those eventualities and of course seize the opportunities as they arise.

LEIGH SALES: But I just wonder if that message though, when you look at what's happened in the Britain, the message about change and the need to embrace it and so forth, people find change scary and lots of things about it scary - that technology takes jobs, that markets are open, that flow of labour is open, there's increased immigration, for example, back and forth within Europe. I just wonder if that message that you're making perhaps scares and alienates people?

MALCOLM TURNBULL: Well Leigh, I think the big - you mentioned immigration and that was a very big issue in Britain, probably the single biggest one, that Britons felt they were not - they felt they'd lost their sovereignty - or many Britons did, and this was the argument, that because other citizens of other European Union countries could come and go into the United Kingdom as they pleased, Britons felt that they - they'd lost control of their own country. Now, rightly or wrongly, that was a perception. That was something that reminds us of how really important it is for the Government to be seen to control its borders. And of course, we are able to do that in Australia and that's one of the issues in this election.

LEIGH SALES: Nonetheless, what about my message more broadly that this message of optimism and change is unsettling to people?

MALCOLM TURNBULL: Well the - if you look at the cases made by people like Boris Johnson, it is very much about Britain being able to better engage in the 21st Century, freed from the shackles of bureaucratic Europe and better able to embrace the world. Part of the argument that the Leave case made was they said, "In this age of technological change, in this age of the internet, in this age of globalism, why would we remain part of Europe for no reason other than geographic proximity at a time when technology has abolished geography?" Now that was part of their case. I'm not saying it was right, but that was part of their argument. So the Leave case actually embraced a message of optimism and a belief in Britain and a belief in Britain's sovereignty to go it alone and of course then be able to deal with everybody, every country in the world as an international citizen and being particularly able to do that because of the independence, and as I said, the abolition of geography occasioned by technology and the internet.

LEIGH SALES: You mentioned before that this will inevitably result in a period of instability. Some voters might think, "Well the last time we had a period of global instability with the Global Financial Crisis, Labor was in government. They shepherded the country through safely. We avoided going into a recession, unlike many industrialised countries around the world. Therefore that is evidence that it's Labor with the experience to manage the economy through times of instability and trouble."

MALCOLM TURNBULL: I don't think anyone could put that with a straight face. I mean, the prospect - being deadly serious about this, the prospect of a Labor-Greens-independent alliance and all of the instability that brings with it, a Labor Party with no economic plan other than to run up higher deficits ...

LEIGH SALES: But Labor shepherded Australia through the GFC successfully.

MALCOLM TURNBULL: I think what shepherded Australia through the GFC successfully was the Chinese stimulus and the large amount of cash that John Howard left in the bank. You may recall when I was Opposition Leader, I begged Kevin Rudd not to spend so much. And with the benefit of hindsight, there's no doubt he spent far too much and he left us with a huge structural deficit and of course a mountain of debt which we are struggling to deal with.

LEIGH SALES: But the deficit has tripled under the Coalition, so are we not in an even worse position now?

MALCOLM TURNBULL: Leigh, that's - the deficit was massively understated by Labor when they left government and what we have been endeavouring to do, as you know, is to bring it back and we've had savings rejected by Labor in the Senate. There's no question that we are, if you compare our economic plan, which is the Budget, versus what we know of Labor's, they are proposing to deliver higher deficits and more debt. So there's no question about that. They've owned up to at least that. They haven't told us how much more in deficits and how much more in debt yet.

LEIGH SALES: Before we run out of time, let's run through a couple of other domestic political issues that have been a feature of the campaign today. In October last year, according to Hansard, you said that - of a same-sex marriage plebiscite, it is clear that every Australian will get a vote and that vote will be respected. If the vote is carried, it will become law. And yet today you're saying that MPs will have a free vote, which means it may not become law. Why have you changed your position?

MALCOLM TURNBULL: No, I haven't changed my position at all. It absolutely will become law because it will sail through the Parliament. Can I say ... ?

LEIGH SALES: Why do you think that, though?

MALCOLM TURNBULL: Well, because I understand the Parliament.

LEIGH SALES: No, no, but - sorry to cut you off. But previously, many people on your own side and people on Labor's side have said they don't support same-sex marriage, so why do you think it will get through the Parliament?

MALCOLM TURNBULL: Because the - the - there is - there was probably not a support for a - on a free vote basis for same-sex marriage in the last parliament. Of course we don't know who will be in the next parliament. But I know parliamentarians well enough to know this and I know my colleagues well enough, that if the Australian people vote Yes in a plebiscite for same-sex marriage and I will be encouraging them to vote Yes and I'll be voting Yes, as will Lucy, I have no doubt it will sail through the Parliament. Leigh, that is the last thing to be concerned about. The - you can make all sorts of arguments for and against the plebiscite. I understand that. But the - if that plebiscite is carried, as I believe it will be, the Parliament will pass into law legislation which legalises same-sex marriage without any doubt.

LEIGH SALES: But if MPs are going to have a free vote anyway, then what's the point of having a plebiscite? Why not just have a free vote?

MALCOLM TURNBULL: Because we've offered the plebiscite. My predecessor, in his government, the Coalition government led by Mr Abbott, offered the Australian people that plebiscite. It was a commitment that we've made. There's very high levels of support for it. It's a commitment we have to honour. I understand the arguments against it very well, but it is thoroughly democratic and every Australian will get a say in it and I am very confident that the plebiscite will be carried. And I think the argument that Mr Shorten makes that the Australian people can't be trusted to have a civil conversation and a decent and respectful conversation about this is really - he's really selling the Australian people short. He is not giving Australians credit for the ...

LEIGH SALES: But Scott Morrison was sort of backing that this week because he was coming in after Penny Wong said that she feared it would open a sort of hateful national conversation. He said that he felt people with his point of view were also subject to hate, so he's sort of backing Bill Shorten there.

MALCOLM TURNBULL: I don't - I've discussed this issue with Scott on numerous occasions and as recently as today. So the - that's not - he certainly - Scott is confident, as I am, that there will be a respectful, no doubt robust debate about the issue. But you know, we have - we resolve controversial issues by referendum. The republic was one. Sadly, I was on the losing side there, but it was certainly - we managed to have a respectful debate there. We've got the issue of the recognition of our First Australians in the Constitution. That will require a referendum. Nobody is suggesting we can't have a respectful debate about that. So I have more faith in the Australian people's good sense than Mr Shorten does, I'm afraid.

LEIGH SALES: One more question. Labor's claim that the Coalition has a plan to privatise Medicare. In your first interview on this program as Prime Minister you nominated as one of your first principles the free market. So isn't it a logical conclusion therefore that a Coalition government would prefer to privatise every aspect of Medicare that you could? I'm not saying privatising Medicare overall. You'd like to privatise whatever aspects of it would appeal to the free market.

MALCOLM TURNBULL: That is - that is - that is not correct.

LEIGH SALES: But you're a free marketeer.

MALCOLM TURNBULL: Well I do believe in the free market, but I also believe in government. And one of the criticisms I've made of government in the past is that it outsources too much of its own business. Now look, ...

LEIGH SALES: But how does that fit with your first principles?

MALCOLM TURNBULL: Well, let me just continue. As Michael Gannon, the AMA president said a couple of times this week, if you were to outsource to a payments firm the payments of Medicare, that would not be privatising Medicare. It's nonsense to say it's privatising Medicare. It's just the mechanism for ensuring that money gets to doctors and patients and so forth. But as it happens, governments in my view have outsourced too much in the area of technology and systems and often at great cost. So if you look at what I've done, I set up the Digital Transformation Office within government in order that we could bring government services into the 21st Century without having to pay enormous fees to big systems integrators like IBM and others. I've got nothing against IBM of course. But it is important that the Australian public service has the capacity to deliver 21st Century services and of course we can do that. We can access all of that technology. And my commitment is that none of the payment services of - or any of the services of Medicare that are being undertaken by government today will cease being undertaken by government in the future. Now, Mr Shorten knows that, but nonetheless he has persisted with this shocking lie. You - you asked him to put his hand on his heart and repeat it and he wasn't prepared to do so. It is a desperate lie and he has been calling up older Australians late at night and frightening them over this.

LEIGH SALES: So do you want to put your hand on your heart and look Australians in the eye and say you're not privatising any aspects of Medicare?

MALCOLM TURNBULL: (Laughs) You can absolutely take my word for it. There is no way we will privatise any part of Medicare at all.

LEIGH SALES: Prime Minister, thank you very much for joining us.

MALCOLM TURNBULL: Thank you.