TONY JONES, PRESENTER: To discuss the media and politics, I'm now joined in the studio by the former prime minister Paul Keating.

Thanks for being here.

PAUL KEATING, FORMER PRIME MINISTER: Tony.

TONY JONES: Now Tony Abbott's fond of saying that unlike the reforming Hawke-Keating governments, the Gillard Government has no real reform credentials, that carbon pricing is not a reform at all. What do you say to that?

PAUL KEATING: Well it's a huge reform, Tony, a huge reform. Look, only prices and markets shift these big things.

You know, people used to say to me, "What is the most important price in the economy?" And of course it's the exchange rate. When the exchange rate changes, all sorts of things happen.

When we started moving to a floating exchange rate, whole new industries popped up. The first one was international tourism; we never had one before. Then the international wine industry, then a new domestic financial industry. Then education services from abroad, you know. Then exports of high technology things.

I mean, this is - the price allocates capital in the market. Only a price on carbon will start allocating capital to the right places, where we should be investing in the new Australian economy.

See, the question is, I think: do we want a first-rate industrial economy or do we want an economy with a brown, fat underbelly? You know, do we want to get into the new age with the new industries, or do we stay in the old ones, talking as Tony Abbott is talking about industries that were important a hundred years ago?

TONY JONES: So, put another way, do you regard carbon pricing in the same way you regard some of the great reforms, even acknowledged by Tony Abbott, of your era?

PAUL KEATING: I certainly do. I mean, I think - see, there is a view that the industries that may come out of this are things we kind of have to do. We have to clean up coal, we have to clean up water, we have to do this, we have to deal with nitrogenous fertilisers, we got to - as if they are a problem.

People should see them as the new industries. These are the new Silicone Valley industries. This is how the Chinese see them. You know I'm on the board of China Development Bank, which is the body which is basically growing the whole of the west of China. They see the new industries as their key new growth industries.

We won't have them here. I mean, the idea here that we turn our back on the new country, on the new transforming Australian economy, by not letting carbon be priced and therefore capital allocated properly is nonsense. I mean, the Abbott argument that you don't tax the polluters, you give them money, you give the polluters money to change their bad habits, is tripe.

TONY JONES: Thinking about what Tony Abbott and others who oppose the carbon price are saying about the Chinese, that in fact their emissions are going to keep growing, they're not serious about green technologies, in fact they can't be because they've got to keep growing their economy.

PAUL KEATING: If anyone says that, they don't know China. I mean, the Chinese, look, they got eight-lane highways into all their cities. All their cities are going to be connected by the fastest trains. They have the most modern airport terminals, they will have the cleanest water whenever they can get it, they will have sustainable industries, they're losing arable land, they're going to maintain it, they're going to remove nitrogenous fertilisers.

I mean, China knows that the new tertiary industries are in the green area.

See, Tony, in this country, 80 per cent of people work in the tertiary economy, in services, in the industry like - as we are tonight, in the service economy. And, the new industries, the green industries, are service industries, not the old manufacturing.

Manufacturing's moved to the east. It's the service industries are the new growth industries. So, to turn your back on the mechanism which allocates the capital out of the old industries and into the new ones is to turn your back on your future.

TONY JONES: So, I mean, do you see these as traditional Labor reforms? Because your reforms, ...

PAUL KEATING: Yeah, Labor.

TONY JONES: ... the reforms of the Hawke-Keating era, the big one was enterprise bargaining, the reduction of tariffs, floating of the dollar, the big privatisations, prices and incomes accord, etc., etc., they're even lauded by Tony Abbott. But you're - do you actually see this in the same terms?

PAUL KEATING: I do. And, look, the economy's in a massive transition. That's obvious to everybody.

The terms of trade are effecting a massive transition on us. And this pricing mechanism is carbon is part of that transition, so of course it stands with those big changes, Medicare, superannuation, the deregulation, the ones you mentioned. It's in that league. It's part of the Labor tradition of change, the Labor tradition of the adaptation of the economy.

You know this - you know what Tony Abbott's policy is? "If you don't give me the job, I'll wreck the place. If you don't give me the job, I'll wreck the place." And we're supposed to, "Well, Tony, you better have it, you know, otherwise you might destroy it on us." I mean, Tony's got to have the political judo chop. That's what Tony has to have.

TONY JONES: This policy is an all-or-nothing gamble for Julia Gillard, who it seems you think should be judo chopping Tony Abbott.

PAUL KEATING: Well, what can you do with obscurantism?

TONY JONES: Well, first of all, it's an all-or-nothing gamble for him as well. Judging by the polls and the public mood, it could go either way, but certainly right now it's going his way.

PAUL KEATING: Well, if a country wants to backs its way - countries make mistakes, Tony. Lots of countries have made mistakes. If a country wants to back its way down the pathway of obscurantism to keep the old, brown, dirty industries of the Industrial Revolution, the early post-industrial revolution, which is what these are, then it doesn't want a growth future, it doesn't want higher levels of income and it doesn't want to better allocate resources, it doesn't want to have a clean environment, it doesn't want to have clean water, better forests, better - you know, simply be part of the new age.

TONY JONES: Why is Tony Abbott's - given what you're saying, if the public took that view, they wouldn't necessarily be supporting him so wholeheartedly. But his 'Just Say No' campaign appears to be winning right now.

PAUL KEATING: Well, let's go - I mean, I've been through a lot of these ones myself. I fought car companies, textile companies - you know, you name them, when the tariffs come down.

But you at it today, look at the results, you know. Do you think that Ford and General Motors would have been giving us the cars they're giving us today if we hadn't have had low tariffs, if we hadn't of taken away the effective subsidy away, if we'd have just handed them some money to do better, as Tony Abbott's suggesting we do with pollution? Hand them some money to do better.

You'd still have the handles falling off, the old creaky doors, the low quality. I mean, you've got the quality in Australian cars now because of competition, because the market's given you imports. You know, you can get a Mazda, you can buy a Volkswagen, so therefore the Australian cars have measured up to that.

Unless you have a market mechanism working, the idea that the Government can hand money out to improve these things, which is the Abbott policy, is just - is bunkum.

But, by the way, what's the media doing about this? What about that sleepy press gallery of ours? What are they ... ? I mean, is there no premium on quality? Is there no premium on good public policy anymore? Do they just say, "Oh, he said that and then she said this. And they said this and we said that." You know, where is the quality of the national debate and why isn't Abbott being flogged by the media for this position?

TONY JONES: Well, we'll come to the media, we'll come to the media in a moment. But tonight, for example, Tony Abbott was taken to task at a public forum in Brisbane for bagging climate scientists, for bagging economists who support the carbon tax. And he was asked: why doesn't he listen to these experts? And he was asked, who do you listen to?, and he said, "I listen to the public."

PAUL KEATING: Well it's the jingoists answer, isn't it? Jingoism. You know, don't lead - don't conscientiously lead the community or lead the nation, just follow along behind public opinion. Well, you know, that's what ...

TONY JONES: Well he seems to be leading public opinion in this regard. I mean, he's saying that he listens to the public, but he's leading the public, isn't he?

PAUL KEATING: Well, I don't think he is, Tony. No, he's not leading the public. I think the Prime Minister's leading the public. And she's doing a level best, but she's, you know, getting support in important places, but this is a very great reform. And if a country like Australia can't effect these kind of changes, where does it leave us in the big game against the Chinese, the Chinese economy, you know, all these other countries, most of Europe, making these important changes in climate and climate science? Where does it leave us?

TONY JONES: You of all people know how hard it is to get a new tax put in. In fact, Tony Abbott's stolen one of your best lines on opposing the carbon tax. He's stolen your own campaign line against the John Hewson's new tax, the GST: "If you don't understand it, don't vote for it; if you do understand it, you'd never vote for it." I mean, he's using your best lines.

PAUL KEATING: Yeah, well, that's - Oscar Wilde said, "Anyone that doesn't like flattery's never been flattered."

TONY JONES: But doesn't this just go to prove how hard it is to actually introduce a new tax in this country?

PAUL KEATING: Look, Tony, let's be clear about it: it's $30 billion in all coming from the polluters. It's not the public paying the tax, it's the companies. Of the $30 billion, $15 goes to the public, roughly, and $15 billion goes to new clean technology. Right? Just as it ought to be, just as it ought to be.

It's not as if it's a tax on members of the public; it's a tax on the companies and the extent that leads to increases in prices, they're covered by the compensation the Government are offering them. So, I mean, it's a very, very well-thought-out scheme, and importantly, a very fair one.

TONY JONES: But surely some of this has got to do with the way the Government has sold this policy right from the beginning. Months and months of ministers, the Prime Minister and everyone who wanted to support this scheme having no detail to work with. That was a political disaster, wasn't it?

PAUL KEATING: Well, it's very hard to get this stuff out and going when people know you're doing it and yet you haven't got the detail out.

Now it's out there. See, for instance, the Treasurer's increased the tax-free threshold to $18,000. That's a very big change, very big change. Half a million people will have a substantial benefit out of that, mostly women, mostly part-timers - women. And of course, the increase in the tax-free threshold of $18,000 goes to everybody, it goes to you and it goes to me, so everyone has a win.

This is a very big tax change, very big change. So until people see the detail, it is hard to sell the stuff, but once it's out there - I mean, this policy change and the neatness of the compensations, and, if you like, the justice of the measure, should really be applauded across the media.

You know, if it gets this bad that it's that hard to get a plus for something this right, what hope does a country have?

TONY JONES: Let's talk about the media then. Like all of us, Paul Keating, you've been closely watching the unfolding News of the World scandal in Britain. Are we seeing ... ?

PAUL KEATING: I'm not glued to the TV over it.

TONY JONES: Truly not, but are we seeing the beginning of the end of the extraordinary sway that Rupert Murdoch has had on politics, not only in Britain; in the United States and in Australia as well?

PAUL KEATING: Well there's one thing that's clear for sure comes out of this and that is self-regulation by the media is a joke. A joke. You know, I notice tonight John Hartigan talking about the Press Council of Australia. I mean, people shouldn't have a right to appeal about invasions of their privacy to some body funded by newspapers; they should have a right at law.

What we need, what we seriously need, which has been now recommended by the Commonwealth Law Reform Commission, the Victorian Law Reform Commission and the New South Wales Law Reform Commission is a separate right-of-action in privacy, a separate tort.

So in other words, you don't have a right of appeal to some body, you have a right to action, you have a right to the law. In the end, the only regulator of this bad behaviour is the law. And, this episode in Britain ...

TONY JONES: Well there's certainly no right to privacy in the law in Australia at this time. And in actual fact, at a broader level, it's sometimes said that privacy will be one of the great issues of our time, because of the internet, because of Facebook, Twitter, etc., etc. But it doesn't seem that there's any chance at the moment you're going to get a consensus on this. Could the Murdoch issue reflect into this debate in Australia?

PAUL KEATING: Well, I mean, Minister Conroy's now sitting on the Commonwealth Law Reform Commission report. Very reasonable recommendations. It basically says if you had a reasonable right to privacy and there are no public issues involved and they are infringed, you have a right of action at law.

For instance, those people in London who News International or the News of the World was asking the police to finger by their movements off their mobile telephone, those people had a reasonable right to believe that their free movement through London was their own affair, that they weren't to be tracked by the police via the telephone system for the benefit of a newspaper.

TONY JONES: But do you believe this sort of thing only happens in Britain? I mean, could it also have happened in Australia?

PAUL KEATING: It could have happened in Australia. In fact, your chief executive officer made the very same point in a speech a year or so ago. He - I brought the quotation in, which is a point.

He said that - Mark Scott, "With digital surveillance, location tracking and genetic tracing becoming commonplace, there's a very firm case for the law to allow people to protect their privacy." Correct. Correct.

TONY JONES: Let's talk about the politics of this with the time we've got left. Do you think Murdoch's News Limited is effectively at war with the Gillard Government?

PAUL KEATING: I think it's beyond doubt. I mean, when the Daily Telegraph yesterday is saying, "Let's have a national election," why do we need a national election? We have an operating - a clear operating majority in the House of Representatives, it's a stable majority, the business of the Government is reasonable business, that is the controversial matter is putting a price on carbon.

There is a consensus, it seems, in both Houses of Parliament for it. Why should there be an early election, other than the editors of that newspaper believing that were there to be an early election, the existing government would be defeated.

So this is why ministers are saying News Corporation is after - or News Limited is after regime change. You know, I think, you know, how can you read it any other way?

TONY JONES: And do you believe, if that's the case, that it comes directly from Rupert Murdoch?

PAUL KEATING: Well, I'm not certain of that. I'm not certain. I think what matters to Rupert Murdoch mostly is the economic performance of his organisation. I think the test for him is what their EBIT, uh, what their earnings before interest and tax is, rather than the expression of policy for every publication.

TONY JONES: And yet, dealing with Rupert Murdoch has been something that prime ministers have always had to do. In fact you gave some advice to Tony Blair before he became prime minister on how to deal with Rupert Murdoch, as reported by Alistair Campbell."Murdoch is a big, bad bastard."

PAUL KEATING: No, I never said that.

TONY JONES: You didn't say that?

PAUL KEATING: No, that's some ...

TONY JONES: Alistair Campbell said ...

PAUL KEATING: That's some donkey who worked for Campbell said that. No, I never said that. No, I said the only way to deal with any of these proprietors is from a position of strength. That's the only way to deal with them.

And in which case, I dealt with them with the cross media rule. Right, I said, you know: if you're in television, you can't be in print. So you look at what's happened now. Howard took the cross media rule away to suit them, and now you've got West Australian Newspapers and Channel Seven together. You know, you'll see more of this.

TONY JONES: Well, I mean, Bob Brown is today calling for an inquiry into media ownership in Australia. Do you think there should be one?

PAUL KEATING: Well, inquiries into media ownership don't matter unless governments do it. The best thing that the Government can do and Bob Brown can do is to support the Commonwealth Law Reform Commission report for a separate law and tort and action in privacy. That's within their power now. No inquiries.

TONY JONES: But that's got nothing to do with media ownership.

PAUL KEATING: Able to do today.

TONY JONES: That won't affect media ownership though.

PAUL KEATING: No.

TONY JONES: Do you think there should be a media ownership inquiry?

PAUL KEATING: Well, I think there's nothing wrong with inquiries providing they matter. But when you take these things away - I mean, you know, when Murdoch took over the Herald and Weekly Times group of newspapers, he lost control of HSV7, which they owned, therefore the Seven Network. I made him sell down 010.

As well as that, the APN set of newspapers which are now controlled by the O'Reillys. He lost control of the West Australian, for instance, you know. And you've just got to be hard with these guys, you know? He said to me when we were doing this legislation, "But if I buy the Herald and Weekly Times, why can't I keep 010?" I said, "Because that's not how the rule is going operate. That's why."

TONY JONES: Let me ask you this, because we're nearly out of time: should the News of the World scandal and the questions in Britain over whether Murdoch is a fit and proper person to run a major broadcaster, should that affect the Government's decision, pending decision, on whether Sky, partly owned by Rupert Murdoch, gets the $223 million public contract to broadcast Australia's overseas television service?

PAUL KEATING: Well, that's portending - who can know what the course of these inquiries are? Rupert Murdoch, I understand, has said he will appear before this inquiry, right? And so will other officers of News International. When that inquiry's terms are finished and Ofcom, the British regulator ...

TONY JONES: Oh, no, I'm talking about here in Australia. I'm talking about the Sky TV ...

PAUL KEATING: I understand, but - I understand that issue will be well and truly over before these hearings are finished, wouldn't that be the case? I'm pretty sure that would be ...

TONY JONES: Well, Conroy's delayed it by six months, so in six months the Government has to make a decision whether to give a $223 million contract to ...

PAUL KEATING: If there are important findings about these matters in Britain, it must materially affect things here.

TONY JONES: Paul Keating, we're out of time completely. We thank you very much for coming in to join us tonight.

PAUL KEATING: Thank you, Tony.

TONY JONES: As usual, much more to talk about, too little time.