TOM ELLIOT Joining me in the studio now is the Foreign Minister Julie Bishop. Ms Bishop, good afternoon.

JULIE BISHOP Good afternoon Tom.

TOM ELLIOT I understand in the last few days you have actually spoken personally with both Andrew Chan and Myuran Sukumaran. What did they say?

JULIE BISHOP I did have the opportunity to speak to both men today. Our Consul-General Majell Hind in Bali was visiting the prison. She was accompanied by Mrs Sukumaran and Michael Chan – the mother and brother of the two men – and I contacted Majell and she put me on loudspeaker so I had the opportunity to speak to Andrew and Myuran.

They expressed their deep gratitude that the Australian Government and the Australian people appeared to be providing them considerable support – they took heart from that. We discussed the delay that the Indonesian authorities had announced and I assured them that we would take this opportunity to continue to press the case with the Indonesian authorities that they should be granted a stay of execution and their clemency pleas should be reconsidered.

TOM ELLIOT How did they seem?

JULIE BISHOP They both seemed very relieved. I think the delay in the decision to proceed with the planning of these executions came as a great relief to them and obviously to their families. They were keen to get back to what they had been doing for the last number of years and that is Andrew and Myuran have both rehabilitated in the most extraordinary way and one is a priest, administering pastoral care to prison inmates and the other is a painter and takes painting classes. So they were both keen to continue with their prison lives such as it is.

TOM ELLIOT I know that you and the Prime Minister are doing what you can to plea with the Indonesian Government but do you really think there is anything that Australia can do to alter the fate of Chan and Sukumaran?

JULIE BISHOP We remain hopeful that Indonesia will understand why we are pressing for a stay of execution, that we oppose it both at home and abroad and we’re not asking the Indonesian Government to do anything that they are not doing themselves for their own nationals who face the death penalty elsewhere in the world.

Indonesia has been very successful in seeking clemency and stays of executions for Indonesian citizens who face the death penalty – particularly in the Middle East – and we are seeking to do the same for two Australian citizens who I believe are repaying their debt to society. I do not for a moment understate the gravity of their crimes, the seriousness of what they did, but for the last ten years there has been a remarkable rehabilitation and I don’t believe they should now be paying with their lives.

TOM ELLIOT The Prime Minister made a speech today and he amongst other things reminded the Indonesian Government that after the Boxing Day tsunami almost a decade ago, Australia gave over $1 billion in aid both in case and services – our military went there to help out – and also I believe we give Indonesia between $600 and $650 million a year in ongoing aid on top of that. Now is that a subtle threat by the Prime Minister perhaps to the Indonesians to say that if you do this, if you carry out these executions, you might see our aid to you being cut?

JULIE BISHOP The fact is our aid budget is subject to completely separate considerations. We are currently struggling with our aid budget because we can’t get the savings through the parliament that we need – Labor won’t even acknowledge the $5 billion worth of savings that they came up with – and so in the absence of being able to get those savings we are having to look across the aid budget for savings as well as other areas of government.

But we are not going to flag any of the options that may well be available to us should these executions proceed. My whole focus at present is on obtaining a stay of execution. I’m not talking about other options or what avenues might be available to us should the executions proceed in the face of Australia’s pleas that they not.

TOM ELLIOT It can’t be a coincidence that the Prime Minister’s brought up these large numbers. We helped out Indonesia - $1 billion back then, the annual aid, some of which is military aid, $650 million a year – so you’ve just acknowledge that the aid budget is under stress as so many bits of the Federal Budget. Are we putting the Indonesians on notice, the Indonesian Government?

JULIE BISHOP There is going to have to be a cut to the aid budget across the board. But I’m not linking the two. What I’m saying is that our aid budget is under pressure because we have a massive debt and deficit situation, we can’t get savings through the Senate – even savings that Labor themselves proposed, there are $5 billion of savings that Labor put up but now won’t agree to passing – so that means that we have had to announce a further cut to the aid budget.

I’m in the process of going through where that will occur, but it is self-evident that Australia is a significant partner of Indonesia, we work closely with them in a range of areas and we want to ensure that our relationship can be maintained at the highest possible level. This issue of the death penalty is causing tension, it is a challenge and we have to deal with it.

TOM ELLIOT My understanding is that our aid is reasonably important to the Indonesian Government, we are one of their biggest foreign donors. So if we cut it is it going to cut our relationship with Indonesia?

JULIE BISHOP Not at all. Let me put this in context. The foreign aid budget is a minute proportion of Indonesia’s GDP, they have a trillion dollar economy, they are a G20 economy, they have one of the largest and growing economies in the world. So foreign aid to Indonesia is different to say foreign aid to the Solomon Islands or Nauru or a Pacific Island country, it is a different issue.

But I don’t want to mix the two issues at present, there is a concern about how we are going to manage our foreign aid budget in the absence of being able to get savings that Labor proposed through the Senate - $5 billion worth of savings – and then of course there is the separate issue of the death penalty and we have a very different view from Indonesia on the question of the death penalty.

TOM ELLIOT Have you summoned the Indonesian Ambassador here in Indonesia for a private talks?

JULIE BISHOP The Indonesian Ambassador has been talking to us on a regular basis, indeed he appeared before the Joint Standing Committee on Foreign Affairs and Trade only the other week. So we are in constant communication with the Indonesian Ambassador but more of our focus is on Jakarta where our Ambassador-designate and our diplomatic team are making daily representations.

Indeed there have been personal representations from the Prime Minister, the Governor-General, me as Foreign Minister, our Attorney-General, our Minister for Justice and we have been making representations for some time, quite some time. For as long as I’ve been Foreign Minister I have raised the issue of the Bali Nine and the death penalty with successive Indonesian Ministers.

It was only since their final legal avenues – the pleas of clemency – were denied on the 7th of January that we have had to increase a much more coordinated and concerted effort. Although there is still a legal avenue available - I understand, on the 24th of February the lawyers for Mr Sukumaran and Mr Chan are presenting a further case before the State Administrative Court in Jakarta seeking clemency.

TOM ELLIOT Would you withdraw the Australian Ambassador to Indonesia should the executions go ahead?

JULIE BISHOP Tom, these are all options that are available in diplomatic circles. There have been recent instances where other countries have withdrawn their Ambassadors. For example, the Netherlands and Brazil both had citizens on death row, both were executed in recent executions carried out by the Indonesian Authorities, both countries withdrew their Ambassadors, so clearly there is a precedent for it. Indeed, Indonesia has withdrawn its Ambassador from Australia over issues in the past, recent past in fact, but these are options that we will consider should the pleas not succeed. They are not matters I want to dwell on now.

TOM ELLIOT Let’s move on from what is happening to Bali, I know that is occupying a lot of your time. Foreign Affairs in 2015, leaving aside what is happening with Indonesia at the moment and hopefully that will be sorted out one way or the other fairly soon, what else are you hoping to achieve this year?

JULIE BISHOP A considerable focus of my time tragically is also on national security through this phenomenon of foreign terrorist fighters. This means necessarily significant involvement in the Middle East. First because there are Australian citizens who are taking up the calls of ISIL or Daesh – this violent brutal terrorist organisation – in fact there are Australian citizens fighting alongside Daesh in Iraq and Syria. So we necessarily are engaged in helping train the Iraqi Defence Force so that they can take back territory, so that they can protect their citizens and we want to stop the flow of foreign fighters and funding from Australia.

TOM ELLIOT Can I just ask you about that because an unusual situation popped up yesterday. A Melbourne man – he is part of the Syrian Christian community – a dual citizen of both Iraq and Australia, his name is [inaudible]. Anyway he has joined a Christian militia called Dwekh Nawsha. Anyway they are fighting Islamic State in Iraq, but my understanding is if he comes back to Australia he would face the same legal challenges as someone who is fighting for the Islamic State…

JULIE BISHOP [interrupting] Islamic State or Daesh is a prescribed terrorist organisation and so anyone who takes up the cause of a prescribed terrorist organisation is committing an offence against…

TOM ELLIOT [interrupting] But fighting in a Christian militia?

JULIE BISHOP Well I’d have to look at the details of it but I don’t believe that Christian militia is a prescribed terrorist organisation under Australian law. But what we plead with young Australians in particular is that they not take up with ISIL or Daesh – this is not martyrdom, this is not a noble cause, this is a brutal, violent terrorist organisation who has no regard for humanity, for rights, for laws, for governance.

It is trying to take us back to the Dark Ages and we will do all we can to stop Australians supporting this terrorist organisation and will do all we can to prevent a terrorist attack occurring here in Australia. This is our most significant national security threat at present.

TOM ELLIOT It is twenty-two past four, we will hear from finance in about ten minutes time. Foreign Minister Julie Bishop is in the studio. Ms Bishop, I don’t know if you saw this today, but he is now a fund manager, chief economist of the Edinburgh-based Standard Life Investments – but he used to be a treasury official – his name is Jeremy Lawson. And he said Australia needs a full blown 80s or early 90s style recession to focus the minds of our political leadership.

That in fact having unemployment go up and having the economy really slowing is actually what we need to make us realise the changes that need to be made. What do you think about that? Do we need another recession, as Paul Keating once said, the recession we had to have?

JULIE BISHOP I don’t believe we need a recession at all. We are entering our 24th consecutive year of economic growth. Treasury forecasts show that the average real GDP growth over the next four years is likely to be three per cent. That is how you create more job opportunities - with a growing economy.

We have a challenge in trying to bring Labor’s debt and deficit under control, to put the budget back into surplus, to start paying off net government debt. What we need are opportunities to grow the economy, that’s how you provide job opportunities, that’s how businesses can find new markets, that’s how businesses can start up and people can create wealth for themselves and families and employees.

TOM ELLIOT But do you honestly think that you will be able to get the debt and deficit down. I mean because the latest forecast have us in deficit into the 2020s at the moment.

JULIE BISHOP We have to have a credible path back to surplus. We have done it before and we will do it again. Mind you, the task this time is mammoth. We inherited the very worse set of accounts of any incoming federal government in Australia’s political history and mind you only six years earlier, the Labor incoming government inherited the very best set of financial accounts bequeathed from the Howard-Costello years. So in six years they managed to run up a massive government debt and plunged the budget into deficit. We have to turn that around.

TOM ELLIOT It is still going up now.

JULIE BISHOP There are expenses that are in-built into the budget that we have to continue to meet. But we also have to look at savings. The Government has to be leaner, more efficient, more effective, a greater use of technology, a whole range of things have to be done and as I’ve said a couple of times on this show, we also need to be able to get through the Senate the savings that Labor themselves identified as being necessary.

TOM ELLIOT Ok now I agree with all that. But it seems to me part of the problem is that a lot of political capital that you brought to government in late 2013 has been lost. Only just over a week ago your own backbench called for a spill of the leadership of the party. I know it didn’t go ahead, but it does suggest discontent with Tony Abbott’s leadership.

Do you still have the necessary or required political capital to make these tough decisions? I mean, no one likes tax increases, no one like spending cuts, but at the end of the day that is what you have to do to get a deficit back under control. Do you still have the political will or ability to do that?

JULIE BISHOP The Coalition – our history shows – have been very good economic managers. We come from a variety of backgrounds, we are people who have been involved in business, we have real life experience employing people, managing money, we are the party of economic managers. So we are committed to ensuring that over time we can bring the budget back under control, over time we can pay down debt…

TOM ELLIOT [interrupting] Do you think you will get that time now?

JULIE BISHOP Well as long as we can explain to the Australian people what we inherited and how we are going about restoring the budget and starting to pay down debt, we have to do it. We cannot end up like an economy elsewhere in the world. Australia has a great many natural assets, we have natural resources, we have an educated workforce. We do have pockets of disadvantage that we have to address but we have a very high standard of living compared to other countries…

TOM ELLIOT [interrupting] that is spot on…

JULIE BISHOP [interrupting] I’m saying we want to maintain that standard of living for the Australian people. We don’t want to go backwards. That's why we have to deal with intergenerational debt. In a couple of weeks the Treasurer will be handing the next iteration of the Intergenerational Report. That will be an opportunity for us to explain to the Australian people the changing demographics, the changing profile of taxpayers in this country and what we have to do to increase participation and increase productivity to ensure that our economy can continue to grow.

TOM ELLIOT [inaudible] the measures that have been put forward like GP co-payments and that sort of thing. They have not gone down very well, that means you have to reach into the bag of tricks and find other things to do now…

JULIE BISHOP [interrupting] Let’s take the health and medical sector. Everybody in that sector knows there are savings to be made in the health system. So we came up with one option, the GPs didn’t agree with it, Sussan Ley – our new Health Minister – is out there consulting with the health and medical sector to find savings.

TOM ELLIOT Are there any other options?

JULIE BISHOP There has to be other options.

TOM ELLIOT Alan Tudge – the Parliamentary Secretary to the Prime Minister – said on this program that it was off the table. There would not be further ideas on the GP co-payment.

JULIE BISHOP No I wasn’t talking about that. I said there are savings in the health system and we have to find them. The doctors, the professionals themselves say there are savings in the health system to be found and that’s what Sussan Ley is seeking to do.

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TOM ELLIOT Julie Bishop, thank you so much for talking to us.

JULIE BISHOP It’s been my pleasure.

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