SPENCER MICHELS, NewsHour Correspondent: On his way to the G-20 summit in London, Australian Prime Minister Kevin Rudd came through Washington, just as President Obama was pushing a global stimulus for the ailing world economy and putting the finishing touches on a new strategy for Afghanistan.
BARACK OBAMA, President of the United States: There are very few countries that are closer than the United States and Australia.
SPENCER MICHELS: Before an hour-long meeting in the Oval Office yesterday, the two leaders emphasized their backing for a global stimulus, which many European allies oppose.
BARACK OBAMA: It’s going to be important for the relatively wealthy nations like ours to take leadership in assuring that we don’t see a continued downward spiral.
SPENCER MICHELS: Later at his news conference, President Obama referred to the Australian leader.
BARACK OBAMA: I was with Kevin Rudd, prime minister of Australia, today, who was very forceful in suggesting that countries around the world, those with the capacity to do so, take the steps that are needed to fill this enormous hole in global demand.
SPENCER MICHELS: Australia, home to 21 million people, has been a key U.S. ally in the Pacific since World War II. Rudd and his Social Democratic Labor Party won parliamentary elections in November 2007, turning out John Howard, a stalwart backer of President Bush.
A career diplomat, Rudd has served in China and speaks fluent Mandarin. China is now the largest trading partner for mineral-rich Australia.
Rudd fulfilled a campaign promise to withdraw Australia troops from Iraq, but he has kept nearly 1,000 Australian soldiers in southern Afghanistan. Australia has lost 10 soldiers in Afghanistan, two of them last week. A recent newspaper poll showed 65 percent of Australians opposed to sending more troops.
In Washington, Rudd has limited his comments on Afghanistan to the principle that the nation should not become, once again, a haven for terrorists.
On the eve of his visit, Rudd said that Australia, which had avoided the global recession, will probably see its economy shrink in the coming year.
JIM LEHRER: And Prime Minister Rudd joins us now.
Mr. Prime Minister, welcome.
KEVIN RUDD, Prime Minister, Australia: Thank you.
JIM LEHRER: On this comment that President Obama quoted you on, he said you spoke very forcefully about the need for nations to essentially step up to the plate and do what needs to be done to abate this terrible financial economic situation in the world. What nations were you referring to?
KEVIN RUDD: Well, nations with capacity. And if you look across the world today, capacities vary. But, Jim, this gap, which has been caused by the retreat of the private sector, because of the problem in private credit markets, governments have got two options. You either stand back and just let people around the world take the full brunt of the storm or governments temporarily step into the breach and provide temporary support through their budgets.
I think that's the right strategy. And, remember, the International Monetary Fund -- that's a pretty conservative body -- out there saying that developed economies, G-20 economies should be out there providing 2 percent of gross domestic product in stimulus through their own actions in '09. It's what we're doing; it's what President Obama is doing. I think it's the right course of action.
JIM LEHRER: But some of these countries are not doing it, right?
KEVIN RUDD: There have been a few who have been less enthusiastic to step up...
JIM LEHRER: Mostly in Europe? Are you talking about mostly in Europe?
KEVIN RUDD: There are some. I mean, the picture varies, and it becomes a little more problematic when you start looking at the needs for 2010.
That's why the London summit is very important to provide the concerted political support necessary to get behind this temporary global action, pending recovery in private credit markets.
JIM LEHRER: Of course, one of the major economies in the world is China. Is it doing its part?
KEVIN RUDD: The Chinese have stumped up a reasonable stimulus package so far. It's probably something in the order of about $500 billion. This...
JIM LEHRER: What is that -- put that in perspective, what does that mean, $500 billion? Is that a big package or is that -- in Chinese terms...
KEVIN RUDD: Well, there are different ways of calculating such a package in China. And, of course, there's a certain opaqueness with some of the numbers in China.
And there are other things which the Chinese may not be currently declaring, for example, how credit is being released through their banks to support businesses and consumers.
But if governments around the world -- and this debate on fiscal stimulus is getting going a bit at the moment -- let's just look at the possibility of governments not stepping up to the plate with what they've already done.
The IMF has calculated there will be 20 million -- nearly 20 million more people on the unemployment queue across the G-20 economies today, including China, were it not for fiscal stimulus. I think the responsible course of action is to get behind this as a temporary measure.
JIM LEHRER: And you don't see any signs, though -- the G-20, you're going to carry this message, President Obama is clearly going to carry that message. Is it going to be up to you and a few others to try to make this case to the other G-20s? And if they don't do it, the others in the G-20, we're going to have even further economic disaster in the world? Is that what you're saying?
KEVIN RUDD: I think, when we look at the global economic crisis, it's important to sort of step it through. The first thing is to stop the house--it's like a fire. It's to stop the house from burning down. How do you do that? What you do is you step in with temporary economic stimulus to lessen the impact on economies and jobs.
The second thing you do, stop the fire from spreading. That's why it's important for the G-20 to act to prevent an outbreak of protectionism, because that'll just make it worse.
But the third thing is to start rebuilding the house, and that's why dealing with the damaged financial institutions, what's called toxic assets, on the balance sheets of the world's biggest banks is part of the rebuilding process.
Doing all these three things together and fixing up the rules or the procedures for the future, that's an integrated strategy, and that's what I see from the Obama administration, as well.
JIM LEHRER: How much responsibility for this whole mess does the United States deserve?
KEVIN RUDD: It's a global recession. It has global causes. And to fix it, we need a global response.
Sure, America's the world's largest economy. A lot of stuff has happened here, but a lot of stuff has happened in Europe, as well. The key thing is this: Toxic assets on balance sheets...
JIM LEHRER: Yes, toxic assets fall into -- cover a great many things. They're housing. They're also...
KEVIN RUDD: Oh, yes.
JIM LEHRER: They are all kinds of things that people have that used to be worth something and aren't worth anything anymore, right?
KEVIN RUDD: That's true. Absolutely right.
JIM LEHRER: All right.
KEVIN RUDD: But the impact on the real economy, which is the point I was going to make, is toxic assets, for example, on a Wall Street bank is intimately linked to whether a plumber keeps his job on a construction site on Parramatta Road in Sydney, Australia, because the global economy is so connected.
That's why fixing up the balance sheets of the world's biggest banks -- not just American, but European, as well -- is the core economic problem which has to be dealt with and addressed, which is why Tim Geithner's plan released here in Washington just the other day is such an important step forward.
JIM LEHRER: Now, for all practical purposes, Australia has escaped the recession up until now, correct?
KEVIN RUDD: We've maintained very modest, positive growth through calendar year '08, though in the final quarter we dipped negative for the first time.
But like the rest of the world, it's a global economy. And events on Wall Street translate through to, as I say, construction jobs in cities in Australia, too.
JIM LEHRER: So you don't believe that Australia has done anything wrong in terms of running your economy, your financial system. It's just that you're the victims of others having made mistakes?
KEVIN RUDD: You know, Jim, we've all joined up to this thing called the global economy...
JIM LEHRER: OK.
KEVIN RUDD: ... over a long period of time. And we've all benefited from many of the things that have flowed from it, in terms of boosted prosperity. But now this has happened, and it's time to pause and reflect and, as I said, deal with the fire intelligently in the way in which I suggested before.
The alternative, which I think is just wrong, this kind of, you know, radical, sort of right-wing free-market ideology, which just says, "It will all sort itself out," well, I don't think that ideology served us particularly well when we got into this mess in the first place.
Government has a role -- that's why I support what the Obama administration is doing -- temporarily to step into the breach and to set up better rules for the future. And that's the challenge we've got on our plates in London.
Giving China a place at the table
JIM LEHRER: You've suggested in some of the things you've written and said that you believe there is a golden opportunity for -- that's my word, not yours -- for the United States, as well as the rest of -- Australia and the rest of the so-called developed world, to collaborate more with China and kind of move together as partners in some of these areas involving economic and financial matters. Explain your point there.
KEVIN RUDD: Right now we're trying to deal responsibly, globally, with this global recession, through the G-20. Now, what's the G-20? It includes 20 of the largest economies in the world, a few exceptions. But it's got some representativeness to it, because together they represent about 80 percent or 90 percent of global GDP.
But it's also a small enough body that you can actually get together and broker some decisions politically. And in the past, a lot of our international institutions have broken down because an agreement couldn't be reached.
Now, China is a player in the G-20. And, therefore, when we look at one of the decisions we're going to have to make soon, when is the reform of the International Monetary Fund, China will be expected to step up to the plate and put more resources into the fund.
But China right now, its voting rights within that fund are the equivalent of Belgium and the Netherlands. I think you've got to change that so that China has a bigger place at the table, rightly, but also that the world can then draw upon the resources which China puts responsibly into an international financial institution.
That's one example of how this G-20 group can help frame an outcome for the future of the International Monetary Fund, which also brings China into helping with the solution.
JIM LEHRER: In a more general way -- I mean, you are a China hand, as a professional diplomat, you speak Mandarin Chinese -- should China -- what would be your advice to Americans as to how they should view China now, as a competitor, as a potential ally, as an enemy, as a potential problem? What is it? What's China represent -- should represent to the average American? Put it in any terms you want to.
KEVIN RUDD: Jim, I think China represents a huge opportunity for us all for the 21st century. The numbers speak for themselves. The center of global economic gravity is moving to the Asia Pacific region in the 21st century. And so what's happening in China, we see it also with India and you also see it with many other economies in the region, in Southeast Asia, Indonesia. But China is big. And, of course, the continued strength of Japan, as well.
Therefore, when you look at China in the future, I don't think anything's to be served by simply assuming it's all going to go bad. I think the challenge is this -- and our friends in America to do the same -- work with us in integrating China into the institutions of global governance, on the political side, on the security side, also on the economic side through, for example, the G-20, and also integrate them front and center in the great challenge of climate change, as well.
If you engender that sort of environment, then you enable China to do -- as the head of the World Bank, Bob Zoellick, once said -- for China to play the role of a responsible global stakeholder.
Now, if China was to turn its back on that or not be responsible, the world would soon know. But I think the smart course of action for us all is to involve them.
They're not perfect. They've done some bad things in the past. But let's look at the opportunities, rather than simply assume it's all threat and all risk.
Working with U.S. in Afghanistan
JIM LEHRER: Another subject, Afghanistan. In your meetings with President Obama, did he ask you to send more Australian troops to Afghanistan?
KEVIN RUDD: No, he did not. Our discussion was about the American thinking as it's unfolding through America's own review of its long-term strategy, civilian and military and diplomatic, for Afghanistan.
And I understand the president will make that public in due course and also converse with America's NATO allies, as well.
Once we're through all that, of course, we'll work with our Americans -- American friends and allies about how we implement that strategy long term, but that lies a ways ahead.
JIM LEHRER: There is no Australian policy now that you have about whether or not to send more troops or take more troops out at this point, right?
KEVIN RUDD: What I've said repeatedly since becoming prime minister of Australia, we are there as a strong, reliable ally of the United States, and I've said also we're there for the long haul. Now, this war, as evidenced by your introduction, is increasingly unpopular; that's just the truth of it.
JIM LEHRER: In your own -- in your country?
KEVIN RUDD: In Australia, I'm sure in Europe, and I would imagine in the United States. I've not seen polling here on it.
But the bottom line is this: It's the right place to be. When we think about Afghanistan, think about this. I cannot remove from my mind the image of the Twin Towers coming down. And we are there because terrorists, operating out of the safe haven of Afghanistan, caused that to happen.
They also, having been trained in Afghanistan, were responsible for murdering nearly 100 Australians in Bali a year later.
We have, therefore, a combined responsibility to do whatever we can to make sure Afghanistan does not become a safe haven for terrorism again. It's going to be tough; it's going to be hard; and it's going to be difficult and dangerous.
JIM LEHRER: Mr. Prime Minister, thank you very much.
KEVIN RUDD: I appreciate the opportunity.