FRAN KELLY: Senator Wong, good morning.

SENATOR PENNY WONG, LEADER OF THE OPPOSITION IN THE SENATE: Good morning, good to be with you Fran.

KELLY: Lets start with George Brandis, Labor says he should be sacked. What proof do you have that he acted against the Commonwealths interests in this High Court case involving the Bell Group?

WONG: The revelations on Friday were extraordinary. What they indicated was that Senator Brandis has been part of an arrangement that effectively cheated taxpayers out of money in order to do a deal with his political mates. This is, at worst, political corruption and at best moral bankruptcy. That you do a deal to cheat taxpayers of money for political gain.

KELLY: Hang on, why is it corruption of you do a deal that helps the taxpayers of WA? Its not that theyre trying to help their mates, theyre trying to help the taxpayers of WA arent they?

WONG: This is about the first law officer of the land saying were not going to apply the law because some Liberal Government mates have asked me not to. Thats what the allegation is. It is difficult to contemplate a more serious allegation against an Attorney-General. And what should happen Fran is the Attorney-General should attend the Senate at 10am today and give a full explanation. So far he has refused to do so. He was asked questions about this previously. He has not answered them. He was asked questions about the story that broke on Friday and he has refused to respond. It is time for him to behave accountably, He should turn up to the Senate, give an explanation, and frankly, Malcolm Turnbull should make him do so.

KELLY: According to the reports, and we spoke about them here on Friday, here on Breakfast last week, it was Joe Hockey, then Treasurer, who negotiated this deal. If thats true, if indeed this deal was done with WA, and the Attorney-Generals role in it was to advise the Solicitor-General to not run a particular constitutional argument, in the High Court when this matter of the Bell Groups creditors when this matter came into the High Court. Is that corruption?

WONG: Well, two points about that. First, it is completely inappropriate for somebody who is charged with being the First Law Officer, upholding the law, upholding the constitution and the law, to instruct a Solicitor-General not to run a particular proposition because it is politically inconvenient. That is utterly inappropriate and frankly it makes it all very clear now what the dispute with Mr Gleeson was.

But the second point I make is this. Its all very clear for the Government to background, to lay the blame at Joe Hockeys feet, we know from what was said in the Western Australian Parliament that there are a number of ministers with serious questions to answer about this. Christian Porter was identified as being part of this arrangement, of knowing about this arrangement in the Western Australian Parliament, as was Kelly ODwyer. So those ministers really do need to front up and explain their actions as well.

KELLY: When you say front up, the Greens are pushing for an Inquiry,under the Senates Legal and Constitutional Affairs Committee. Does Labor support that, and I could be wrong here, but the Senate cant force Ministers from the other House to come before it, can it?

WONG: Were always happy to have an Inquiry. We moved an Inquiry into the Gleeson matter, the Direction preventing the Solicitor-General from providing advice without the permission of the Attorney-General, which becomes very clear now, it becomes patent what that was all about.

But I think theres a first step, which is: Senator Brandis should attend the Chamber. He is accountable to the Chamber and through that the Parliament. He is accountable to the Australian people. It is the primary mechanism for accountability. We sit in just under two hours. He should front up to the Chamber and give his version of events which so far he has refused to do.

KELLY: But if there is a committee, and its slated to be a very quick one, so you might wonder whether it is more politics than actual trying to get to the bottom of this. But would you be calling on Senator Brandis to address that?

WONG: Were always open to have discussions about committees. As I said, the Committee should also, if it is set up, also examine the behaviour of other ministers, the involvement of other ministers. But I do want to say this, the Committee is not the substitute for a Minister attending the Chamber and doing the honourable thing which is to give the explanation to the Chamber is due.

KELLY: Lets go to the week in the Senate because it is going to be a very busy one, Senator Brandis aside. It includes the ABCC, the Australian Building and Construction Commission Bill, the Backpackers Tax. The Prime Minister dearly wants the ABCC fixed before Christmas and I would say he need the Backpackers Tax fixed before Christmas. But everything has been put on go-slow a little because of the dispute with Senator Nick Xenophon over water. We now know the Prime Minister is directly involved in this and Nick Xenophon wants the extra 450 gigalitres that he says was guaranteed by the Murray-Darling Basin Plan. The Government says it was an additional allocation contingent on there not being negative impacts on communities upstream.

You are a South Australian, youve got a keen interest in understanding of the Murray-Darling Basin plan I know. What do you believe? Was this a guarantee, this 450 gigalitres and was the Federal Government preparing to walk away from that and some of the states?

WONG: And Im a former Water Minister for my sins as well. Let me tell you this was a hard fought plan. This is a plan that we took to the 2007 election. Malcolm Turnbull announced it prior to that election and was unable to get the states to agree. Over the period we were in Government we managed to hammer out a deal and I think it is very important that we actually stick to the deal.

KELLY: So are you cheering Nick Xenophon on in his negotiations?

WONG: Weve already said the deal has to be honoured. Weve come out very clearly as all South Australian Labor MPs and Senators, we held a press conference last week saying we are all behind the deal and Malcolm has got to deliver the deal.

But lets understand what is actually occurring here. As part of a deal to get the Prime Ministership, Mr Turnbull agreed to a range of things. Obviously one of them was on Marriage Equality and blocking the way on that. But more importantly for the purpose of this discussion he agreed to give water to a National Party person which was Mr Joyce.

We know what Mr Joyce thinks on water. He already said prior to the 2010 election that people should move to where the water is. Hes already said that. Now, he wrote a letter saying we cant deliver it. Mr Turnbull now wants Nick Xenophon, Penny Wong and every South Australian to believe he didnt really mean it. The problem is we know he did. And Mr Turnbull has got a problem of his own making because he has handed the National Party the water portfolio were they do not believe the deal should be implemented.

KELLY: That might be the back story to it, and youre right, some of the Nats are cheering Barnaby Joyce on, but nevertheless the plan does say that the social and economic elements of committees need to be taken into account. So, if 450 gigalitres is going to strip those communities up river of basically their livelihoods, should this deal be honoured or should there be more effort which as I understand is what Nick Xenophon is trying to get in place with the Prime Minister on efficiencies upstream. Is that where, to be frank, your Government and this Government have dropped the ball really?

WONG: I dont accept that we dropped the ball. We purchased water for the environment. We got in place the first agreement to deliver health to the Murray-Darling Basin between all the states and the Federal Government in the nations history. So I reckon that is a very important milestone and not one you want to take credit for, its one you want to deliver. Thats what we should do.

The point is this, we need to understand that every path you take when it comes to the Murray-Darling has impacts. So, you say there are social and economic impacts upstream, well, let me tell you during the drought we had salinity levels at the end of the river which were extraordinarily high, which could have compromised Adelaides water supply, if they were not dealt with quickly enough.

So, there are social and economic impacts whatever way you look at it. The key things is to deliver the plan and to stop Barnaby doing what he seems to want to do, which is to blow this up for political gain upstream.

KELLY: Two quick questions Senator if you dont mind. On the Backpacker Tax, time is fast running out for a compromise. The fruit growers of Australia are looking on, feeling helpless really. Now we look as though there is a path to a compromise from the Governments 19% position to the Pauline Hanson recommendation for a 15% tax on these backpackers, these foreign working holiday makers. Will Labor support a compromise to try to get this resolved for basically the confidence of the fruit growers?

WONG: Lets understand the reason the Backpackers Tax is now currently at 32.5% to commence next year is because the Government put it in their 2015 Budget. So it is all very well for the National Party to now be saying that you should compromise, well, it was in this Governments Budget. Lets be clear about that.

Now, we have put forward a position in the Senate of 10.5%. We think that is a sensible position. The Government shifted from its Budget position of 32.5% to 19%. Now theyre floating 15%. I mean, what is going on?

KELLY: Well, compromise is what the Senate does best. Will Labor be part of this compromise so fruit growers get some solace here?

WONG: Weve already put forward a clear position 10.5% - thats the position weve been supporting that weve been supporting. Its a position supported by the overwhelming majority of crossbenchers.

KELLY: So, Labor would rather stick to that even if it meant the compromise couldnt happen and the growers are going to be stuck with the higher rate?

WONG: The growers should be talking to the Government as to why they put a 32.5% rate in their Budget.

KELLY: Can I just ask you finally a Fairfax Ipsos poll out today shows support for the major parties has dropped. Primary support for Labor has dropped five per cent since the election in July to 30 per cent. The Coalition down six points to 36 but Greens and Independents combined make up a whopping 34 per cent of the primary vote.

No, I know were not at election time, but thats a significant shift going on. Are you concerned about that? That the major parties combined can only attract between them two thirds of the electorate?

WONG: I can understand why a lot of people often turn off politics.

KELLY: Turn off the major parties.

WONG: Turn off a lot of politics and easy slogans are often an answer. Weve got to work harder as a Labor Party. We know that. Weve got to work harder on jobs, focussing particularly on jobs, health and education, which are core Labor policies.

I think the problem for the Government is they are so divided. Whether its on water, whether its on Mr Abbott rocking up yesterday basically telling Malcolm Turnbull how to run the Government and making it clear hes not done. The Government is extraordinarily divided and the problem they have is that is distracting them from governing and so I am unsurprised people have turned away from the Government.

KELLY: Penny Wong, thank you very much for joining us.

WONG: Good to speak with you.