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Poll flags the end of Rudd's honeymoon -

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TONY JONES, PRESENTER: A new opinion poll out tomorrow provides another sign the Prime Minister's
honeymoon is over. The Government has dropped to its lowest support level since last year's
election, and Brendan Nelson's rating has slightly improved. The poll coincides with the delivery
of tax cuts, which Kevin Rudd hopes will temper any voter dissatisfaction.

From Canberra, Hayden Cooper reports.

HAYDEN COOPER, REPORTER: The weekend's by-election painted a disturbing picture for Kevin Rudd. Now
for another one - Newspoll in tomorrow's Australian newspaper has the Government at its lowest
levels since the election, down four points in the two party stakes, and now holding a 10 point

KEVIN RUDD, PRIME MINISTER: Look I think opinion polls come and go. I mean, and by elections will
come and go. The key challenge is this, to govern for the future.

HAYDEN COOPER: The future of Brendan Nelson looks to be on marginally safer ground than it was. His
approval rating is up in tomorrow's poll, while Kevin Rudd has dropped four points.

BRENDAN NELSON, OPPOSITION LEADER: The Government has suffered more than a seven per cent swing
against it after seven months in government.

HAYDEN COOPER: In his own style, the Opposition leader says it all proves that Kevin Rudd is all
backswing and no follow through. But computers, not polls, occupy the Prime Minister's mind as he
handles some disquiet among the states.

KEVIN RUDD: There'll always be argy bargy on the way through.

HAYDEN COOPER: Having made it the centrepiece of his campaign.

KEVIN RUDD: This is the toolbox of the 21st century, OK?

HAYDEN COOPER: Eight months on, the Prime Minister is now dealing with the baggage that goes with
any big promise, and the challenge of keeping New South Wales on-side.

MORRIS IEMMA, NSW PREMIER: We've simply pointed out that it does have flow on costs which need to
be met.

KEVIN RUDD: We understand that, we accept that, that's something we agreed back in March in
Adelaide. Those negotiations continue, including with the good state of New South Wales.

HAYDEN COOPER: Morris Iemma says his state will be $245 million out of pocket, and that's where the
Federal Treasurer comes in with one option to meet the shortfall. Advice from his office suggests a
side deal to fund a separate capital project in New South Wales. The aim "to ensure that the deal
remains 'hidden', and seemingly unrelated to CoAG."

BRENDAN NELSON: Mr Rudd won't admit that he got it wrong, that he hasn't costed this, and now he's
trying to hide that with secret deals with arguably one of the worst governments in Australia, and
that's the Iemma Government. When they meet at CoAG this week, the other states will be watching

DAVID BARTLETT, TASMANIAN PREMIER: Well I want to make sure that if New South Wales is crying poor
and expecting a larger share of the portion because they haven't done the work in the past that
we're indeed compensated to that level as well.

JOHN BRUMBY, VICTORIAN PREMIER: There are some cost issues for the state, but we've agreed to
accept those in the spirit of getting on with the job and seeing this program implemented as
rapidly as possible.

WAYNE SWAN, TREASURER (looking at video game monitor): It's a great game.

KEVIN RUDD: Yeah I know.

HAYDEN COOPER: The Treasurer says he would never have agreed to the secret deal with New South
Wales. To his boss, it's all fun and games.

KEVIN RUDD: There's always something which is called argy bargy, and this is just normal argy bargy
associated with a negotiation with states and territories to get good things done.

HAYDEN COOPER: On his 54th birthday.

SCHOOLCHILDREN (singing): Happy birthday dear Mr Swan.

HAYDEN COOPER: Wayne Swan is preparing to hand back a few dollars to the taxpayer. Tomorrow heralds
the long awaited tax cuts, as well as a bigger childcare rebate and education refunds.

WAYNE SWAN: The tax cuts are absolutely essential to provide some relief to working families who
are doing it tough.

HAYDEN COOPER: The new financial year brings bad news too, price rises in childcare, transport, and
utilities. But fresh from a poor showing in the Gippsland by-election and with one more expected,
the Prime Minister will hope the good outweighs the bad.

Hayden Cooper, Lateline.