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Lateline -

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Beautiful. 26, 36 feet per second up. (Indistinct)

Aldrin's ingenuity had saved the pair from a lonely death. It remained for the crew to rendezvous
with the command ship orbiting far above the surface.

RADIO: OK, Mike. I'll try to get diversion here, then you got it.

Only when this manoeuvre was accomplished could the crew begin to believe that Apollo 11 might
bring them and their precious cargo of Moon rock safely home.

Once we left lunar orbit, that gave us for almost the first time, a relaxed sensation of, we're
heading home, we're looking to come back and then have our own, slightly late celebrations.

But they weren't home and dry yet. Eight days after the start of their mission, Apollo neared the
Earth to prepare for the last great danger - re-entry. If the module approached the atmosphere from
the wrong angle, it could burn up or simply bounce off into space.

If you come in too steep, you're gonna have very high g-forces, high temperature. If you come in
too shallow, you won't slow down below orbital velocity before you start gaining altitude in going
back out again. And of course, under those conditions, you may not have enough oxygen to survive
coming back in again.

RADIO: (Indistinct)

STATIC The intense heat of re-entry caused a total communication blackout with the module. For four
anxious minutes no one on the ground would know if the tiny craft had survived the high
temperatures. Off the coast of Hawaii, Nixon aboard the carrier, 'USS Hornet', awaited his next
photo call.

RADIO: At blackout, we were showing a velocity of 36,237 feet per second. Range to go to splash,
1,510 nautical miles.

We were excited alright. We were just wondering, would the parachutes open?

RADIO: Apollo 11, Apollo 11. This is Hornet, over.

This is Apollo 11. Receiving loud and clear.

At 15,000 feet, the three parachutes deployed. Against all the odds, Apollo 11 was coming home.

Somewhere, I guess below 10,000 feet, we could smell salt air. And that was quite a welcome home
sensation.

In the back of my mind, I could almost hear President Kennedy's words. "We choose to go to the..."

KENNEDY: We choose to go to the moon in this decade and do the other things, not because they are
easy, but because they are hard.

Now, all the close calls, equipment malfunctions and human errors that nearly cost the crew their
lives were forgotten. The first lunar landing was a success. NASA believed itself to be invincible.

CHAIKIN: The feeling was definitely there that, you know, man, just throw any challenge at us and
we can meet it. We can do anything. You want us to go to Mars, we'll do that. You want us to build
a space station, we'll do that. You want us to build a reusable space shuttle, sure, we'll do that
too.

But over 30 years later, and with the reality of losing shuttle missions in space, the men on the
Apollo team now realise just how lucky they had been.

If we were to approach somebody today with the idea of flying to the Moon, like we had in 1969,
they would laugh in our face and say there's no way that you're gonna be able to do that. It's not
safe enough.

BAKER: Space flight is intensely risky. High risk was needed to get that mission done. I think that
most of the flight crews would agree that had we not stopped flying Apollo missions when we did, we
would definitely have lost lives on those missions.

But despite the perils of blastoff, encounters with a UFO, low fuel, computer failures and the need
to save the mission with a ball point pen, there is still one man for whom failure was not an
option.

I don't look back and pat myself on the back for being part of a real risky manoeuvre. I think we
made some bold decisions. Yeah, we had things that could have gone wrong and some did go wrong. But
we also had an inspired group of people - pioneering. And I marvel at the very close conditions
that resulted in my still being alive to go to the Moon and to be here today.

It is only now that we can truly understand just how close to disaster Apollo 11 really came.
Closed Captions by CSI

This program is not subtitled

Tonight - a failed coup in East Timor, the wounded president rushed to a Darwin hospital.

Had two injuries to the upper chest and one to the abdomen as well. The next 72 hours, 48-72 hours
will be critical.

Jose Ramos Horta shot down, Prime Minister Xanana Gusmao targeted.

Coordinated attacks aimed at assassinating the democratically-elected leadership of East Timor.

As the crisis unfolds, Australia promises more troops and police.

CC

Good evening, welcome to Lateline, I'm Tony Jones. It's more than 12 hours after a coordinated
assassination attempt on two of the regional leaders closest to Australia, and the details of what
happened are still very sketchy. As you've seen President Ramos Horta is in intensive care in
Darwin. Australian reporters have been arriving in Dili in the last couple of hours. Moong them
Anne Bacher. We'll be speaking to the Foreign Affairs Minister.

I think the very strong view of the East Timorese Government is that given what's occurred, as I've
put it, these people now need to be rounded up and the sensible thing for them to do would be to
effectively hand in their weapons rather than run the risk of them being pursued by the
international stabilisation force, or the additional complement of troops or police that we are
providing.

Stephen Smith says Federal Police sighted and identified the body of the rebel leader Reinado
before they confirmed he'd been killing. First, our other headlines. Turning point - the Parliament
and Australia prepares for the stolen generation's apology. Out on the island - the rebuilding of
the devastated landscape of Nauru finally gets under way. On 'Lateline Business', more pain on the
way - the Reserve

Failed coup in East Timor - President seriously injured in assassination attempt

TONY JONES: The streets of Dili are calm tonight. After a dramatic day which began with
co-ordinated assassination attempts on East Timor's two top political leaders.

President Jose Ramos Horta was shot in the stomach and the shoulder in the attack. Which also saw
the rebel leader Alfredo Reinado killed.

Anne Barker reports the from East Timorese capital.

ANNE BARKER: The dawn raids targeted the two most powerful people in East Timor, in what seems to
have been an attempted coup. Prime Minister Xanana Gusmao escaped injury when he was attacked as he
left his home. But President Jose Ramos Horta wasn't so lucky. Returning from an early morning
walk, he was ambushed and shot three times, twice in the stomach and in the shoulder.

MARK AARONS, FORMER ADVISOR TO JOSE RAMOS HORTA: That was his usual practice. To get up fairly
early in the morning, six, six-thirty, and go for a fairly long walk. Usually with someone else who
was staying at the house, perhaps a staff member. And during those walks, of course, he was
exposed.

ANNE BARKER: Security forces returned fire killing two of the rebels including renegade former
Major Alfredo Reinado.

XANANA GUSMAO, EAST TIMORESE PRIME MINISTER: The State considers this a serious attempt against the
State. Not only against the person Xanana, but against the Prime Minister. Not only against Ramos
Horta the individual, but as President of the Republic.

ANNE BARKER: Ramos Horta was taken to an Australian military hospital in Dili where he underwent
exploratory surgery. And this evening he was air lifted to Darwin, where he will undergo further
medical treatment.

LEN NOTARAS, ROYAL DARWIN HOSPITAL: His vital signs are all very stable at this particular time,
and I understand that before he was sedated, he was speaking and in a very clear frame of mind.
That all said, the next 72 hours, 48 to 72 hours will be critical.

ANNE BARKER: There was swift condemnation of the attacks from around the world and the Australian
Government responded immediately to a request for help; agreeing to send extra troops and up to 70
more police.

KEVIN RUDD, PRIME MINISTER: Australia will stand resolutely behind East Timor at this time of
crisis in their democracy. In response to a request from the Government of East Timor, the National
Security Committee of the Cabinet has met today and authorised a substantial and immediate
reinforcement of Australian defence force personnel, as well as an additional contingent of AFP
personnel.

ANNE BARKER: Rebel leader, Alfredo Reinado, deserted from the army in May 2006. Citing a dispute
with former Prime Minister Marie Alkatiri. Initially the Government tried to negotiate a
reconciliation with the renegade, but in July Reinado was detained. He escaped from jail with more
than 50 other prisoners at the end of August that year, sparking an outbreak of violence in the
capital, which saw 37 people die and 150,000 forced from their homes. Some avid East Timor watchers
believe a split was emerging within the ranks of the 600 rebel soldiers, some of whom were trying
to negotiate a settlement with the Government.

MARK AARONS: In recent weeks significant divisions have emerged amongst the sacked 600 soldiers.
Large groups of whom have been wanting to go it alone and get a negotiated settlement. Reinado, it
would appear from all the rumours that have emerged out of Dili, in the last 12 hours or
thereabouts, that there was a very real possibility that those moves were making him desperate.

ANNE BARKER: Tonight the streets of Dili are calm, but security is very tight. United Nations
police are on high alert to prevent any further violence in this troubled nation. Anne Barker,
Lateline.

Tony Jones talks to ABC reporter Anne Barker in Dili

TONY JONES: Well, joining us now from the East Timor capital is the ABC's Anne Barker. Anne, you
obviously mentioned there it was calm when you did that piece to camera it remained so, I take it?

ANNE BARKER: It is Tony. It's very calm tonight. If you didn't know what had happened this morning
you wouldn't think that there was anything amiss. Earlier, before darkness, there were a lot of
groups on the street. People were clearly talking about what had happened. And there are very mixed
feelings. A lot of worry about what this will mean for East Timor. A lot of shock and a lot of
sadness. But certainly relief that neither leader was killed. But overall it is very calm and the
security forces here are hoping it will stay that way.

TONY JONES: How could East Timor's key political leaders be so vulnerable?

ANNE BARKER: Well I think it's a sign of, in one sense, it's the sign of the standing that they had
in the community here. The fact that they are very popular, both Xanana Gusmao and Jose Ramos Horta
and they never believed that this could happen to them. If you come here for any length of time you
know that Jose Ramos Horta for example goes for a morning walk along the beach front almost every
day and he goes out without any real obvious security. Now certainly there are security forces with
him, but he makes himself a very easy target. But I guess never believed this might happen to him.
And likewise, Xanana Gusmao was often out. You would see him in very large crowds when there were
things happening. He enjoys enormous popularity and I don't think many people would have ever
believed again that this could happen to him either.

TONY JONES: Anne, we've just heard Australia's Foreign Minister Stephen Smith say that Australian
troops will be involved in rounding up the remaining rebels, given that the leader Reinado has,
it's confirmed that he's been killed by the Federal Police. Do you think they are going to meet
resistance?

ANNE BARKER: Well, look there's every chance that they could. Obviously this morning's incident
shows they are prepared to put up a big fight for what they want. There was an incident only a week
or so ago where they were shooting at Australian soldiers. I believe Alfredo Reinado does have
about 20 or more supporters at least. Many of whom are also on the run in the bush. And they're
obviously going to want to evade capture. But without a leader you have to wonder, just what chance
they do have of that happening now.

TONY JONES: OK, Anne Barker, thanks very much for joining us. No doubt we will be hearing from you
again tomorrow.

Tony Jones talks to Foreign Affairs Minister Stephen Smith

TONY JONES: Well, Australia's Foreign Affairs Minister, as I have just said, Stephen Smith, came
into our Canberra studio just a short time ago to discuss the assassination attempts.

Stephen Smith, thanks for joining us.

STEPHEN SMITH: Pleasure Tony.

TONY JONES: It now appears that President Ramos Horta was injured more severely than the initial
reports at least had it. What can you tell us of his condition now that he arrived in Australia?

STEPHEN SMITH: Well, he's arrived in Darwin. He's now at Darwin Royal Hospital. He received two
bullet wounds. He was operated on in Dili and then transported by Medivac to Darwin. His condition
is very serious but stable and a lot of care and attention was required before making the decision
to transport him to Darwin. But his condition there is described by the medical team as very
serious but stable.

TONY JONES: Is it your understanding that he is now effectively out of danger? And will he undergo
further surgery?

STEPHEN SMITH: Well, I think the phrase, very serious but stable means that there's a bit of water
to go under the bridge yet. I think the medical advice is that he obviously needs to be very very
closely monitored over the coming days and we just hope for the best. It's been a very bad day. It
was something that we were deeply moved by because it came as a bolt out of the blue and both the
President and the Prime Minister are very highly regarded in Australia and so it was a very
significant development. And we just now, Tony, just wish the best for him personally. As of course
we wish the best for the people of East Timor and we hope that we continue to have stability and
peace in East Timor.

TONY JONES: Is he conscious? Has he been conscious and has he been able to talk and describe what
happened to him?

STEPHEN SMITH: Well I don't know whether he's conscious. My understanding is that for the purposes
of the transportation from Dili to Darwin, he was medically induced into a coma. And that was done
for the obvious reason of easing the transportation. Whether he is still in that induced coma or
not, I'm unaware. What we do know, as I've put it, he is in a very serious condition, stable. We
hope for the best, but we do need to monitor the situation very carefully and be absolutely
confident that he's in very good hands at Royal Darwin.

TONY JONES: We presume you've had detailed briefings from the Australian military on the ground.
Let's start if we can, because reports have so sketchy on what actually happened in this shooting.
Let's start at the President's compound. How did Jose Ramos Horta end up in the line of fire?

STEPHEN SMITH: Well, can I just make this point first Tony, we're not going to rush to judgment.
We're still awaiting ourselves for detailed factual advice and analysis. So there are a range of
things that remain very sketchy. So the first point I think to make is that we're not going to rush
to judgment. We will wait until the full facts and analysis to come through. But what we are aware
of, as we were advised, is that early in the morning there was an exchange of gunfire at or near
the President's home. There were at least one casualty and it's confirmed that that is Reinado, the
rogue as he's been described. In the course of the exchange of fire the President received the two
bullet wounds which required the operation and subsequent transfer that we've spoken about earlier.

TONY JONES: Was he effectively ambushed when he was out on his walk as some have said, or
alternatively another theory that he actually walked up and attempted to negotiate with these
rebels when they arrived at the compound as some would expect him to do, in fact?

STEPHEN SMITH: Well, again Tony we're not aware of those facts and we expect or hope at least, that
that'll become clear in the coming days. What we do know is so far as Reinado was concerned,
President Ramos Horta had made it clear that his view was that he wanted to seek to negotiate an
arrangement with him. Some time ago, from memory, nine or 10 months ago, the East Timorese
Government made it clear to the international stabilisation force that they would prefer to seek to
negotiate a solution with Reinado and as a consequence the international stabilisation force ceased
effectively looking for Reinado. You might, of course, recall that last week there was a chance
meeting where an international stabilisation force patrol effectively ran into him and after some
warning shots were fired, withdrew. So we do know for some time that the President has been minded
to seek to affect a negotiated outcome with Reinado. Now whether it was a chance meeting, whether
it was an ambush, whether it was an arranged meeting that went awry, we hope will become clearer in
the days and potentially weeks ahead.

TONY JONES: Do you know, for example, whether it was Reinado who shot the President?

STEPHEN SMITH: No, we don't. It took some time before the Australian Federal Police were able to
confirm that Reinado had actually been killed. We received that advice after a number of hours.
That itself was in some doubt for a considerable period of time and again just underlines some of
the facts, if not a lot of the facts, are sketchy and it's important that we neither rush to a
judgment about the facts or rush to an analysis. What we do know is this has been a serious and
deleterious day and the Australian Government has responded by essentially saying, we stand
shoulder-to-shoulder with the duly elected government of East Timor. And we have reflected that by
the additional troop and police commitments that we've made and also the Prime Minister indicating
that towards the end of the week he'll make a trip himself to East Timor.

TONY JONES: Will you be going with him by the way?

STEPHEN SMITH: No, but I am proposing tomorrow to travel to Darwin. My counterpart Zacharias De
Costa, the Timorese Foreign Minister, has travelled to Darwin to be with the President. And I'm
proposing tomorrow to be with Darwin to speak with Zacharias De Costa to relay to him personally
Foreign Minister to Foreign Minister, the very strong view that the Australian Government gives all
its support to the duly elected government of East Timor. At the East Timor Government's request we
have responded very, very quickly with the additional troop and police complement. And we want to
make the point that we regard it as very important that Australia supports East Timor in this very,
very difficult time. And we wanted to effectively send a show of strength or a show of support or a
show of force that security and stability in East Timor is very important to Australia, just as
respecting parliamentary democracy in the duly-elected government is also very important.

TONY JONES: A few more details before we go back in that direction, and we still don't know the
answer to. Have the Australian Federal Police confirmed for themselves, have they sighted the body?
Have they confirmed for themselves as witnesses that it is Reinado who's dead?

STEPHEN SMITH: Well, we didn't proceed to come to the conclusion that Reinado was dead until we
received advice from the Australian Federal Police that one of their officers had personally
sighted the body and confirmed that it was Reinado and that he was dead. That was the basis on
which we moved from reports that were circulating that he was dead to concluding that that was the
state.

TONY JONES: OK, the second attack on Xanana Gusmao, what can you tell us about that? It appears to
have been an attack on his vehicle. I assume that he was in the vehicle. Was he escaping from his
house knowing what had happened at the President's compound?

STEPHEN SMITH: No, as we understand it and again, we may well have to wait days before a final
concluded view, but he was travelling in convoy under his personal protection from his home to his
office, to his place to work. The convoy was ambushed. Shots were fired, and fortunately he was
able to make his escape and very quickly was placed under the protection of the international
stabilisation force. In particular, Australian Defence Forces, and very quickly thereafter his wife
was taken from the residence and also put under the protection of the international stabilisation
force. So the attack on the Prime Minister, on Prime Minister Gusmao, came as we understand it
about an hour and a quarter, maybe an hour and a half, after the exchange of fires which wounded
the President. And he was in a convoy under his personal protection from home to work.

TONY JONES: Is there any question in your mind this was, in fact, a dual assassination attempt? An
attempt to take out the entire leadership of the country or the two key leaders of East Timor?

STEPHEN SMITH: Well, that's the basis on which we're proceeding that this wasn't a coincidence that
this was a deliberative assassination attempt to as you've described it. To take out the Prime
Minister and the President, the two key figures in the dually-elected East Timorese Government. And
that's why the events of the day are effectively so shocking, that this could occur, and that's if
you like, the main reason apart from the natural warmth and friendship that we feel not just to the
President and the Prime Minister but to the people of East Timor. That's the main reason why we
have responded with what we regard as an effective and appropriate show of force and strength. That
this to us looks like a deliberative attempt to assassinate the two key East Timorese government,
political figures.

TONY JONES: Is it your worst fear that had either of those assassination attempts succeeded it
could have triggered a civil war or some escalating civil conflict?

STEPHEN SMITH: Well, we know that it's very important that we have ongoing stability and security
in East Timor. That's one of the reasons why we very strongly are on the view that the
international stabilisation force should remain. And when I was recently in the United States both
in New York and in Washington I made the point to United Nations officials and to administration
officials that we very strongly were of the view that the United Nations mandate which expires
towards the end of this month should be renewed. Because an ongoing presence of international
stabilisation, an ongoing presence of United Nations through its own police force was very
important to seeking to give an environment of stability, of peace and security to enable East
Timor to grow as a nation in the capacity building areas that are so important. Providing
employment, providing education and training, all the attachments to parliamentary democracy. To
enable East Timor to build and grow as a nation state. You can't do that in the absence of peace
and stability and security. So we very strongly, even before this terrible event today, were of the
view that a continued presence by the international stabilisation force and the United Nations was
imperative. And we are now even much more strongly adhering to that view, and I don't think now
that that view would in any way be contested given the terrible events of today.

TONY JONES: You expect the United Nations now to agree and to keep the stabilisation force in place
and keep supporting it?

STEPHEN SMITH: Well, I think the only thing at issue is whether the UN mandate was extended for a
six month period or a 12 month period. I think it's clear that the sensible thing to do is to
extend that mandate for a 12 month period because we now need a period of settling down. We now
need to ensure that in the next few days in which we don't have an outbreak of unrest or disorder,
but we have a continuing calm despite the very terrible events.

TONY JONES: What is the situation now regarding the supporters of Reinado, he's a charismatic
leader, now that he's dead is the assumption that they may fade away or be easier to deal with. Or
is the assumption now he's dead they may respond with some form of revenge?

STEPHEN SMITH: Well, again that's to be seen in the next few days and possibly longer. But
certainly one of the reasons that we have committed the additional complement of troops and police
is it may well be necessary for that additional complement to be used to effectively round up
Reinado's supporters. Now we would hope that given that the rogue ring leader is now dead that
there might be some peaceful and amicable way of his supporters returning to the fold or at least
handing in their arms.

TONY JONES: Do you know how many of them there are, if there is to be such an attempt to round them
up?

STERPHEN SMITH: On the advice that I have, and I'm happy to stand corrected, but the advice that I
have and the understandings that I've got in the course of the day, we're talking here in terms of
20, 25 core key supporters. There are potentially a wider number of the so called participants, the
former army personnel, but in terms of a key core group, 20 is about the number. And when we
received early reports of a group of 10 involved in the exchange of fire at or near the President's
house and then a group of 10 ambushing the Prime Minister's convoy, people came quickly to the
possible conclusion that we were dealing here with Reinado, and that appears to be the outcome of
the day's events.

TONY JONES: A final question, you mentioned earlier that there had been as we know and reported on
it last week an exchange of fire or at least Australian troops were fired on. In fact, they did
return fire on that occasion. Will there be a change now to the rules of engagement, because these
rebels clearly are extremely dangerous?

STEPHEN SMITH: Reinado's men fired warning shots and they were described as warning shots, in the
direction or vicinity of the patrol. The patrol withdrew. That was their judgment, and it was a
sensible judgment, consistent with the request of the East Timorese Government about nine months
ago that they didn't want Reinado pursued because they were seeking to effect a managed or a
negotiated outcome.

TONY JONES: I take your point. What I'm wondering is now they have actually made an assassination
attempt on the two key leaders in the country, are they to be regarded differently? And will there
be a difference to the Australian rules of engagement?

STEPHEN SMITH: I think the very strong view of the East Timorese Government is that given what's
occurred, as I've put it, these people now need to be rounded up. And the sensible thing for them
to do would be to effectively hand in their weapons rather than run the risk of them being pursued
by the international stabilisation force or the additional complement of troops or police that we
are providing. A decision made today, and whilst, of course, it's an operational matter we expect
they will commence to arrive in the course of tomorrow.

TONY JONES: Stephen Smith we are out of time, we thank you very much for coming in, filling in an
awful lot of detail on what has been a very sketchy day of information. A very bad day for East
Timor and for the region, thank you very much.

STEPHEN SMITH: Thanks Tony, thank you.

information, a very bad day for East Timor and for the region, thank you very much.

Thanks

RBA statement says another rate rise possible

TONY JONES: Home buyers and mortgage holders are likely to face more pain with the Reserve Bank
indicating today the interest rates might have to rise again. In its quarterly statement, the RBA
says the risk of inflation remaining uncomfortably high is considerable, that interest rates are
likely to rise in the period ahead. Tellingly the Central Bank has upgraded its inflation outlook
to peak at 3.75 per cent in June. It's also forecasting inflation to remain above the comfort zone
for two years.

KEVIN RUDD, PRIME MINISTER: It's a disturbing warning from the Reserve Bank about the extent of the
inflation problem that we in Australia now face. We've said before and we'll say it again, when we
were handed government we were handed government with inflation running at its highest level in 16
years.

TONY JONES: New data out today also shows job ads have risen again, reinforcing concerns the tight
employment market will further fuel inflation.

ads have risen again, reinforcing concerns the tight employment market will further

Parliament prepares for Stolen Generations apology

TONY JONES: It's almost three months since Kevin Rudd swept John Howard aside. But tomorrow Labor's
ascension to power will be complete. For the first time in nearly 12 years the ALP will command the
Treasury benches when the House and the Senate reconvene for the nation's 42nd Parliament. The day
will be dedicated to age old Westminster customs. But there will be one exception. MPs and Senators
will be welcomed to Canberra by the region's traditional owners. But that's just a precursor to the
day many have been waiting for, when Kevin Rudd delivers the Government's apology to the Stolen
Generations on Wednesday. Dana Robertson reports from Canberra.

DANA ROBERTSON: For a decade it's been the hardest word and while Kevin Rudd's official apology to
the Stolen Generations is still two days off, expectations are high.

FRED CHANEY, RECONCILIATION AUSTRALIA: This is a turning point, a point at which we can all move
forward together.

RAYMATTJA MARIKA, RECONCILIATION AUSTRALIA: Saying sorry is an act of forgiveness and forgiveness
is an act of love.

DANA ROBERTSON: There's little love lost, though, between the two sides of politics before they
come together to say sorry. Brendan Nelson admits there's still ambivalence within the Coalition
ranks towards the apology. Not to mention fury that MPs are yet to see the final wording.

BRENDAN NELSON, OPPOSITION LEADER: If Mr Rudd wants it to unify Australia, to bring our nation
together the most important person he should be negotiating with is me.

KEVIN RUDD, PRIME MINISTER: Remember who our audience is here, which is Indigenous people, to have
an apology registered with them through the Parliament.

DANA ROBERTSON: The words will be made public late tomorrow, but regardless of what's said, there
are still demands for more.

MICHAEL MANSELL, ABORIGINAL ACTIVIST: If something's worthwhile doing you may as well do it
properly and if the intention of the Prime Minister is to settle the Stolen Generations issue once
and for all, then you can't either have an apology or compensation, you've got to do both.

BOB BROWN, GREENS LEADER: There has to be reparations, there has to be compensation that comes with
that. The fact Mr Rudd has said no to it doesn't mean that will be the outcome.

DANA ROBERTSON: The apologies cast a long shadow over the opening of the 42nd Parliament. Veterans
and greenhorns alike are pouring into Canberra ahead of tomorrow's ceremonies.

CHRISTOPHER PYNE, COALITION FRONTBENCHER: I must say this is my 15th year in politics and I'm as
excited about today as I was the first day I walked into Parliament House.

AMANDA RISHWORTH, LABOR MP: My suits, I'm not sure where they are, they've assured me they'll get
it to us this afternoon.

NICK CHAMPION, LABOR MP: I think you'd be a fool if you weren't a little excited and a little
daunted by the prospect of sitting in the national Parliament.

DANA ROBERTSON: But all eyes are fixed firmly ahead to Wednesday. After outlining the impact of the
change of government with the apology, Kevin Rudd will face his first Question Time as Prime
Minister. From there, there'll be no let up in the frantic pace, with the introduction of
legislation to abolish WorkChoices. The Opposition has already abandoned the election loosing
workplace agenda, but will fight to retain workplace agreements.

NICK MINCHIN, COALITION FRONTBENCHER: We'll I think move to have that bill referred to a Senate
committee for examination inquiry.

JOE HOCKEY, COALITION FRONTBENCHER: We're very mindful of the fact that the Government has an
almighty IOU to the Union Movement as a result of the last election.

JULIA GILLARD, DEPUTY PRIME MINISTER: They're probably not very happy with the result of the last
election, but they should respect the result and they should respect what the Australian people
voted for.

DANA ROBERTSON: It'll be the new Speaker's job to keep it all under control.

HARRY JENKINS, INCOMING SPEAKER: If I'm able to achieve that without being noticed, that's what I'd
like to do. But from time to time there may be a need for some form of intervention to try to get
the type of behaviour that I think that the electorate expect.

DANA ROBERTSON: Already there's disquiet about Parliament sitting regularly on Fridays.

NICK MINCHIN: There'll be no Question Time, no votes, no quorums, no divisions. I think it is
really a bit of propaganda spin by the Rudd Government.

NICK SCULLION, COALITION SENATOR: There's no opportunity to scrutinise Government, that can't be
considered a parliamentary day.

DANA ROBERTSON: Absent ministers they claim, will render the private member's day a parliamentary
mirage. Dana Robertson, Lateline.

Rehabilitation of Nauru landscape finally underway

TONY JONES: After decades of phosphate mining the tiny Pacific nation of Nauru looks more like a
moonscape than a tropical paradise. But, finally, the rehabilitation of the island has begun with
funds accumulating for a decade in an Australian account. As Sean Dorney reports from Nauru, the
work started with a controlled explosion to shatter the first of the island's traditional
pinnacles.

SEAN DORNEY: The start of rehabilitation on Nauru has been a long time coming.

GRAEME RAPLEY, NAURU REHABILITATION CORPORATION: Sean, you can see the blast fracture mark down
through there and you can see the hole over there, the fracture line coming through there, that's
all we want. We only want to crack 'em. So what we are going to do is just push those over, maybe
break them with the block breaker, pick them up with the grab, put them on the back of the truck
and take it to the crusher.

SEAN DORNEY: In the 1990s the Keating Government settled out of court when Nauru sued Australia
before the International Court of Justice, setting up a trust fund to pay for the island's
rehabilitation. It's only just beginning now after Australia agreed some of the money could be
spent on new equipment that will not only get rid of the pinnacles, but also mine the residual
phosphate down below.

FREDERICK PITCHER, NAURU REHABILITATION MINISTER: Now when I took on this portfolio a few years ago
I made it clear to Australia that I thought secondary mining was an important part of
rehabilitation. We had to remove the phosphate in the pinnacles first before we could level the
land and rebuild and regrow on it.

SEAN DORNEY: The trial rehabilitation plot has been selected for a reason.

GRAEME RAPLEY: It's been talked about for at least the last 10 years and nothings happened. All
I've heard is a lot of talk. Finally we're at that stage now where it's going to happen. Now,
people are sceptical about, "Ah, we've heard all this talk, nothing's happened", and now they can
see something happening. But they're still sceptical as to how the land's going to be
rehabilitated. So we chose that block where the public can drive up and have a look.

SEAN DORNEY: Nauru was once known as "pleasant island", returning it to that state is the
rehabilitation aim. Sean Dorney, Lateline.

Obama grabs momentum with four victories in primaries

TONY JONES: To the US now and Barack Obama has scored another victory over Hillary Clinton in the
race to win the Democratic nomination for the White House. Voters braved heavy snow and freezing
temperatures to attend the caucus for the State of Mayne. Senator Obama grabbed nearly 60 per cent
of the vote for his fourth win in a row. The clean sweep gives him a burst of momentum in his race
with Senator Clinton. Her campaign manager stepped down after the latest defeats.

in his race with Hillary

33 killed in Iraq suicide bombing

TONY JONES: At least 33 people have been killed in a car bomb attack in the Iraqi town of Balad.
The blast happened as the US Defence Secretary, Robert Gates, arrived in Baghdad on a surprise
visit. Mr Gates had a private dinner with top US commanders including General David Petraeus and
the Iraqi Prime Minister, Nouri al-Maliki. He was in Baghdad to discuss a possible cutback in
American troops and to assess recent security gains.

Kovco coronial inquiry hears new evidence

TONY JONES: An inquiry has been told that Private Jake Kovco was sexually abused as a child and had
contemplated suicide. An earlier military tribunal found that Private Kovco was killed by his own
gun while skylarking in his barracks in Baghdad in 2006. But now, as Leigh Sales reports, the New
South Wales coroner is investigating with greater access to evidence and witnesses.

LEIGH SALES: Jake Kovco's family has already endured one inquiry. This second investigation will
explore even more painful ground. Today a jury of six heard that Jake Kovco had had a short affair
and that his former lover will be a witness. She'll testify that Private Kovco, seen here standing
in his Baghdad Barracks, told her that as a child he was sexually abused by a 17-year-old neighbour
driving him to suicidal thoughts. His wife Shelly also will appear as a witness, but her view was
that Jake was not a suicide risk. Counsel Assisting the Inquiry John Agius SC said this inquiry
would hear much new information in the case.

JOHN AGIUS, COUNSEL ASSISTING: A great deal of the evidence before this inquest was not known at
the time of the military Board of Inquiry.

LEIGH SALES: He told jury members to make up their own minds but said we expect that the evidence
will point to Jake Kovco being responsible for pulling the trigger and discharging the shot. The
question for the jury is whether he deliberately took his own life, or didn't realise the gun was
loaded. Counsel representing Private Kovco's mother Judy Kovco told the inquiry she wants every
scenario explored, including the possibility of murder. Mrs Kovco can't understand why another
soldier's DNA was all over her son's gun when that soldier claims he never touched it. Leigh Sales,
Lateline.

over her son's gun when that soldier claims he never touched it. That's all from us. 'Lateline
Business' coming up in just a moment. If you'd like to look back at tonight's interview with the
Foreign Minister Stephen Smith or review Lateline's stories or transcripts you can visit our
website. Here's 'Lateline Business' with Ali Moore. Thanks, Tony. The Reserve Bank says inflation
will remain high for the foreseeable future.

The Reserve Bank put out a very hawkish statement on monetary policy today, much more hawkish than
what markets were anticipating and most economists.

Healthy appetite - Primary's profit falls but edges closer to a takeover of Symbion.

That's pretty nice, Symbion's just announced a board recommendation.

And farming boom - despite the drought, rural commodities doing a roaring trade.

We're in something like a gold boom, a wool boom, we're in extraordinary territory. To the markets
and the prospect of another round of interest rate rises triggered a broad selloff.

The All Ords dropped 2% dragged lower by big falls in banking stocks. The ASX200 shed a similar
amount. The benchmark index shed 12.5% so far this year. The Nikkei was closed for a national
holiday. Hong Kong's Hang Seng slid 3.5%, and in London, the FTSE is also weaker. The Reserve Bank
sent a shudder through local markets today, warning inflation could remain above 3% for the next
two years. That's renewed concerns that another interest rate increase could come as early as March
and there could even be another in May. However the rate rises so far seem to be having little
effect on consumer spending, with retailer David Jones reporting a big jump in sales for the second
quarter. Neal Woolrich reports. It's a globaling time on -- troubling time on global markets.

The Reserve Bank put out a very hawkish statement on monetary policy today, much more hawkish than
what markets were anticipating and most economists.

The RBA is forecasting that underlining inflation could remain above 3% for the next two years.
That means interest rates are likely to rise again with the market s factoring in another increase
next month.

These worse than expected inflation figures aren't being perceived as being temporary, they're
being perceived as going on for the next few years and so they're looking at the economy and coming
with with if you like a different mix of growth n flation than what they were 3-6 months ago and
hence are signalling they need to go more on interest rates.

Jeff Oughton says most parts of the domestic economy are growing strongly and that's fuelling
inflationary expectations among individuals, business and unions. But he says the RBA could be
nearing the top of its rate tightening cycle and there may be a slowdown in consumer spending by
the end of the year.

So we're still really looking over the next few months for some peaking in household spending. You
have started to see it in the housing market. Housing finance approvals are much softer now and you
really need to see it down the supermarket and that'll confirm that we're slowing down and the
Reserve Bank's near the peak in their interest rate cycle.

The RBA's sobering outlook on inflation had an immediate impact on the market. The ASX200 was
already on the way down this morning, and slipped further to finish 2.1% lower. David Jones shares
fell 4% despite the company unveiling better than expected second quarter sales and upgrading its
first half profit guidance.

Fabulous result. It's another example of what you get when you've got very good retail management.
The like for like sales are imperngted by at least 1%. Topline growth also better buy, about 1%.
They've done a great job, obviously had new stores, refubishment, probably the benefit of the
Aussie dollar as well and obviously full employment.

But the up-market retailer remains caught in a selloff that's hit the consumer discretionary
sector. David Jones, Harvey Norman and the Just Group have lost around a third of their values from
last year's peaks compared to a 18% drop in the broader market. Tony Pearce says investors see
tough times ahead in 6-12 months.

Behind that we're hearing about offshore hedge fund selling. A lot of people are looking at that
and saying this is an opportunity to make money by short selling those stocks. From the broking
world, that's definitely a factor.

Mark McInnes says the RBA's attempts to dampen spending have so far had little impact.

Interest rates on their own haven't been a predictor of slowing in sales growth. We've had record
level sales. That's not the true determine gnat for our business and customer.

That may be another sign that the Reserve Bank has a lot more work in front of it before consumer
spending and inflation are sax contained. That said, in other quarters thereby signs the interest
rate increases are starting to bite. While the latest housing finance figures from the Bureau of
Statistics show the number of loans increased slightly in December, fewer investors are entering
the market. Loans for investors dropped 3%. The number of owner occupiers taking out loans rose
0.5%. The total value of loans fell 0.5% to $22 billion. Rio Tinto's board has again called on
investors to reject BHP Billiton's $165 billion takeover offer. In a letter to shareholders,
chairman Paul Skinner labelled the bid preconditional and said the board believes BHP's takeover
offer significantly undervalues the company. Rio says BHP's offers so far are not formal,