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Julia Gillard on the devastating floods -

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SCOTT BEVAN, PRESENTER: The Prime Minister has been traversing both flood-ravaged states,
announcing financial support for victims and committing to a huge repair bill but where will the
money come from?

Late today I spoke to Julia Gillard in our Canberra studio.

Prime Minister, thanks for your time tonight.

JULIA GILLARD, AUSTRALIAN PRIME MINISTER: My pleasure.

SCOTT BEVAN: While the floods are ongoing and the damage bill just keeps mounting, there have been
estimates - reported estimates - of up to $30 billion for Queensland and then of course there's the
other states, the other areas.

What's the latest estimates in regards to damage and lost production that you're working with?

JULIA GILLARD: We don't know what the damage bill is for rebuilding infrastructure yet and we won't
be able to know with clarity for some time.

We do have to wait for floodwaters to subside to see what's underneath but this is a major economic
crisis in impact from the floods.

Everybody's talked about 1974, comparisons for the actual floodwater. What we've got to remember is
that in 1974, Queensland was a far smaller part of our national economy than it is now - around 14
per cent then, around 19 per cent now. And Queensland contributes about 25 per cent of our exports.
So a flood crisis in Queensland has major economic impacts around the nation.

SCOTT BEVAN: Even if no-one is certain of the amount yet, and you do know, what everyone knows is
it is going to be huge and that the lion's share of that cost will be borne by the Commonwealth.

Now in light of that, what economic reason - economic reason - do you have for pushing on for a
Budget surplus for 2012/2013?

JULIA GILLARD: Well, put simply, the economic reason is our economy will be running at close to
full capacity at that period of time.

We are facing a big repair bill for Queensland and we are facing economic consequences of the
floodwaters.

To take an example, Queensland's supplies 80 per cent of our coking coal - the coking coal that
comes out of Australia. It exports $100 million of it a day and 40 mines, around about, haven't
been able to work during the floods.

So, yes, this is having an impact but we've got to remember our economy is strong, with a large
pipeline of investment coming through. That means by 2012/13, our economy will be running hot and
when your economy's running hot, that's the right time to be having a Budget surplus and saving for
the future.

SCOTT BEVAN: But Prime Minister, business, financial and union leaders are now raising doubts about
sticking to the Budget surplus timetable and a couple I spoke to earlier today said that if you do
hold steadfastly to that timetable, it's for political, not any good economic reasons. So therefore
why not reconsider it.

JULIA GILLARD: It is for a good economic reason and that's why. It's the right way to have our
Budget position, given where the economy will be at that time.

Let's remember - strong economy. We came out of the global financial crisis strong, an economy that
was running or tending to run close to full capacity. The right thing to be doing in those
circumstances is to have a Budget surplus. That's why we had determined that we would bring the
Budget to surplus in 2012/13...

SCOTT BEVAN: But if economists and business leaders, Prime Minister, are saying, "Look, we don't
have to stick to this. This can roll over. We don't have to steadfastly stick to this timetable,"
then surely they'd be saying that with some basis.

JULIA GILLARD: Well, I've got to respectfully disagree.

As Prime Minister, what I'm saying to the nation is we will rebuild Queensland and we will bring
the Budget to surplus in 2012/13 because that's what our economy will require.

Now that does mean we face a number of tough choices and I am working on making those tough choices
right now.

SCOTT BEVAN: Let's talk about a couple of those potential tough choices. Your Government until now
hasn't ruled out a flood levy. Will you rule it out now?

JULIA GILLARD: This is going to require some difficult decisions. There will be spending cutbacks
and there may also be a levy.

I am working on those decisions now and when I'm able to I will announce them at the appropriate
time.

We obviously have more work to do. We don't have the total damage bill yet.

But I want to be very blunt with Australians: We have a lot of flood damage to repair in
Queensland. There will be some economic effects on GDP growth, a short-term effect on inflation
with food prices and the like, but our economy is strong and we will get through this by pulling
together the same way we got through the global financial crisis, by pulling together.

SCOTT BEVAN: The economist Saul Eslake believes before looking at a levy - at more taxes that
Government spending should be seriously reviewed, the cutbacks, and reigning in certain areas
ranging from the Pharmaceutical Benefits Scheme to the First Homeowners grant.

Now, do you know yet what areas you will be looking at and will you, in priority, cut back before
you look at a levy or a tax?

JULIA GILLARD: There will certainly be spending cutbacks. I'm not in a position tonight to detail
to you the areas. I am working on that now, working of course with Treasurer Wayne Swan and my
Federal colleagues on those decisions. But there will be spending cutbacks and there may also be a
levy.

SCOTT BEVAN: So maybe both?

JULIA GILLARD: Well, I've put it as plainly as I possibly can.

There will be spending cutbacks and there may also be a levy.

We are obviously working on those decisions now as we work with our Queensland colleagues to
clarify the bill for infrastructure rebuilding.

At the same time of course we're seeing floodwaters in Victoria and they're right in the midst of
battling those floodwaters and there may well be infrastructure rebuilding that needs to be done
after those floodwaters recede.

SCOTT BEVAN: Prime Minister, in terms of funding for the rebuilding, what about Tony Abbott's idea
of scrapping the National Broadband Network and using some of that money?

JULIA GILLARD: I have seen this suggested and this is a misunderstanding of the way in which the
National Broadband Network is being financed.

The National Broadband Network is an investment which will end up earning interest money,
effectively, for taxpayers.

We've got to be able to deal with the consequences of floods as well as do the big economic reforms
necessary for this nation's future - and building the infrastructure we need for the future is part
of that necessary economic reform.

SCOTT BEVAN: Prime Minister, a major issue that has arisen out of these floods is that of
insurance.

Frustration is deepening and widening among people who thought they had flood cover and evidently
don't. Just how committed are you to ensuring that there is a clearer standardised definition of
flood in policies, without it being used as a reason to hike premiums?

JULIA GILLARD: My colleague Wayne Swan and assistant Treasurer Bill Shorten have been meeting with
the insurance industry.

They've been doing that from the point of view of prevailing upon them to show the same spirit of
generosity in this flood crisis as Australians have shown to each other. So we're certainly putting
that message to the insurance industry.

And, yes, this issue has been raised about standardising what it means to be flooded, hit by
floodwaters, so that's something that the Government is considering. But for people who are in this
circumstance right now, obviously we do want to send a message to the insurance industry to be on
the side of generosity on this occasion.

I think Australians expect that.

SCOTT BEVAN: Prime Minister Julia Gillard, thanks so much for your time tonight.

JULIA GILLARD: Thank you.