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COAG leaders set for belt tightening -

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LISA MILLAR: The Prime Minister is putting the states on notice that the tough financial climate
will have a significant impact on budget revenue.

Kevin Rudd and his Treasurer Wayne Swan are meeting state and territory leaders in Perth and the
global financial turmoil will top the COAG agenda.

The states are worried the crisis will affect their slice of GST revenue but far from giving
reassurance, Kevin Rudd's warning his state counterparts now is the time to be prudent.

From Canberra, Kirrin McKechnie reports.

KIRRIN MCKECHNIE: Joining the Prime Minister for a cuppa in his Perth office.

COLIN BARNETT: Nice to have a Queenslander in the west.

KIRRIN MCKECHNIE: The new West Australian Premier Colin Barnett is hosting his first COAG meeting
since securing the state's top job last month.

As the only Liberal in a sea of Labor leaders, he's told Sky News he's not worried about being the
odd one out at the table.

COLIN BARNETT: I think it's healthy for the federal system and indeed for the COAG meetings that
there is at least one Liberal there.

It's important that debates have differing points of view, that different ideas and concepts come
to the table.

But I support the approach of co-operative federalism. Our federal system is a work in making. It
continues to evolve and change to meet changing needs. So I'll be cooperative in that.

KIRRIN MCKECHNIE: There's a string of issues up for discussion at the day-long meeting.

One hot topic will be the Federal Government's computers in schools roll-out. New South Wales has
already pulled the pin on round two of the deal, because it can't afford the follow-on costs.

Now Colin Barnett too has raised his concerns.

COLIN BARNETT: What would be a better approach is for the Federal Government to say here is an
amount of money available to improve computers and technology in schools and it should be designed
and put in place to suit each individual school situation. So a blanket rule one computer per
student may not be very sensible.

KIRRIN MCKECHNIE: But topping the COAG agenda will be the global financial crisis - and exactly
what that means for Commonwealth-state funding arrangements.

Walking past protestors as she headed into the meeting, the Queensland Premier Anna Bligh,
expressed her concerns.

ANNA BLIGH: It is too early to say exactly what this will mean for state budgets but we won't be
immune from some fallout. We are certainly watching our revenue figures very closely but it is too
early to say.

KIRRIN MCKECHNIE: The Prime Minister has a blunt warning for the states.

KEVIN RUDD: The global financial crisis is going to see a reduction in global economic growth. It
is also reflected in Australia's growth numbers and if growth is going to be down it follows that
budget revenue is going to be affected as well.

I can't give you exact numbers, we're working our way through all of that but what it does mean, it
puts an absolute premium on federal and state governments working closely together to do three
practical things. Reduce duplication and waste because there is no money to waste. Secondly, also
act together to take away unnecessary regulation on businesses because businesses are finding it
tougher. We have got to make it easier for them to invest. And thirdly, the governments themselves
to maximise what they can do to invest in the nation's and in the case of WA, the state's future
infrastructure needs.

That's what I'll be talking to the premiers about today.

KIRRIN MCKECHNIE: It's that impact on budget revenue that has some premiers extremely worried over
fears it'll affect their slice of a smaller GST pie.

And they're not getting any reassurance from Kevin Rudd.

KEVIN RUDD: It's going to be necessary for all of us to be very, very prudent about the way in
which we spend because this is a global financial crisis and it affects all of us.

We intend to be very practical about all of this. There will be stuff that we can do and there will
be stuff which it will be too hard to do because of the financial affordability factor.

LISA MILLAR: That is the Prime Minister Kevin Rudd, ending Kirrin McKechnie's report.