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Good afternoon, welcome to

the program. The defence

spending cuts announced in

this year's budget haven't

exactly dominated the

political debate since being

handed down in May, but today

they are back in the

headlines after Tony Abbott

weighed into the issue on his

trip to Washington. Coming

up on the program, we will

speak with the Opposition

Leader, get Julia Gillard's

reaction to his comments and

hear some analysis with

defence expert James Brown.

Also, we will look at those

relentless Labor leadership

rumours and the political

debate over the latest job

cuts. All of that coming up.

First, though, here is

today's other top stories.

There's been a land mark

decision in Victoria today

for victims of the drug

thalidomide. With a woman

who was left without arms or

legs win ag multi million

dollar settlement. Lynette Rowe took legal action against a British drug company, claiming she has

been left to cope in life

without arms or legs because

her mother took the drug thalidomide for morning

sickness during pregnancy.

Today, she won. Distributors

of the drug can has agreed to

settle Ms Rowe's claim. The

decision means that she will

get compensation and be

provided with care for the

rest of her life. She wept

as the announcement of a

settlement was made today in

the Victorian Supreme Court.

The world moved on, and tried

to forget about the thalidomide. Well,

thalidomide are grown up now,

they are adults. And all

over the world, they are

demanding answers and

accountability. And today,

Lynette Rowe, an armless and

legless woman in suburban Melbourne Victoria, has

struck a blow for thalidomide

all over the world. She has

always accepted her

disabilities with grace and

dignity and she has never

allowed herself to be defined

by what she doesn't have.

She got involved in this

legal action not just to get

the right result for her own

future, but to try and do

something for other people.

So she is very proud she has

been able to do that. After

today's settlement, more

victims are expected to come

forward. The company has also agreed to negotiate

settlements for the claims of

more than 100 other people

living in Australia and New

Zealand who are part of a

thalidomide class action.

Two bodies believed to be

those of an explain Mount Isa

couple have been found in

denz rain Forrest near

Cairns. 35-year-old, Scott

Maitland, and 33-year-old,

Cindy Masonwells were last

seen in the far North

Queensland town almost two

weeks ago. A 41-year-old man

was charged with their murder

on the weekend. It was in

dense bushland at Kanimbla

that two bodies were

discovered by local Cairns

police. They believe these

bodies to be missing Mount

Isa couple Scott Maitland and Cindy Masonwells. The

investigation has been very technical and it has been

very minuscule detail driven

and through that, the

analysis of the evidence that

we have collected and the

detail that we have been able to collect, and the

assistance from the public,

we have been slowly but surely narrowing down our

area of focus to a point

where we could throw some

intensive resources at this

particular area and we have

come up with this discovery.

Police declared the bushland

area west of Cairns a crime

scene yesterday. Guarding

the road leading into

Copperlode Dam. And

scourering the steep and

inaccessible terrain for

further clues. Now remains

have been located, police are

sending their condole lenss

to the couples' families. It

is a tragic event, it is not something that happens every

day, and my heart certainly

goes to the families. The

pair were in Cairns to

collect a prized Holden panel

Van that was being restored

at a local workshop and to

attend an engagement party on

July 6. The couple never made it to the engagement

party. And this sparked the police search and called out for information from the

public. Authorities say this

information was crucial to

their investigations so far.

A worker, 41-year-old Brandon

McGowan, has already been

arrested and charged with

their murders. Police say

there is a chance others were

involved in the couples

deaths. It may take up to a

week to formally identify the

bodies. In the meantime, investigations continue and

up to 50 police officers are

working on the case. Tony

Abbott has taken aim at the

Government's cut in defence

spending during a speech in

the United States. The

Opposition Leader is in the

country for the US Australia leadership dialogue and says

he is concerned about the

$5.4 billion in defence cuts

over four years. It is

irresponsible to save money

in defence in a way that

compromises your military capability given that

Australia's military

capabilities are not vast, to

start with. Julia Gillard

says defence spending has hit

$100 billion under Labor for

the first time in Australia's

history and says it is just another example of Mr

Abbott's negativity. He has

gone overseas, talked our

nation's national securities

credentials down, voted for

the defence budget he is now

criticising, how negative can

you get? Union delegates

have met with Ford management

after the car giant announced

440 job losses at its

manufacturing plants in

Victoria. Ford is cutting

production in response to an

industry-wide slump in large

car sales. A day after Ford

announced a 15% cut to the

number of staff working on

its factory floors, both here

in Geelong and also at

Broadmeadows, the AMWU has

come here to Geelong to meet

with union delegates, as well

as management, to find out

how many of those 440 jobs

can be saved. What we know

at this stage is they will

not meet that target in

voluntary redonedancecies. Our members

are gutted out here. The

relate is there was an

expectation with large car

sales being down, that there

was going to be some sort of

redundancies but nowhere near

the 440. Thousands of

Australian car workers have

got jobs today and will have

jobs in the future because of

the actions of this

Government. If we hadn't

partnered with the industry

for a long-term future, we

would be talking about

thousands and thousands and

thousands of job losses. We

have seen the tragic loss of

440 jobs at Ford which goes to show the Prime Minister

was either grossly naively

incompetent, or was lying.

The Geelong Ford factory is

one of two manufacturing

pillars in this area, the

other being Alcoa, but any

job losses here are felt right across the entire

community and the workers we spoke to this morning say

they have no idea what they

will do next. What are we

going to do? We are now

looking at healthcare and

that's about it. Is what

else do we do in Geelong? It

flows on to the person who

has a coffee shop and all of

that, because there will be

less people going in to buy

his coffee, so it magnifies

in a town like Geelong out.

It is continuing to put

pressure on the Federal Government wondering why the

Government only has 33% of

its fleet cars Australian

made. They say it should be

100% to protect Australian

jobs. The health services

union has returned to court

today with national secretary

Kathy Jackson seeking to have the administrators stood

down. The Federal Court

appeal is against a decision

to place the scandal plagued

HSU east under

administration. Ms Jackson

says that she hasn't been

paid in months and that her

work email and phone have

been cut off, even though she

is still working for the

unions members. The whole

basis on running this case is

to show that we have done the

right thing as an

organisation, or we tried

doing the right thing, and we

were stopped in our tracks by

people that were there to

protect Michael Williamsons

empire and that is still

continuing. The judge

presiding over the case has

upheld the appeal and it will

be heard next week. Tears

have been shed at South Australia's Parliament as

premier Jay Weatherill

apologised to the victims of forced adoption in the State.

It was an emotional special

sitting of Parliament today

as premier Jay Weatherill's

Government became the second

in Australia to apologise to

the victims of forced

adoptions. Between 1950 and

1970, around 150,000

unmarried mothers across Australia had their babies

taken against their will.

More than 17,000 children in South Australia are believed

to have been adopted before

1980, some of those being forced adoptions. Mr

Weatherill says he is deeply

sorry for the hurt and

distress caused by the practise. To those people

who were disbelieved for so

long, we hear you now, we

acknowledge your pain, and we

offer you our unreserved and

sincere regret and sorrow for

those injustices. To all of

those hurt, we say sorry.

The Western Australian Government has already

delivered an apology to those

affected by forced adomgs in

that State and the Federal

Government is also planning a

similar move. A national

apology was one of the

recommendations made by the

Senate community affairs

committee following an

inquiry into forced

adoptions. Mr Weatherill

says the apology is long overdue but the Government

hopes it will be a

significant moment to those affected.

affected. A fisherman has

drowned after being swept off

rocks in Sydney's south-east.

The man believed to be aged

in his early 30s was fishing

off a rock shelf this morning

when he was swept into the

ocean. Despite a rescue

helicopter spotting the man,

it wasn't possible to

resuscitate him and he died

at the scene. The incident

follows the drowning deaths

of four people in two

separate rock fishing

accidents on the NSW Central

Coast in the past month. The

Commonwealth Bank is freezing

the pay of around 400 of its

senior staff. The move will

apply to all employees on a

base salary of $150,000 or

more during the 2013

financial year. Excluding

the chief executive and other

top executives. The bank

says the freeze will help

prevent any job losses. CBA

has also followed ANZ and

Westpac by cutting wage

increases for other employees

as well. The wage freeze

comes despite another waive

of record earnings expected

from the banks which are

tiped to make more than $25

billion this financial year.

Israel is in political

turmoil after the biggest

party in the Coalition

Government walked out. He

left the administration after

a dispute over military

conscription for ultra

orthodoxed justs. Its

departure leaves the Prime

Minister in charge of the

hard line Coalition opposed

to most Middle East peace

moves. This is the protest

march that has caused a

political fracture line in

Israel. Thousands of ult

stra orthodoxed jews and its

children. They are

protesting against proposed

changes to the Israeli

military draft that would

force them to enlist in the

country's army. Military

service is a highly motive

issue. And the system that

exempts some Jews angers the

majority. It's a debate that

divides the political

landscape. Until the turmoil

of the past 48 hours, the

Prime Minister and the party

leader were allies.

Coalition partners since May

forming one of the biggest

and strongest Governments in

the country's history. But

now Kadima have pulled out of that Coalition, accusing him

of surrendering to ultra

orthodoxed jews over the

issue of subscription.

TRANSLATION: At every point

of decision, he chose to

stand still rather than to

move forward. Every time he

had to make a decision, he

chose the interest of the

minority over that of the

majority. At every point of

decision, he relented to his

allies in the stream right.

On Monday, the US Secretary

of State Hillary Clinton met

the Prime Minister to discuss

stalled talks with the

Palestinians. The impact of

this internal situation in

Israel has consequences for

the region and it may now

prove a distraction from the

peace process that, even on

Monday, the Prime Minister

said was a priority. We were

just discussing how turbulent

and how swiftly changing the

world is and our part of the world in particular. We are

going to talk about the Palestinians. That is also

Annan ger of peace and we

have to invest every effort

to maintain it, to keep the

tranquillity and see if we

can move the process

forward. The demonstrator s

will likely welcome the

change in the country's

balance of power. But some

fear it has given iscrayle's

wing the upper hand and they

are less inclined to want the

peace process to succeed.

Quick look at sport now and

Carlton coach Brett Ratten

has described Chris Judd's

chicken wing tackle as a big

mistake. The Blues will be

without their skipper for

four weeks as they fight for

a spot in the top eight. He

just got the tackle process

wrong and, yeah, it was just

a bad technique and the way

it's panned out is a big

mistake on his behalf.

Ratten says the team is

moving on and is focus odd

this weekend's clash with the

Western Bulldogs. Tomorrow's

forecast now:

now back to Ashley as PM

Agenda continues. Coming up next, David Speers full

interview with Tony Abbott in

Washington. Stay with us for that.

Welcome back. Foreign and

defence policy are

traditional areas where the

two major parties have a lot

of common ground. This week

Tony Abbott is visiting the

United States and China to

beef up his own foreign

policy credentials and meet

the movers and shakers in

those two countries, which as

we all know, are just so important to Australia.

Overnight in Washington, Mr

Abbott met with the US Vice

President and the President and the former

republican presidential

candidate. He also made some

comments about China telling

Americans they shouldn't fear

the rise of the economic

powerhouse. Plus he has

added his weight to concerns

coming out of the US about

Australia's decision to cut

defence spending. It is

irresponsible to save money

in defence in a way that

compromises your military

capability given that Australia's military

capabilities are not vast, to

start with, and certainly the

last thing we want to do is

to dismai our friends and

allies at what is, for

everyone, a difficult time. The Prime Minister Julia

Gillard for one isn't

impressed. Mr Abbott has

reached a new low in

negativity by going oversees

and criticising this nation's

national security credentials

in front of an overseas

audience. That is a new low

in negativity even for Mr

Abbott. Your regular host,

David Speers, is also in Washington this week where he

met up with the Opposition

Leader to discuss his foreign

policy plans. Tony Abbott

welcome. The Prime Minister

copped a fair bit of flak

when she once said that

foreign policy wasn't the

passion that drove her into

politics. Is it a passion

for you and, if so, who has

inspired you in this area

1234 Well, it is important --

in this area? Well, it is

important and I think that any Prime Minister or aspiring Prime Minister has

to take it seriously because

in the end the Prime Minister

is our voice in the wider

world. So it is very

important. As in so many

things, John Howard is a

pretty good teacher. John

Howard wasn't regarded as a

foreign policy expert when he

became Prime Minister but he

learnt quickly and was a

truly great Prime Minister,

not just as a domestic

leader, but also as a leader

in the wider world. Well, in

fact in your speech today,

you did seem to echo John

Howard when it comes to China

and the US. You said, and I

quote, the right response to

the rise of China is not to

begrudge its growing economic

strength, but to welcome it

and even to foster it. Do

you think there is too much fear here in the United

States about China? Look, I

can understand why the

Americans are nervous about

the Chinese. The impression

I'm getting is that that

anxiety is not about China's economic growth, which

theying appreciate is good

for the world, but more about

China's behaviour in places

like the South China sea and

elsewhere. Is that valid?

Look, there are rules and all

countries need to play by the

rules. I guess the argument

is has China played by the

rules in the South China

sea? What do you think? On

some occasions, I'd say most

probably not. What are those

occasions? Well, let's not

go into detail, but it is

very important, David, that

all countries play by the

rules. But there also has been criticism on the

economic front when it comes

to China. Mitt Romney, the republican presidential

hopeful, has said they are a

currency manipulator. Is he

right? I wouldn't use that

kind of language and that is

not the language that Mitt

Romney used earlier where he

customers rather than a said that China was a billion

billion competitors. Do you

think he is toughening his

language because there is a

campaign on now? Again, I'm

not in a business on

commenting on the current

presidential campaign here in the United States but I just

wouldn't use that language.

I know you don't want to

weigh into the presidential

race, but do you think Barack

Obama has been a good

President? I think it is

impossible for me to reflect

on that without effectively

entering the debate. You

could say he would be a good

President or not? I think

the problem for America is

that America doesn't feel

great right now. That's the

difficulty that America

faces. Now, this is an

unusual situation for

America. America is a

country that believes in

itself. It even thinks of

itself as having a manifest

destiny and I don't think its

destiny is done and that was

the message that I was trying

to give the American audience

today. But is that President

Obama's fault? I think there

are a whole range of factors

that have contributed to it.

The economic strength of

China. The problematic war

in Afghanistan. The ongoing

grid lock and Congress over

the budget and other matters.

I think these have all

contributed. Just back on

China, China was concerned

about the US and Australian

decision to rotate US marines

through the Northern

Territory. You strongly

support this, in fact, you flagged at the time you may

be prepared to go further

when it comes to basing

American troops on Australian

soil. Have you given more

consideration to this and is

it something you've been discussing here in Washington

this week? Well, no request

has been put. No demand or

interest has been shown in

going further. But there is,

obviously, great interest and

pride, I think, in this

latest US initiative.

There's a lot of talk here

about the so-called pivot to

the pacific and I think that

they see this Darwin rotation

as a very important part of

that. It is not just about

greater military cooperation

with Australia. It also

presides greater military

cooperation with other

countries in our region. But

it is more American boots on

the ground in Australia and,

you know, if you're

signalling that you are

willing to go further, how

will China react to that?

Again, I think what the

Chinese need to understand is

that we want to be the best

possible friend and we want

to see engagement with China. You'll never

You'll never hear from me at

least this concept of

containment, engagement is

the way forward with China.

When it comes to our own

military spending, which has

been cut in the last couple

of budgets, to now around

1.5% of GDP, the lowest level

I think it is since 1938,

there has been criticism here in Washington this week, in Washington this week, the

former deputy Secretary of State has been quite critical, he has said

Australia is taking a free ride and putting its

credibility as an alley at

risk. Will you restore this

military spending? The

important thing here is to

ensure that we don't

compromise the capability of

the Australian armed forces. Now,

Now, I guess there were some

programs that were cut or

which have been delayed as

part of the budget. I'd want

to get the advice of the

defence chiefs as to what the

impact of this will be on our

military capability. I don't

say that it is impossible to find efficiencies in defence

and, frankly, all of us want

Government, all elements of Government, all elements of Government, to be as

efficient as possible. But

the last thing a

self-respecting country in a strategically, sometimes

difficult environment, would

want to do is put at risk its

defence capability. Would

you set a goal, though, of

restoring that spending to 2%

of GDP? Again, I don't want

to put figures on it. I just want to

want to say the important

thing is not what you spend,

but what you deliver. That's

the important thing. Now,

the problem for the current

Government is that they've

put forward a very ambitious

list of acquisitions, 12 submarines for instance,

joint strike fighters and so

on. Now, all very ambitious and in

and in their own way very

worthy. But none look like

being delivered any time

soon. Finally, a question on

a domestic issue, although I

think it is fair to say it

has been fairly widely

discussed amongst Australian

politicians and others here

in Washington here this week

as well. The Labor

leadership. Now, honestly

speaking, do you fear the possible return of Kevin

Rudd? Well, I think Rudd? Well, I think

Australia should fear any

continuation of bad

Government and it was we have

got. Without being too party

political while I'm here in Washington, I think the

difficulty we have got at the

moment is a Labor Party which

is arguing within itself over

the deal with the Greens and

every Labor person who

criticises that deal criticises that deal is

implicitly criticising the

author of that deal, namely,

the Prime Minister herself.

And just this week we had the

Government's chief whip effectively undermining the

Prime Minister without any

reassertion of ministerial

authority. Do you see the

hand of Kevin Rudd in this?

I think at this conference Kevin Rudd has been Kevin Rudd has been doing

what you'd think a former

Prime Minister and a former

Foreign Minister ought to do

at a conference like this.

He has been actively engaging

in debate and I have to say

that the contributions that

I've heard from Kevin Rudd

have been highly

sophisticated and very much

to the point. That's more

generous than you have been

about Julia Gillard. Look,

the important thing is the important thing is to

have the best possible

Government for Australia. I think that is what everyone

in America wants. They want

Australia to have the best

possible Government because a

strong Australia is in

America's interest just as a

strong America is in Australia's interest and in

the interests of the wider

world. Thanks for your

time. Thanks David. Tony

Abbott there in Washington

with David Speers. with David Speers. We will

have more on some of those

issues canvassed in that

interview after the break. I

will be joined by our panel

of journalists. That's next.

Our panel

Our panel of journalists is

coming up next. First

though, time to check today's

top stories. A Melbourne

woman who was born without

arms and legs has settled her

court case against drug

distributor Diageo. 50-year-old Lynette Rowe was

born with no limbs as a result of her

result of her mother taking

thalidomide. The drug was

widely used to treat morning

sickness during the 1960s and

70s. Lynettes father says

the family hopes the ruling

will help other victims gain

justice. Two bodies believed

to be those of a Mount Isa

couple have been found in

dense rain Forrest near

Cairns. Police believe the

bodies are those of Scott Maitland and Cindy Masonwells who were last

who were last seen in far

North Queensland almost two

weeks ago. A 41-year-old man

but police say the has been charged with murder

investigation is far from

over. Unions say Ford is yet

to provide workers with the

fine print surrounding the

440 job cuts at its Geelong

and Broadmeadows plants in

Victoria. Union officials have met with management

today saying Ford's workforce

in Victoria is in

in Victoria is in a state of

shock. Ford is cutting

production in response to an

industry-wide slump in large car sales. The South

Australian Government has apologised for the pain

Premier Jay Weatherill's caused by forced adoptions.

Government became the second

in the nation to say sorry to

the mothers, fathers and

children affected by forced

adoptions. He told a special

adoptions. He told a special

sitting of Parliament his

Government accepted with

profound sorrow that many

mothers did not give informed

consent to the adoption of

their children. Tony Abbott

has taken aim at the

Government's cut in defence

spending during a speech in

the United States. The

Opposition Leader is in the

country for the US Australia

leadership dialogue and says he is concerned about the

he is concerned about the

over four years. Julia $5.4 billion in defence cuts

Gillard says it is a new low

in negativity for Mr Abbott.

And in sport, the Bulldogs

will head to the NRL

judiciary to knight in a bid to clear a prop while South

Sydney have decided not to

contest Issac Luke's three

match ban for a dangerous

throw. Straight to our

panel of journalists. Good

afternoon to both of you. Do

you think the defence budget

is fair game for Tony Abbott

to bring up overseas

considering, of course, the

Coalition really didn't pipe

up that loudly about those cuts when they were

first-handed down? And in

fact, hand ball in his budget

reply speech foreshadowed reductions in staff of

defence, saying why do you

need 7,000 people to run

defence. I think Mr Abbott

was responding to the mood of

his hosts. The heritage

foundation is a right wing organisation. When the question was bowled up to

him, he batted it back in the

would appreciate and like. style he knew his audience

When he was questioned on

this later, he hedged his

bets. He didn't commit to

resuming - returning or

reversing all of the cuts

this Government has made. In

fact, he said we will have to

talk about it with defence

chiefs before we make our

position clear. Indicating

he doesn't really have a position. So is Julia

Gillard in her rights to be

considering that the outraged by those comments

Coalition's policy on this

isn't crystal clear? Well,

it's hardly unusual for

Australian leaders to go to

the United States and to suck

up to their hosts. Tony

Abbott is making a point for

points sake. It was just

mentioned by my colleague

Malcolm here is absolutely

right. Tony Abbott didn't

make a tremendous fuss and it

has been pretty clear that

defence funding is one of

those things that had to be

cut if decent amounts of cuts

were going to be made in the

United States are the Hawkes budget. But his hosts in the

and they are saying the

Europeans should be paying at

least 2% of their GDP on defence funding to get into

the NATO club and that is

what they expect of their

allies and Tony Abbott was

simply responding to that. I

don't think there is a great

surprise in it and I'm not much surprised at all that

Julia Gillard has said it is

a new low in negativity. So

how do you rate Mr Abbott's

foreign policy credentials?

Those comments on China

weren't really that out

there, most experts on this

containment isn't an option. issue will argue that

Mr Abbott, you can see those

pictures there on the screen,

I read one comment earlier

today suggesting that we

didn't meet with Barack should feel offended that he

Obama, but that isn't a huge

surprise, is it? Well, not

at all. He is the Opposition

Leader. He is not in the

business of being invited to

meet Presidents of the United

States, particularly in an

election year, particularly

when he is not of their I had

logical bent. But, of

course, opposition leaders do

these sort of things in the

lead-up to elections and we

are essentially in the

election season, even though

we are 15 or 16 months out

and to prove that you can go

around the place without

stumbling too much. I mean,

I remember Paul Keating

making a huge fun of John

Howard as a possible foreign

policy leader saying that

nobody would talk to him and

so forth. Well, that worked

out all right for John

Howard. Tony Abbott is going

through the motions. You

have just written a piece

really praising Bob Carr's

Minister despite him getting efforts so far as Foreign

a lot of flak from the

opposition. How do you rate

where we are in terms of

foreign policy coming from

both sides? Which one is

stronger, do you think?

Look, I think that Bob Carr's

performance has been good

compared to the way it was

portrayed by the opposition

after a few stumbles and

bungles at the start, he

finally got down to listening

to the professionals in the

department and he has done a

good, honest job over the

last couple of weeks.

Foreign affairs, there are really only three elements at

the moment, one is

relationship with China, one

is relationship with the

United States and one is

relationship with Indonesia.

There are no surprises there

at the moment. Wayne Swan is

back from China where he says

he had some very constructive

talks with the Chinese

economic leadership. Mr Abbott is now going to China

where I'm sure he will be

warmly welcomed. They might

be a bit curious about his

suggestions today that China

hasn't been playing by the

rules in the South China sea,

they might ask him for more

detail on that, he might not

be inclined to give it. But

I think there is nothing in particular that this

Government is doing wrong.

There is nothing in

particular that Tony Abbott

would need to rectify. Let's

look a little closer to home.

The Labor leadership issues

has come up yet again. How

serious do you think it is

this time, are Julia

Gillard's days numbered?

Look, I think it has been

fairly clear for a fair while

that an increasingly larger

group within the caucus

thinks that Julia Gillard's numbers days ought to be

numbered. They haven't quite

worked out how that might

occur and precisely what form

of change would take place.

We are in the winter recess

and these things can be

talked about at will without

anything occurring. But it's

pretty obvious, I think, that

when we come back from the

winter recess, if Julia

Gillard's numbers don't get

better, then something will

probably have to give as Joel

Fitsgibbon made pretty clear

on Q and A the other evening.

But how that is going to take

place, nobody knows because quite clearly Kevin Rudd is

the person on the lips of

those who talk about change.

He is not going to challenge.

It would have to be done as a

concerted effort by all of

the faction leaders going to

Julia Gillard and she has

made it very clear that she

is not going to roll over and

die as has been so

colourfully used by both Tony

Abbott and her. So, look,

down in Victoria this

weekend, there is a State by-election. Already those

who would like to see the

back of Julia Gillard within

the Labor Party have leaked polling which suggests that

if the Greens get up, it is

because too many people in

Labor have lost faith with

the Labor brand because of

Julia Gillard. I think that

is over-stating it. The

Victorian by-election will be

interesting in itself in that

it is essentially between the

Greens and Labor. There are

about 16 people standing for

that particular seat. But it

looks like a very close run

where the Greens may well get

up. It will be a one to watch this weekend for

watch this weekend for sure.

What do you think... It wouldn't be good news for

Julia Gillard, really, if

that happened. Yeah. What

do you think about those

comments that Tony was talk

being there? What game was

he playing the other night?

He is a pretty experienced

operator, he knew what impact those comments would have,

wouldn't he? I'm not sure

that he set out to use that

tone. Even though it might

be the tone that he sincerely

holds. I mean, it might be a

sudden outburst of frankness

and then go "Whoa". It is

also the bleeding obvious.

It is. Look, it is

remarkable that any leader

with 30%, depending on your

polling a bit less than 30%

of the primary vote, is still

holding down his or her job.

Months and months and months

of it. It is quite

extraordinary. The fact that

Kevin Rudd has not been

highwaysed on to the

shoulders of an adoring

caucus and asked to take over

the position says a lot about

the Labor Party, a lot about

Kevin Rudd, and a lot about

Julia Gillard. And I've got

to say there was very cheeky

of Tony Abbott today in

Washington to comment - and

he couldn't entirely

eliminate the smile on his

face - about the smiscation

of Kevin Rudd's contributions

Kevin Rudd's contributions to to the -- sophistication of

the dialogue at the moment.

It was a very cheeky shot but

it did underline the fact

that Kevin Rudd, when he goes

overseas, more people want to

listen to him than would

Julia Gillard when she goes overseas. Even as Prime

Minister. The real give away

in the Joel Fitsgiggon matter wasn't really what he said

about, you know, leaders who

aren't popular don't stay

leaders, it was when he tried

to fix it up and say, well,

actually you know, I hope

that Julia's polling numbers

get better, and everyone sort

of fell about the place

laughing in the audience

laughing in the audience and

on the panel. I think that

was a particular give away to

what we are talking about in

what's happening. I don't think Joel knew what he was

doing, much as I don't think

maybe Sam and Paul House knew

what they were doing when

they introduced this whole thing of let's kick the tripe

out of the Greens. That's a

sign of where the Labor Party is, a suggestion succession

of accidents. You mean

chooks with heads cut off?

Something like that. I think

we should give you both your

own show here on Sky News.

You are a double act now. We

appreciate your insights as

time this afternoon. Coming always. Thank you for your

up next, we will look a bit

further at what those defence

cuts will mean for the ADF

and just how worried we

should be about the criticism of that decision coming out

of the US. I'm going to be

speaking with the defence

expert, James Brown, next.

Tony Abbott has voiced his criticism about the

Government's decision to

slash the defence budget.

It's a fact that hasn't buy

passed our marriage allies

with the former Secretary of State warning we shouldn't

expect a free ride on US defence efforts. Julia Gillard, though, doesn't appear concerned insisting

earlier our ties with the US

have never been closer. The

first time our defence budget

ever topped $100 billion was

under this Government and it

is still over $100 billion.

That is Labor's track record

on defence. And Mr Abbott

voted for the budget for

defence he is now criticising

and he is talking down our

nation's national security

credentials on the

international stage in front

of an international

audience. Earlier I spoke

with James Brown. He is a

military fellow at the LOWE

institute and also a former

military officer. I asked

him about the significance of

those comments. Thank you

for your time. How

significant is it for the

United States to actually

publically express these

concerns about Australia's

defence budget? Well, it is important to remember that

this is not an official

member of the United States

administration but it is

someone who has inmy mens

degree of contact. So for

him to come out and say that

Australia isn't pulling its

weight as an alley, that is a

pretty significant comment

and that will be the tip of

concerns being privately the iceberg, I think, for

expressed by our US alley.

How much sway do you think

that would have within the

Government? How much

attention would Labor be

paying to that here? We

haven't yet seen a really

strong political debate about

the defence budget cuts that

we had back in May. This may

be one of the things that

might prompt that debate, a

bit of serious

reconsideration about what we

are doing with defence and

how stalled the program in defence is. How concerned

are you about the flow-on

impacts that have been

assured that our front-line

won't be affected? We are

reducing the number of the

front-line troops and back in

2009 we decided that the big

challenge was fixing up our

defence force and changing it

to reflect the fact that our

part of the world is a lot more contested, more

uncertain, a the lof

uncertainty due to the rise

of China and due to the shift

of power to the Asian region.

There's been no explanation

from the Government of why we

no longer need to do that or

how we are going to be able

to continue to do that now

that less money is being

spent on defence. So I'm

pretty concerned that we are

cutting money from defence

without really explaining how

that is going to lead to less

defence capability. So what is it then that wol really need to happen for the Government to reconsider

this, do you think? I think

there is three things. One

is some sort of military task

that we were found wanting

on, so another intervention

somewhere, or a particularly difficult intervention

someone like Papua New

Guinea. That might catch us by surprise and force a

rethink of what we are doing. A bit of concern and prompt

from an alley, and we saw

that last night. The third

thing is a plitisation of

defence policy. We started

to see a little bit of that

in Tony Abbott's comments

last night. Do you think

that that would be healthy

for the political debate here

in Australia? We have seen

defence generally being an

issue of bipartisanship and

the United States is a very

different case, we would

benefit from that here? It

is usually a code word for

complacency. There is not a

lot of critical thinking of

defence on either side of

politics at the moment but

it's a case of be careful

what you wish for.

what you wish for. Someone

should think more deeply

about defence issues and how

we fund and use our defence

force, I would like to see

more attention from both

politicians on this issue.

You mentioned Tony Abbott, he made some interest comments about China over in

the United States saying that

he understands why China

might make the US nervous.

What did you make of those

comments? He made the point

deliberately that he didn't

want to be seen as someone

who would advocate containing

China and that is pretty

important. There's a bit of

concern in Australia at the

moment about some of the

rhetoric coming out of the US

about how to deal with China.

Things like the air sea

battle that the military is

talking about, that that

might be a little bit

aggressive and offensive to

the Chinese. So he was quite

pointed in making that remark

but he also made the remark

that China hasn't exactly

been a model citizen in places like the South China sea and that is particularly

important to note. Have we

been strong enough from the Australian end with our

rhetoric when it comes to the

South China sea and is it our

place to have a strong view

on that issue? Look, Australia's actively engaged

on this issue. We are trying

to be constructive.

Australia, unlike the US, is

a signatory to the UN

Convention and law of the sea

which makes it a lot easier

for us to talk about being a

good global citizen in

playing by the rulings and

the US decided this week that

they didn't want to ratify that treaty which makes it

very hard for them to argue

about concepts like fredom of

navigation. So Australia is

in a good place to be a

useful player in miedating

that dispute. Just finally,

what really is at stake? If the Australian Government

decides to continue cutting

the defence budget over coming years, it's not like

the US is going to walk away

from the relationship we

have, the military ties we

have between the two countries that have lasted

for so many years, what is at

stake do you think? It used

to be in the past decade that

the US wand us to give the

political support to join the

Coalition, to give them

retcal support. Now what

they want is boots on the ground. They want spending

on military infrastructure,

they want enhanced access to

some of our facilities and

they want us to help to pay

for those facilities. Both

sides of politics don't want

to be spending more money on

defence so it's a dill lemma

that they both face. The US might start to pay more

attention to other friends in

the region rather than Australians and they might

see our military capability

if we are not prepared to

back it with funds. So we

could be taking that

relationship for granted? I

think we could be taking it

for granted. But with the

comments overnight, it seems

that they are starting to

take more of a critical

look. Thank you. That is

all we have time for in this

edition of PM Agenda. Of

course my colleague will be

along again tomorrow morning

at 8.30 eastern time forum

agenda. Also we will be hearing plenty more from

David Speers over the next

couple of days as he

continues his trip in

Washington where David will

be back again, of course,

later in the year ahead of

the US presidential

elections. I will see you

again tomorrow. Until then,

thank you for your company.

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