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EMMA ALBERICI, PRESENTER: The federal budget has taken a $9 billion hit.

The Treasurer has given a one-off grant to the Reserve Bank to help it deal with any major economic shocks.

It moves the budget deficit towards $40 billion, as James Glenday reports from Canberra.

JAMES GLENDAY, REPORTER: The Coalition's promising to get the budget back into the black.

But in just his second month on the job, Joe Hockey's putting the nation's finances an extra $8.8 billion in the red.

JOE HOCKEY, TREASURER: We need all the ammunition in the guns for what's before us and this is part of that equation.

JAMES GLENDAY: It's the Reserve Bank that's calling for extra protection from possible currency shocks in the US or Europe.

CHRIS RICHARDSON, ECONOMIC FORECASTER: All banks, including central banks like the Reserve Bank, need reserve funds, and they buffer - rainy day money, if you like. The problem for the Reserve Bank is that over the last handful of years, that money had run down pretty fast for it.

JAMES GLENDAY: In 2012, the RBA's reserve was at just $1.9 billion.

Chris Richardson says the rising Australian dollar and Labor's hunt for a surplus were to blame.

CHRIS RICHARDSON: The budget's looked artificially good in the last few years partly 'cause the Reserve Bank's been artificially hurt. This is a squaring of the ledger.

JAMES GLENDAY: Every dollar will have to be borrowed.

JOE HOCKEY: Well it can only be through borrowing. We have no choice in this regard. It is a significant sum of money.

JAMES GLENDAY: And it blows out this year's deficit by about 25 per cent.

TONY ABBOTT, PRIME MINISTER: Our job is to get debt down, and we will, and that's why this commission of audit is so important.

JAMES GLENDAY: But the Prime Minister says Labor is to blame for any unpopular budget decisions the audit commission makes.

TONY ABBOTT: Wayne Swan was like the Treasurer, he was like the bad tenant who was trashing the house before he got evicted.

TONY BURKE, OPPOSITION FINANCE SPOKESMAN: It's a commission for cuts, and this is what we've seen Liberals do before. It's what we predicted the Liberals would do this time.

JAMES GLENDAY: The commission is unlikely to look at MP entitlements. Tony Abbott today defended Liberal Don Randall, who claimed $5,000 from the taxpayer for electorate business in Cairns, even though his seat is in Western Australia.

TONY ABBOTT: He went from Perth to Cairns to have some very important discussions with the whip.

3AW RADIO COMPERE: Haven't they got a telephone? Video conference?

TONY ABBOTT: Neil, look, there are some discussions that are best done face-to-face.

JAMES GLENDAY: Tony Abbott says he's open to the idea of improving the entitlements system, but he says there currently aren't any better options on the table and insists there'll always be some problems at the margins with travel expenses.

This well-travelled politician is off for good.

BOB CARR, LABOR SENATOR: I thought I'd announce today my resignation from the Senate.

JAMES GLENDAY: After 18 months as Foreign Minister, the former NSW Premier had some parting advice for his party.

BOB CARR: I believe the Labor government did many very, very good things, but I was struck by a lack of canniness in the Government, A lack of caution, cunning - canniness is probably the best word.

JAMES GLENDAY: The race is already on to fill his Senate seat.

MIKE KELLY, LABOR MP FOR EDEN-MONARO: So I have decided to nominate for the vacancy.

JAMES GLENDAY: But former Eden-Monaro member, Mike Kelly, will have his work cut out. Former Central Coast MP Deb O'Neill is the firm favourite to win.

James Glenday, Lateline.