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Prime Minister outlines the Government's achievements and criticises the Opposition's leadership and lack of vision

JOHN HIGHFIELD: Those close to the Prime Minister say he's been smiling since the night Treasurer, Ralph Willis, delivered the Budget, happy that he's now free to concentrate on things he really enjoys - big picture issues like the republic and APEC. Well, last night, Paul Keating was in Tasmania addressing an ALP fundraising dinner, revealing his certainty that the republic is the issue that will damage if not mortally wound the electoral hopes of John Howard. Fran Kelly in Hobart.

FRAN KELLY: Paul Keating knows that if the republic sells well and interest rates don't rise, then the opinion polls will begin to turn his way and he can start looking at election dates. At that point, he knows the big factor to combat is not so much the Coalition but Keating fatigue - an electorate sick of 12 years of Labor.

The Opposition's playing on the electorate's dislike of Paul Keating and the inevitable mood for change that comes after 12 years of the same government. But last night in Hobart, the Prime Minister was painting a different picture for the party faithful.

PAUL KEATING: A surplus budget, a new national retirement income policy, 15 per cent of all Australian workers put away, two trillion in savings by the year 2020, maternity allowance, the justice statements, the One Nation railway, the civics program and the republic - in one month. Now, there's more in a month than the 'Tories' did in the whole of their governments. No, really.

FRAN KELLY: Before last week, Paul Keating's criticism of John Howard as a weak, indecisive leader was going nowhere, but John Howard's dramatic turnaround on the republic over the weekend played right into the Prime Minister's hands.

PAUL KEATING: I just say this about John Howard. I respect John Howard's right to be an Australian monarchist but I do not respect his pretending for several days to be something other than a monarchist. I don't respect him blowing in the breeze. And whatever else he might be, he's supposed to be a leader. He's nominally and notionally the Leader of the Opposition. So least of all do I respect his attempt in the last week to confuse and misrepresent the issue to cover his own indecisiveness and divisions within his own party, and those divisions, of course, are very evident here, in Tasmania. He can only try and survive the debate. I mean, this is what this week showed, that John Howard can only try and survive the debate; he can't constructively engage it.

FRAN KELLY: The Prime Minister concedes that the republic won't be a big issue at the next election, but he's confident that the Coalition's handling of it now will damage their standing with the voters in the long run, that's why the electorate can expect constant references to it from the Prime Minister for a while yet, especially when Parliament resumes next week for the final session before the long winter break. Last night was just the beginning.

PAUL KEATING: We've got Bronwyn Bishop, of course. She's out there saying it's a communist dictatorship. We've got them saying that Keating wants to be president. Well, let me tell you that the day Parliament gave me a two-thirds vote would be the day I knew that I'd lost my political virtue.

I only want two things when I retire from politics: (1) I want to live in an Australian republic; and (2) I want a private life.

So anyway, the conclusion I draw from Mr Howard's behaviour in the past week does not really concern the republic at all. The conclusion I draw is this: I think the last week has demonstrated how sad it is that, at this stage in our history, the Liberal Party has resorted to a leader who will not lead. As one commentator put it, this week, Mr Howard's leadership principle is: I'm your leader; please show me the way.

FRAN KELLY: Between now and the election, expect to hear constant reminders of the vitality and vision of this Labor Government as Paul Keating tries desperately to counter the Coalition's attack. While John Howard continues to hammer home that Paul Keating can't be trusted and that Labor has run out of energy and ideas, the Prime Minister will continue to paint the Opposition as a bumbling outfit devoid of leadership and talent.

PAUL KEATING: I mean, Gareth and I are working on these things. Could you imagine Alexander Downer working on APEC? He's telling us to send a gunboat to Mururoa. I'm sure he still has battleships in the bath tub with him, the sort of 'Boy's Own' view of the world. You know, he'd have the 'Repulse' or the 'Renown' floating past his toes and 'King George V' just going over the ankles.

TONY EASTLEY: The Prime Minister in Hobart, last night, and Fran Kelly reporting.