SARAH FERGUSON, PRESENTER: The stage is set for a fight between the Commonwealth and the states; over $80 billion in cuts to funding and Education and Health over the next 10 years. The surprise manoeuvre is being seen as a ploy to get the states to plead for more revenue and that means a higher GST.

The Premier of South Australia, Jay Weatherill, and Queensland Premier Campbell Newman joined me a short time ago.

Gentlemen, welcome to 7.30.

JAY WEATHERILL, PREMIER, SOUTH AUSTRALIA: Pleasure.

SARAH FERGUSON: Campbell Newman, starting with you, can you run your state's schools and hospitals with billions of dollars less from Canberra?

CAMPBELL NEWMAN, QUEENSLAND PREMIER: Well, it remains to be seen what the impacts are when we look at the fine detail, but I say this: it will have real impacts. Let me just give you a very local example. In my electorate, the money that we got, the extra money we got that's gone into Education, is helping kids with learning difficulties actually achieve the same results as other kids. So, for example, in one of my schools, a young Aboriginal child has seen her results go through the roof after this intense coaching and counselling that she's been getting due to the federal money. That then disappears in only four years. That's the sort of human impact that we'll see from a reduction in funding.

SARAH FERGUSON: Jay Weatherill, if I can ask you a similar question: will schools or hospitals have to close in your state if this reduced funding goes ahead?

JAY WEATHERILL: Well what we know is that it's about $5.5 billion that's been ripped out of SA. That's the equivalent of about 600 hospital beds, which is about the size of one of our large teaching hospitals, the Flinders Medical Centre; or it's about 3,000 teachers. So that's what's been ripped out of SA as a consequence of last night's Budget. Remember that this was an agreement, this is a binding agreement between the Commonwealth and the state. It was committed to again in the federal election. It wasn't mentioned at the COAG meeting we just had a few weeks ago. It wasn't even mentioned last night. You wouldn't have known about these cuts if you'd listened to Joe Hockey's speech last night.

SARAH FERGUSON: Let me ask you about that, Campbell Newman. This did come as a surprise. Do you think, given the quantity, the amount of money that's going to be taken from you over the 10 years, do you think this is an attempt to wedge the states into asking for and owning, therefore, a raise in the GST?

CAMPBELL NEWMAN: Well, Sarah, I watched intently when you interviewed Joe Hockey last night and you put that to him and I'm afraid that is indeed the conclusion that I reached from his response. And I'm not going to play that game and I don't think the other premiers want to play that game. We want to actually fix the problems that face this nation. And I'm afraid it is disappointing it was sort of lobbed on us last night in this way, particularly when we had a COAG meeting only two weeks ago.

SARAH FERGUSON: Campbell Newman, the Prime Minister this morning said that he wants you to be an adult and grown-up government. It sounds like he's accusing you of being petulant.

CAMPBELL NEWMAN: I think that's very unfortunate. Again, two weeks ago we were talking about the reform of the Federation. Last night, without any warning, we were told essentially that significant chunks of money, $80 billion across the states and territories for the forwards, just disappears. Now, you know, that's just not on. We need to hammer out a proper way of making our federation work. That's what we need to do. And I'm more than happy to do that co-operatively, but you don't - you know, you don't tell people they've got responsibilities and then not give them the money to do deal with it.

SARAH FERGUSON: Jay Weatherill, let me just ask you the question about the GST. Federally, the Labor Party has ruled out a raise to the GST. Are you going to have to ask the federal Labor Party to reconsider?

JAY WEATHERILL: No, we're not playing that game. They've shifted this problem over onto our side of the table. We're going to shift it right back where it belongs. They've made these cuts; they have to explain and take responsibility for these cuts. We're not going to go cap-in-hand to the Commonwealth Government and try and solve a problem of their creation. This is the Liberal Party's responsibility. The Liberal Party are going to take political responsibility for these cuts. We're going to campaign against these cuts. They're unacceptable. The burden of the adjustment has been put onto ordinary working men and women of Australia and it is unacceptable. They've quarantined their mates on the big end of town. We're - before we talk about how we respond to these cuts, we haven't given up the campaign to resist them, and we'll be doing that, along with members of the community who are only beginning to become aware of these cuts. They wouldn't have known last night from what Joe Hockey said. Our job is to make sure they know that $80 billion of cuts were actually hidden last night and they're going to affect mums and dads who want to make sure their kids get a great education. They're going to hurt sick people that are trying to get treatment in our public hospitals and our GPs.

SARAH FERGUSON: Let's just talk about another issue in the Health area, Jay Weatherill: the $7 co-payment on Medicare. Are you concerned that that's going to lead to more people turning up at the emergency rooms of the hospitals in your state?

JAY WEATHERILL: Absolutely. I mean, it's another consequence that will occur which will place further burdens on our public hospital system. People will rush into our emergency departments and it's no answer to suggest that we can also make a similar payment to these people. I mean, how on Earth do you administer between those people that are coming in for essentially a GP visit and other people that are coming in for what is an emergency? It's impossible to administer. It's a pathetic suggestion in response to what is an obvious cost shift back onto the states. So, we're not playing that game. The Federal Government are going to have to take responsibility for the changes that they've put in today. They have to argue their case. And we will be resisting these changes and we'll be campaigning to have them reversed.

SARAH FERGUSON: Campbell Newman, briefly, on the Medicare co-payment, do you share those concerns about the emergency rooms of your big hospitals?

CAMPBELL NEWMAN: I do. And Sarah, we've done a lot of heavy lifting the last two years to actually reform Health in Queensland. We've dramatically improved the performance of those emergency departments. A lot of hard work on the ground by dedicated nurses and doctors and administrators. So they've taken the performance from 62, 63 per cent of patients being seen within the national target of four hours to over 75 - I think it's actually 78 per cent now. A great effort, but they're now potentially going to be swamped by people who are trying to get away from having to pay this money at the GP. And I do have ...

SARAH FERGUSON: So does that mean that you would consider - sorry to interrupt you, but does that mean that you would consider a fee for people coming into the emergency departments?

CAMPBELL NEWMAN: Well I don't think so because I think, Jay - and I agree with Jay with what he said about the potential impact, I certainly agree with that. I certainly agree with him it's very difficult to cost-effectively administer that. How you're meant to get sort of $7 out of someone's pocket. You know, the cost of administering that will be more than that $7 and so I see great difficulties in actually doing that.

SARAH FERGUSON: Campbell Newman and Jay Weatherill, thank you very much indeed for joining 7.30.

JAY WEATHERILL: Pleasure.

CAMPBELL NEWMAN: Thank you.