SARAH FERGUSON, PRESENTER: The Federal Government is congratulating itself on delivering its biggest election promise, despite signs from Labor that the debate is not over yet.

I spoke a short time ago with Prime Minister Tony Abbott.

Mr Abbott, welcome to 7.30.

TONY ABBOTT, PRIME MINISTER: Thanks, Sarah.

SARAH FERGUSON: Now, you've delivered on your biggest election promise today. What if families don't notice any difference in their lives?

TONY ABBOTT: People will notice a significant difference when they get their next quarterly power bill. We've had a number of power companies writing to their customers, advertising today, saying that prices will come down and those reductions will be backdated to the 1st of July.

SARAH FERGUSON: If we look at the figure that you've been using frequently, which is the $550 figure this year from Treasury - and that's a $280 figure next year - you did make this all about the cost of household goods. Apart from electricity, what's actually going to be cheaper?

TONY ABBOTT: Well, Sarah, that $550 figure is a Treasury figure. It was a figure that was put out by the former government and the former government was hardly going to exaggerate the impact of the carbon tax. Because the price of power is a component of just about every price in the economy, when the price of power falls other prices should go down as well.

And we'll have the ACCC there as a policeman. The ACCC is currently monitoring some 570 businesses to ensure that their prices go down commensurately with the abolition of the carbon tax.

SARAH FERGUSON: But do you expect people to notice anything beyond their electricity bill?

TONY ABBOTT: Well, I'm going to let people come to their own conclusions, Sarah. But certainly this was a $550 hit on families' cost of living. They were the former government's own figures and I don't imagine they were exaggerating them.

SARAH FERGUSON: All right. Let's have a look at that figure: I think it works out to about this year $10.50 a week, next year $5. If in that week, that given week, a family had a visit to the doctor and paid your Medicare co-payment, you'd agree that most of that saving would be gone straight away?

TONY ABBOTT: Well, I certainly agree that it is important to have a sustainable Medicare, Sarah. And that's what...

SARAH FERGUSON: That wasn't exactly my question. Would you agree that the money they're going to save from the carbon tax will be lost if they have to pay the Medicare co-payment?

TONY ABBOTT: Well, there are swings and roundabouts and the important thing is to have a strong economy with taxes reduced, with regulation reduced, with productivity and participation increased. And this is all part of a fairly comprehensive economic plan. And all the bits go together. That's what I'd say to you, Sarah.

SARAH FERGUSON: Well, let's have a look at some of those other bits because if that same family in that week with their $10 extra: if they needed radiology or, let's say, pathology, they'd be even further in the red

This is my question: isn't that $500 saving illusory if you give with one hand and take away with the other?

TONY ABBOTT: It's still significant. Now, I certainly accept that there were a range of changes in the budget, changes that we are pursuing in the Parliament and changes which I believe make sense. We've long been paying a modest co-payment when we get PBS drugs from the pharmacist and if it's fair and reasonable to have a modest co-payment there, why isn't it also fair and reasonable to have a modest co-payment with Medicare?

SARAH FERGUSON: Let's just look at some of the other things you said about this tax. You claimed that... as everyone would remember, you claimed it was going to be a wrecking ball. You said that Whyalla, Port Pirie, Gladstone, Portland, Kwinana would be wiped off the face of the map. How did you get that so wrong? Because that didn't happen, did it?

TONY ABBOTT: Well, Sarah, under the former government's own figures - and let's not forget that the former government's carbon tax-cum-ETS, fixed price tax-cum-floating price tax was going to go up to $38 in 2020 and, would you believe it, $350 in 2050.

And under the former government's figures, steel and iron production was going to reduce by 20 per cent, aluminium production was going to reduce by 60 per cent. And I think, if I may say so, these were pretty optimistic figures. And the towns that you mention are all towns with large steel and aluminium facilities.

And so I think it was right of us to warn the people in those places, the people dependent upon the steel and aluminium sectors, that they faced a pretty bleak future under the carbon tax.

SARAH FERGUSON: What you actually said was that those towns would be wiped off the face of the map. It's the accuracy and the truth of what you're saying. And I'm just wondering if for you, in the heat of that particular argument, whether winning the argument is more important than the truth of what you actually were saying?

TONY ABBOTT: Well, if you go back to Whyalla: what I was doing, Sarah, was quoting the South Australian state secretary of the Australian Workers Union. I think his name was Wayne Hanson. And I think it was Wayne Hanson who said that Whyalla would be wiped off the map by a carbon tax.

And, of course, there were a lot of people, good, honest unionists who are very anxious about the carbon tax. Even Paul Howes himself was initially a critic of the carbon tax but I guess he was taken into a quiet room and bludgeoned into silence. (Chuckles)

SARAH FERGUSON: You've got rid of one tax today but you're also bringing in at least two new taxes and there's a tax increase. That's after promising no new taxes. Is it fair enough that people ask questions about your honesty when they see that?

TONY ABBOTT: Well, we've got another tax to go. We're going to abolish the mining tax.

SARAH FERGUSON: But I'm asking you about the taxes that you're introducing, having told the public before the election that there would be no new taxes?

TONY ABBOTT: Well, I actually said, Sarah, before the election that there would be a paid parental leave scheme levy. Maybe you don't think that's a tax but certainly I did promise a paid parental leave levy before the election.

SARAH FERGUSON: But beyond that, Mr Abbott, you said there would be tax cuts without new taxes. What happened to that promise?

TONY ABBOTT: Well, exactly. I did say in respect of the carbon tax repeal, that you would have tax cuts without a carbon tax, that you would keep the tax cuts without the tax. I said that and that's exactly what's going to happen under this Government.

SARAH FERGUSON: But on the whole series of occasions when you said things like: "The only party that's going to increase taxes after the election is the Labor Party;" "No-one's personal taxes will go up;" these were broken promises?

TONY ABBOTT: Well, interestingly, what we have done as a result of all of the changes in the budget is reduce the overall tax burden by $5.7 billion. And I think that's a tax cut when you reduce the overall tax burden by $5.7 billion.

SARAH FERGUSON: The reason I ask these questions is: you're the person that made the election about trust. You said famously that the worst deficit is not the budget deficit: it's in fact the trust deficit, the election is about trust. You're the one that set the standard. Do you accept now that you were not able to keep to your own standard?

TONY ABBOTT: And plainly, Sarah, you obviously have a perspective which you are doing your best to prosecute.

SARAH FERGUSON: With respect, Mr Abbott, it's not a perspective: it's a simple matter of language. You said one thing, you've done another. I think people have been waiting to hear you come clean and admit that that's what happened?

TONY ABBOTT: Well, I think people have been waiting for us to implement our policies. And today a very important policy was implemented to scrap the carbon tax. And we are also stopping the boats, we're also getting the budget back under control, we're also building the roads of the 21st century. We are honouring our commitments, Sarah.

SARAH FERGUSON: It is certainly not just me and it's not just the voters: it's also the Senate at the moment. Clive Palmer and the crossbench senators: they call them "broken promises" and that's why they're trying to stop those measures in the Senate.

TONY ABBOTT: They're our political opponents, Sarah, so naturally they make those sort of claims. But I believe that this is a Government which is keeping faith with the Australian people, that is carefully and methodically delivering on the commitments that we made to the Australian people at the election.

SARAH FERGUSON: Is that how you see Clive Palmer: just as an opponent now?

TONY ABBOTT: Well, he's a crossbench member of Parliament and he has crossbench senators and I certainly want to work constructively with Mr Palmer and his senators and I'm pleased that today we were able to do that. But yes: he's out there in competition with the Coalition and to that extent that's what he is.

SARAH FERGUSON: Do you see him as the enemy?

TONY ABBOTT: We are not in an election and if we were in an election, obviously he would be out there competing with the Coalition for votes. And if he was still a member of the LNP, by running against endorsed LNP candidates, he'd actually be expelled from the party.

But until the next election what I want to do, Sarah, is to deliver on my commitments to the people and obviously that means getting legislation through the Parliament. And I'll work with the Labor Party, I'll work with the Greens, I'll work with the crossbenchers to get good policy through the Parliament.

SARAH FERGUSON: So, given right now so much of your budget is locked up in the Senate, Joe Hockey has spoken yesterday about a fresh round of cuts that you could use that the Senate can't block. Are Health and Education quarantined from those potential cuts that Joe Hockey's talking about?

TONY ABBOTT: Well, I just don't like this constant repetition of cuts, Sarah. Because if you look at public hospitals, they're up nine per cent for the next three years every year.

SARAH FERGUSON: But what is it, what is it that Mr Hockey meant yesterday when he said there would be different measures that you could use that couldn't be blocked in the Senate?

TONY ABBOTT: Well, he was obviously making the point that we need to make tough decisions, difficult decisions, tough changes now in order to avoid even tougher ones in the future.

And this is the irresponsibility of the Labor Party. They said they were concerned about the massive deficits that they were running up before the election and now they're in Opposition they couldn't care less. They were wreckers in government and now they are just wreckers of government, now that they're in Opposition.

SARAH FERGUSON: Judging by your recent trip to Canada, you obviously have a great deal of respect for the judgement of Canadian PM Mr Harper. Is that correct?

TONY ABBOTT: He is a fine man doing a fine job. And I had a very good visit and Canada is a very like-minded country.

SARAH FERGUSON: Now, I ask you that because Steven Harper has just cancelled his country's funding to the Commonwealth because of Sri Lanka's human rights abuses and religious intolerance. How is it possible that someone you have so much in common with could have such a different view to you on whether or not Sri Lanka is safe?

TONY ABBOTT: Well, I don't agree with my best friends on everything. That's life. I dare say you don't always agree with your best friends on everything, Sarah.

SARAH FERGUSON: Well, what does he know that you don't know? Or is he getting better information than you?

TONY ABBOTT: Let's never forget that Sri Lanka had one of the most vicious civil wars in human history. Let's never forget that the Tamil Tigers were the originators of the suicide bombing. And thank God that civil war is over.

Now, I don't say that Sri Lanka is everyone's favourite country but it is a safe country and it is a country at peace. And that's something we should all applaud. That's something we should all be pleased about.

SARAH FERGUSON: According to Steven Harper it's not a country at peace: it's a country with human rights abuses going on now and religious intolerance.

TONY ABBOTT: Well, if that's his view, I respectfully disagree. And that's what friends can do. Friends can disagree.

SARAH FERGUSON: The reason I ask is there's 153 innocent people - they're Sri Lankan Tamils - including approximately 30 children, we understand, in Australian custody on a ship somewhere at sea. Where are they?

TONY ABBOTT: Sarah, you very well know that is the settled policy of this Government not to give a running commentary on operational matters because that just gives aid and comfort to the people smugglers.

But I do make these points: we will fully comply with our legal obligations. We will fully respect safety at sea and we will ensure that no harm comes to people who are in our charge.

SARAH FERGUSON: But the question was: where are they? It's not going to give comfort to any people smuggler for you to tell the families of those people on that ship right now - not to mention the Australian people - where the ship is?

TONY ABBOTT: Well, as I said, Sarah, the settled policy of this Government is not to provide a running commentary on these things and I know that does annoy some people, particularly our critics and opponents.

But the policy that we've put in place is doing the most compassionate thing of all: it's stopping the deaths at sea because it is stopping the boats. And let's never forget that under the red-carpet policy that the former government had in place, we had more than 50,000 illegal arrivals and we did have more than 1,000 deaths at sea. That's a tragedy and, thank God, that tragedy now seems to be ending.

SARAH FERGUSON: And just finally on the subject of climate change, Mr Abbott: you used to describe climate scientists as alarmists and extremists. You obviously questioned the science many times in the past. Did you have a "road to Damascus" moment when you decided that you were wrong about that?

TONY ABBOTT: Well, Sarah, on either side of most arguments some people go a little over the top. My position is that climate change is real, humanity does make a contribution and it's important to have strong and effective policies to deal with it and that's exactly what the Coalition's Direct Action policy is.

SARAH FERGUSON: And was there a moment when you decided it was no longer a fad?

TONY ABBOTT: Sarah, it's important to take reasonable steps to deal with significant problems and that's what I've always thought on this issue.

SARAH FERGUSON: Thank you very much indeed for joining us, Mr Abbott.

TONY ABBOTT: Thank you so much, Sarah.