Bloomberg News

Gillard Stares Down ‘Electoral Annihilation’ With Carbon Tax

June 23, 2011

(Adds Gillard comment in third paragraph.)

June 24 (Bloomberg) -- A year after ousting her predecessor, Prime Minister Julia Gillard is counting on the same political skills she used then to hold her party together as she pushes a climate-change plan opposed by 60 percent of Australian voters.

With the least-liked government in almost four decades and the lowest personal popularity in 13 years, Gillard is wooing legislators across Australia for the package.

“Anyone who thinks I am going to fold because it’s tough out there has got me wrong,” Gillard told Australian Broadcasting Corp. radio today. “We are doing these tough reforms because they are right for the country’s future.”

Graham Perrett, a member of parliament in Gillard’s Labor Party, backs her plan to cap carbon emissions even though voters in his district near Brisbane oppose it by what he says is a 3- to-1 margin. Gillard has visited his district five times since taking office on June 24, 2010.

“If anyone can get us out of this hole it’s her,” Perrett said in an interview. “There is no move to swap leaders.”

Gillard’s own support in polls is the lowest for any prime minister since John Howard proposed a tax increase in 1998 that saw his majority cut in the next election. At the same time, failing to proceed with the measure that the opposition says will boost electricity bills by A$700 ($732) a year risks losing the Greens and independents she needs to retain her government.

“The polls seem to show electoral annihilation but the government will still get the climate laws through parliament,” said Ian McAllister, a professor at Australian National University in Canberra who specializes in voter behavior. “There is no clear alternative as leader other than Gillard.”

No Rudd Redux

Gillard may need the loyalty of so-called backbenchers like Perrett, who won his district of Moreton by only about 1,800 ballots last year, to avoid the fate of Kevin Rudd. She defeated him after corralling support among Labor’s conservative faction and unions. Poll numbers for Rudd, now foreign minister, had tumbled over an earlier carbon proposal and a 40 percent resource tax opposed by BHP Billiton Ltd. and Rio Tinto Group.

The first woman to lead Australia, Gillard is seeking to start an emissions trading system next July in the world’s biggest coal exporter. The Minerals Council of Australia says the plan would destroy 126,000 jobs and threaten company investment. It would be the world’s third emissions-trading system after the European Union and New Zealand.

A report is scheduled by month’s end by the Multiparty Climate Change Committee on proposed legislation to go to parliament in the next three months.

Carbon Price

The group, which the opposition has declined to join, will work out a fixed price per ton of carbon in an emissions system that would move to open trading as early as 2015. Also to be decided is aid to businesses and consumers to offset the impact.

Coal & Allied Industries Ltd., a unit of Rio Tinto, and Whitehaven Coal Ltd. may see earnings fall by as much as 10 percent should a carbon tax be put in place, Citigroup Inc. analysts led by Elaine Prior said in a June 16 research note.

The Australian Coal Association says 18 coal mines may close in the next decade if the system is introduced and that it will be harder to attract investment. Anglo American Plc, the third-largest producer of steelmaking coal, said it will struggle with a $4 billion Australia expansion because the climate plan would slash its investments there by 45 percent.

Gillard, 49, began courting backbenchers as soon as she took office. Perrett said part of her internal appeal is that “if you want to talk with Julia, you knock on her door -- that has been her bread and butter since she took the leadership,” in contrast with Rudd.

Minority Government

The August 2010 election delivered the closest result in 70 years and cost Labor its majority. Gillard formed a minority government after signing an agreement with three independents as well as the Greens, who have one member in the lower house and will have the control of upper house Senate votes beginning in July, when new members take their seats.

The premier’s personal support rose as high as 50 percent in polls in February, days before she announced the carbon proposal. Since then, it has fallen to a record low of 30 percent. Posters on opposition Liberal-National coalition office doors in parliament house say ‘Ju-Liar,’ referring to what they call a broken promise.

“Before the election the prime minister said there’d be no carbon tax and there is,” opposition leader Tony Abbott said in a June 16 interview. “We couldn’t believe her before the election. Why should we believe her now?”

His coalition will repeal the carbon plan if it wins government, Abbott said.

In a Basket?

“I’m not going to put the nation’s future in the too-hard basket,” Gillard told parliament on June 22. “That means we do have to step up and deal with the challenge of climate change.”

Independent and Green lawmakers said they would reconsider their support for Labor if Gillard quit. Members of the caucus including Perrett said there was no move to oust her.

An election is due between August and November of 2013 and that’s when Gillard may pay the price for her climate initiative, said Monash University politics professor Nick Economou from Melbourne.

“A climate plan of some sort will pass and there will be one of two results at the next election: a landslide or an uber- landslide,” he said. “She’s gone and she’s taking Labor with her.”

Approval Rating

The poll showing Gillard’s personal approval at 30 percent was published in the Australian newspaper on June 15, of 1,150 people had a margin of error of plus or minus three percentage points. A May Newspoll survey found 60 percent of voters opposed to her climate plan.

Still, no poll has shown that a majority prefer Abbott as prime minister since he was elected coalition leader in December 2009. His satisfaction rating has been between 33 percent and 48 percent in that time.

“Julia will win the fight,” said Shayne Neumann, a Labor parliament member from the Queensland district of Blair who also backs Gillard’s climate-change efforts. “We have to transition the economy to a low pollution champion of clean energy and people will come to understand that.”

--Editors: Anne Swardson, Peter Hirschberg

To contact the reporter on this story: Gemma Daley in Canberra at gdaley@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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