Bloomberg News

Murdoch Makes No Retreat From Scandal With Australia Attack

September 12, 2011

(Updates with Abbot response on refugee proposal in 18th paragraph.)

Sept. 12 (Bloomberg) -- The phone hacking scandal in the U.K. hasn’t muzzled Rupert Murdoch in his native Australia, where his newspaper empire is doing more than any other to undermine Prime Minister Julia Gillard.

Less than two months ago, Murdoch told the U.K. Parliament that the theft of voicemails by his News of the World made his appearance “the most humble day of my life.” That’s not the way it feels to members of Gillard’s Labor party, who say a drumbeat of criticism by his papers has created a “climate of fear,” according to Australian lawmaker John Murphy.

Murdoch’s Daily Telegraph, the best-selling daily newspaper in Australia’s largest city of Sydney, is “running a campaign on regime change,” according to Communications Minister Stephen Conroy. Gillard herself demanded and got a retraction and apology from the Australian, another daily owned by the billionaire’s News Corp., after it printed a falsehood. She said the Daily Telegraph should enter another report “for one of our fiction prizes.”

“It’s not surprising at all that Murdoch is at it again in Australia while the U.K. phone-hacking scandal is still fresh,” said Tim Bale, a professor of politics at the University of Sussex and the author of “The Conservative Party: From Thatcher to Cameron.” “He tries to use his economic power to get political influence. It’s part of his business model.”

Electoral Record

There is no campaign against the government by News Ltd., the company’s Australian unit, said spokesman Greg Baxter. The 80-year-old Murdoch has long wielded political clout in Australia, where he controls about 70 percent of the newspapers. His papers helped elect every British government over three decades, and no New York mayor has been re-elected without his backing since Murdoch first bought the New York Post in 1976.

The hacking scandal ravaged Murdoch’s reputation in the U.K. Revelations that his News of the World intercepted the voice mails in 2002 of Milly Dowler, a missing British schoolgirl who was found murdered, forced him to close the 168-year-old newspaper. Murdoch bought advertising in his own and competing publications to apologize.

The scandal also led to at least 16 arrests and derailed News Corp.’s plan to acquire complete control of British Sky Broadcasting Group Plc. In the U.S., the Justice Department opened a probe of whether News Corp. employees hacked into the cell-phone accounts of victims of the Sept. 11 attacks.

1953 Start

None of that has subdued New York-based News Corp.’s 120 metropolitan, regional and rural newspapers in Australia, an empire Murdoch built after he took control of the business and began running a daily in Adelaide in 1953 following his father’s death. The company also holds 25 percent of Foxtel, Australia’s biggest pay television operator.

Bloomberg News parent Bloomberg LP competes with News Corp. in providing financial news and information.

News Ltd.’s Herald Sun tabloid, the nation’s best-selling daily newspaper, reported Sept. 2 that unidentified senior figures in Gillard’s Labor party urged her to quit even though the next election isn’t until 2013.

The prime minister responded that she was “not going anywhere” before the next election. Gillard, 49, who became Australia’s first female prime minister 15 months ago, declined to comment for this article.

‘More Emboldened’

“News Ltd. has been more emboldened than other media outlets, and the fact they have the majority of ownership in this country means they will have an impact on the way people think,” said Andrew Hughes, a professor who does research on political branding and marketing at the Australian National University in Canberra. “The Murdoch press has its feet on the throat of a government that’s already on the ropes.”

Baxter, the News Ltd. spokesman, responded to questions on the matter in an e-mailed statement to Bloomberg.

“We have made it clear that the company and its mastheads do not have and are not engaged in any kind of campaign for regime change as has been alleged by members of the government,” Baxter wrote.

Gillard’s approval rating plunged to 23 percent, down 6 percentage points in two weeks, in a survey by Australia’s Newspoll organization published Sept. 6 in the Australian. That was the lowest for a prime minister since 22 percent for Paul Keating in 1993. The poll queried 1,152 voters between Sept. 2 and Sept. 4 and had an error margin of three percentage points.

Refugee Reversal

The findings reflect opposition to the prime minister’s proposed carbon tax, according to Hughes. Gillard was dealt another blow on Aug. 31 when the country’s top court ruled that the government couldn’t proceed with a plan to address an influx of refugees by sending asylum-seekers to Malaysia.

A Nielsen poll published in Fairfax Media Ltd. newspapers today showed a drop in her approval by six points, to 32 percent. The Nielsen survey of 1,400 people had a margin of error of plus or minus 2.6 percentage points and was conducted Sept. 8-10.

The prime minister today met with her Cabinet and Labor lawmakers to address the refugee-policy setback, later saying at a press conference that she will submit changes in migration laws to parliament to allow her deal with Malaysia to proceed. Opposition leader Tony Abbott said in a statement that his coalition would consider any legislative proposals from Gillard.

Gillard’s standing has also eroded as Australia’s mining boom fuels a rise in the value of the currency, increasing the cost of exports and hurting the country’s ability to compete internationally. The Australian dollar is up 21 percent against the U.S. currency in the past two years. BlueScope Steel Ltd. last month announced plans to cut 1,000 jobs and shut a furnace because of losses related to the currency’s gains and to high raw material costs.

‘Not Great’

“It is clear things are not great for this government,” said Rodney Smith, professor of politics at the University of Sydney and author of the book, “Politics in Australia.” “Labor is already unpopular without any help from News Ltd.”

In last year’s election, Labor lost its majority, forcing Gillard to rule with a minority government. To retain the 76 votes in the House of Representatives needed to hold power, Gillard needs the backing of the 72 Labor seats plus three independents and one Greens party member.

Most of Murdoch’s metropolitan papers, including the Australian and the Daily Telegraph, urged voters to support Abbot’s coalition, consisting of the Liberal party he leads and the National party. In the early-September Newspoll, the Abbott coalition got 50 percent backing, compared with 27 percent for the Gillard government.

Newspaper Apologizes

Tensions escalated Aug. 29, when the Australian published an opinion piece including false allegations concerning Gillard’s former relationship with a union official. She telephoned the paper to demand a retraction and an apology. The Australian complied that same day and withdrew the article from its website.

In a published apology, the paper said that the “assertions are untrue,” that it hadn’t made any attempt to contact Gillard for a response and that it “unreservedly apologizes.” In an article on Sept. 3, the Australian reported on its interactions with Gillard in the matter and quoted Editor-in-Chief Chris Mitchell describing the prime minister as “apoplectic” in her demand for an apology. Gillard declined to answer questions about the conversation.

“There is a climate of fear among my colleagues about retribution from News Ltd. if they campaign for government policies,” said Murphy, the Labor lawmaker, in an interview in Canberra. “News Ltd. has the power to get rid of this Labor government. I have an unshakeable belief in that.”

Switch in Support

Murdoch’s record for holding sway over Australian politics goes back to 1972, when his support helped Labor win. Three years later, he switched his backing to the Liberal party, which took control of the government.

He stepped into New York City politics in 1977, one year after his purchase of the New York Post, with the paper’s endorsement of Ed Koch.

“I would not have been elected if the Post had not endorsed me,” Koch said in a phone interview. When Murdoch called to tell him of the endorsement, “I said ‘You’ve just elected me mayor.’” Koch is a Bloomberg Radio commentator.

In 1979, Murdoch started his streak of supporting winning U.K. prime ministers by endorsing Margaret Thatcher. Politicians have been courting Murdoch ever since. Before he became prime minister, when he was still the opposition leader, Tony Blair, flew to Australia in 1995 to address a meeting of News Corp. executives.

‘Courting’ Murdoch

“We have all got to be open about the fact that both front benches spent a lot of time courting Rupert Murdoch,” said Conservative Prime Minister David Cameron in the U.K. House of Commons in July. “This sort of relationship needs to be changed and put on a more healthy basis.”

He made the comment as the long-simmering phone hacking scandal erupted. Back in 2007, the News of the World’s former royal reporter, Clive Goodman, and Glenn Mulcaire, a private investigator, were jailed for tapping the mobile phones of prominent people. News Corp. insisted the phone hacking went no further.

Then last year London’s Metropolitan Police reopened the probe after the Guardian and the New York Times reported the practice was more widespread. Among those implicated was former News of the World editor Andy Coulson, Cameron’s communications chief. Coulson quit his government job at the start of this year and was later arrested in the hacking probe.

Phone Hacking

In July, the Guardian newspaper reported that News of the World journalists in 2002 hacked into the voicemail of Milly Dowler, who had disappeared. The hacking interfered with the police investigation and gave her parents false hope she might be alive. As companies withdrew advertising from the newspaper, Britain’s biggest-selling, News Corp. decided to close it.

In Australia, Murdoch’s papers have mainly backed the Liberal party since 1975. Even so, their opposition to the Labor party eased from 1983 to 1996, when Bob Hawke and Keating led the country, according to professor Smith at the University of Sydney.

Hawke and Keating fostered stronger links with business and were “very clever” in the way they engaged the media, said Richard Stanton, author of “Do What They Like: The Media in the Australian Election Campaign 2010.” “They pursued an agenda the media couldn’t help but agree with, like economic reform.”

Tom Mockridge, a former adviser to Keating, is now chief executive officer News International, which runs News Corp.’s papers in the U.K.

Communication Strategy

Gillard has been less skillful than Keating at handling the press, Stanton said. She reversed a pledge before the last election not to enact a carbon tax, he said, then told the public, “you have to like it, and then tried to run an information campaign after the event.”

In a Sept. 6 editorial, the Australian said Gillard lacked authority, stemming “from her own inconsistencies and failure to deliver.” Gillard “seems to have expended the little political capital she had,” the newspaper said. “By her own criteria of securing our borders, delivering a mining tax and implementing a climate-change policy, she is without success.”

Murdoch’s papers aren’t the only ones criticizing Gillard and her party. Radio stations and papers owned by Fairfax Media Ltd., Australia’s second-largest newspaper publisher, last month revived allegations first published in 2009 that Craig Thomson, a Labor lawmaker, used a union credit card to pay for prostitutes before he entered parliament.

Defending Lawmaker

Gillard has defended Thomson, whose departure would threaten her government’s hold on power. Thomson last month resigned as chairman of the House Economics Committee and said in a statement e-mailed by his media officer, David Gardiner, that he continues to reject claims of wrongdoing.

Fairfax’s largest dailies, the Sydney Morning Herald and the Age, supported Gillard in the last election.

In the aftermath of the News of the World scandal, Bob Brown, the leader of Australia’s Greens party, called for an inquiry into media concentration, ownership and content. Gillard, who relies on the Greens to maintain a majority in parliament, said July 14 she will discuss the proposal with lawmakers. In May, Brown called Murdoch’s papers “the hate media” because of their reporting on the climate change debate.

Privacy Laws

Gillard’s government may also toughen privacy laws to give people the statutory right to sue for invasion of privacy, Justice Minister Brendan O’Connor said July 21. The government said it was seeking public comment on a move that may increase compliance costs for media organizations.

Gillard told reporters July 20 that Australians watching “all of that happening overseas with News Corp., are looking at News Ltd. here and wanting to see News Ltd. answer some hard questions.”

In his testimony to the U.K. Parliament in July, Murdoch said he had “never guaranteed anyone the support of my newspapers.” Asked about his meetings with premiers, Murdoch replied: “I wish they would leave me alone.”

So does the Australian lawmaker Murphy.

“Both sides of politics are guilty of courting Murdoch,” he said. “And both are guilty of responding to his overtures.”

--With assistance by Robert Hutton, Simon Thiel and Eddie Buckle in London and Henry Goldman in New York. Editors: Peter Hirschberg, Anne Swardson, Robert Simison

To contact the reporters on this story: Gemma Daley in Canberra at gdaley@bloomberg.net Robert Fenner in Melbourne rfenner@bloomberg.net

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


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