Bloomberg News

Australian Leadership Speculation Intensifies on Gillard’s Woes

February 18, 2012

Feb. 19 (Bloomberg) -- Australian Prime Minister Julia Gillard faces rising speculation the predecessor she ousted will bid for a comeback, as her party trails in polls after pushing through unpopular climate-change and mining-tax measures.

Foreign Minister Kevin Rudd may challenge Gillard as soon as next month, The Australian newspaper reported yesterday. Labor Party cabinet ministers are criticizing the former leader and lobbying for caucus votes in support of Gillard, concerned her position is under threat, yesterday’s Sydney Morning Herald said. Both newspapers cited ministers they didn’t identify.

Since forming a minority government after the August 2010 election, Australia’s first female prime minister has seen her popularity slump in the polls after forging agreements with the Greens party and independent lawmakers on proposed legislation such as a 30 percent tax on coal and iron-ore profits. Gillard, 50, won power in June 2010 in a late-night coup by ousting Rudd, 54, who saw his support fall amid a backlash from mining companies such as BHP Billiton Ltd. after proposing a 40 percent tax on resources profits.

“Labor is very worried,” said John Wanna, a professor of public administration at the Canberra-based Australian National University, who isn’t aligned with any political party. “It’s starting to look like there’s enough heat in the newspapers that there could be truth in talk of a Rudd challenge.”

Rudd’s Support

Rudd’s supporters estimate he has 40 of the 52 votes he requires to win a challenge, the Australian reported yesterday, without saying where it obtained the information. Gillard’s backers estimate she has 45 votes, with the rest of the 103 Labor lawmakers undecided.

Rudd will be overseas from today for meetings in Washington, Mexico, Somalia, Tunisia and Malaysia until at least Feb. 24, he said in an e-mailed statement yesterday.

“It’s quite un-Australian the way Kevin Rudd and his supporters are harrying and harassing Julia Gillard and not giving her a moment’s peace,” the opposition coalition’s Christopher Pyne said, according to the Australian Broadcasting Corp. “While that’s going on, the Australian people are not having their issues addressed.”

A documentary broadcast Feb. 13 questioned Gillard’s version of when she decided to challenge Rudd for the Labor Party leadership. The ABC program cited unidentified officials in the party as saying her staff prepared a victory speech two weeks before she ousted Rudd. Gillard denied requesting a draft speech before her challenge and reiterated that she decided to seek the party leadership the day she ousted Rudd.

Poor Polling

Gillard’s support among voters as preferred prime minister fell 3 percentage points to 37 percent, with opposition leader Tony Abbott rising 3 points to 40 percent, according to a Newspoll survey conducted Feb. 10-12. The Labor party’s primary vote rose 2 points to 32 percent, behind Abbott’s Liberal- National coalition’s 46 percent. The Newspoll survey of 1,141 people had a margin of error of plus or minus 3 percentage points.

The slump came after Gillard faced hurdles last month including an independent lawmaker’s decision to withdraw support for the government, reducing its parliamentary majority to one, and opposition demands for an inquiry into Labor’s role in clashes between police and aboriginal protesters.

The speculation over Labor infighting contrasts with a more successful legislative record under former union lawyer Gillard compared with Mandarin-speaking ex-diplomat Rudd, who enjoyed an absolute majority. Her government will implement taxes on carbon emissions and coal and iron ore profits from July 1 as it strives to return the budget to surplus by 2012-13.

Carbon Tax

The government will raise A$10 billion ($10.7 billion) a year from the carbon tax by charging 500 polluters A$23 a ton for carbon discharges by 2015, when the government-set price gives way to a cap-and-trade system that allows companies that create lower emissions than their cap to then sell unused permits to other polluters.

A 30 percent tax on iron ore and coal profits is forecast to raise A$7.7 billion in the first two years. She had another legislative victory on Feb. 15 when Australia’s lower house passed laws to introduce means-testing of rebates for private- health insurance. Both laws are expected to be approved in the upper house, where her government has the support of Greens, who hold the balance of power.

The $1.3 trillion economy grew 2.5 percent in the year through the third quarter of 2011, a period that spans the first full 12 months of her leadership, according to the latest figures available from the Australian Bureau of Statistics.

Abbott Criticism

Gillard’s bid to trumpet her government’s economic credentials has been offset by criticism from Abbott, who says Australians can’t afford the carbon tax. The opposition leader has highlighted that last year the nation recorded its worst jobs growth in 19 years as currency appreciation made manufacturers uncompetitive.

Australia’s benchmark S&P/ASX 200 fell 2.08 percent last week, compared with a 0.94 percent gain for the MSCI Asia Pacific Index.

“Politics is becoming increasingly internal at the moment,” Mike Smith, chief executive of Australian and New Zealand Banking Group Ltd., said in an interview published in the Australian Financial Review yesterday. “Politics should be focusing on positioning Australia for the future and the reforms and policies needed to make the most of those opportunities.”

Export Industry

Australia’s export industry has suffered as the local currency strengthened more than 60 percent against the U.S. dollar in the past three years, making products less competitive in overseas markets. BlueScope Steel Ltd., the country’s largest steel producer, last August shuttered its export division. Toyota Motor Corp. and General Motors Co. have cut jobs in Australia this year, citing the currency’s strength, while Alcoa Inc. is reviewing the future of an aluminum smelter.

The Reserve Bank of Australia, which unexpectedly left its key rate unchanged at 4.25 percent on Feb. 7 after judging that two cuts late last year would help the economy weather Europe’s debt crisis, sees average growth of 3.5 percent in 2012, down from its Nov. 4 estimate of 4 percent.

Consumer prices will rise 3 percent in the year through to the fourth quarter, less than a previous prediction of 3.25 percent, the central bank said Feb. 10.

Australia’s Finance Minister Penny Wong shrugged off speculation of a leadership challenge in an interview on Sky News yesterday.

“A lot of people are interested in this but the people who elected us are much more interested in what we are doing when it comes to their jobs and how we are managing the economy,” Wong said. “The prime minister has delivered some very big reforms and Prime Minister Gillard has done that in a context where she hasn’t had the majority in the House of Representatives. Those are very significant achievements.”

--Editor: Paul Tighe, Jim McDonald

To contact the reporter on this story: Jason Scott in Perth at jscott14@bloomberg.net

To contact the editors responsible for this story: Paul Tighe at ptighe@bloomberg.net


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