Bloomberg News

Gillard Stops Short of Party Vote Amid Australia Labor Woes

February 21, 2012

(Updates with Gillard-Cheeseman talk in 6th paragraph.)

Feb. 21 (Bloomberg) -- Australian Prime Minister Julia Gillard and predecessor Kevin Rudd failed to quash speculation they will face off in a party leadership contest, raising the prospect of a prolonged showdown.

Rudd, whom Gillard ousted in 2010 and is now foreign minister, said “that is not in prospect” when asked at a press briefing whether he would participate if a leadership competition occurs. Gillard told reporters in Canberra she has the “strong support” of her Labor caucus, while declining to specify whether she’d call an internal vote.

Lack of a clear resolution over speculation Rudd harbors comeback plans would hamper Gillard’s strategy to build support based on a legislative record of success from climate-change and mining-tax measures to a health insurance overhaul. With parliament resuming session next week and a state election looming in Queensland, public focus on Labor infighting would aid opposition leader Tony Abbott.

“If Labor’s political stalemate stays in limbo, public support for the government will continue to drop off,” Andrew Hughes, who conducts research in political marketing at the Australian National University in Canberra, said after the remarks by Gillard and Rudd. “The longer they delay, the more airtime is given to the negatives of Labor. Abbott just has to sit back and wait.”

Gillard’s minority government relies on Green party and independent members for support, so any leadership change could heighten the risk of an early election, before her signature climate-change and mining-tax initiatives are planned to take effect July 1. Companies including BHP Billiton Ltd. have warned the measures risk hurting investment and job growth.

Cheeseman Conversation

“I enjoy the strong support of my colleagues,” Gillard, 50, said at a news conference in Sydney today. She confirmed she spoke yesterday to Labor lawmaker Darren Cheeseman, who broke ranks over the weekend to openly call for the prime minister to quit and hand the job back to Rudd. She declined to give details of their conversation.

Australia’s economic strength offers inducements to investors even amid political turmoil, according to Chris Dickman, a senior money manager at Altius Asset Management Pty Ltd. in Sydney, which started a fixed-income fund in June.

The nation’s 5.1 percent unemployment rate compares with the 7.9 percent average for advanced economies last year. Its government debt was 23 percent of gross domestic product in 2011, against 104 percent for advanced nations, International Monetary Fund data show.

Bonds, Stocks

“Regardless of who is leading the government, Australia’s fiscal imbalance is far smaller than many industrialized nations,” Dickman said. “For bond investors, that outweighs any possible short-term negative impacts of the leadership uncertainty.”

Yields on benchmark 10-year government notes were little changed after the Australia’s central bank said in minutes released today that it has the scope to ease policy if demand were to “weaken materially.” The bonds yielded 4.11 percent at noon, down from 4.12 percent yesterday, having yielded 4.05 percent on Feb. 17. The S&P/ASX 200 Index of equities rose 0.6 percent to 4,281.6 at 12:19 p.m., while the Australian dollar fell 0.3 percent to $1.073.

Business leaders said lack of clarity on the political outlook may hurt confidence as world growth slows.

“We need to make sure that there are as few distractions introduced as a result of our own domestic politics as possible,” said Peter Anderson, chief executive officer of the Australian Chamber of Commerce and Industry, in an interview with Australian Broadcasting Corp. “We have a very tough global environment in which Australian business needs to compete.”

‘Nation-Changing’

Gillard and Rudd each flagged achievements during their tenures as prime minister in public appearances in recent days, amid calls from some party members for a vote when parliament opens Feb. 28.

The prime minister, a former labor lawyer who’s also the nation’s first female head of government, yesterday said her record includes “nation-changing reform” through carbon levy and mining-tax legislation.

Rudd, 54, highlighted in an interview with Australia’s Sky News broadcast Feb. 19 that as leader from 2007-2010, Australia stayed out of recession during the global financial crisis and prevented “mass unemployment.” Speaking to reporters ahead of a Group of 20 meeting in Mexico, he said Australia “has a seat at the top global economic table” because of the steps his government took in 2008 and 2009.

Some Rudd backers in the caucus are drafting a petition to force a leadership ballot after parliament resumes in Canberra next week, Sky reported today, without citing sources.

‘Getting Smaller’

“It is a small group,” Trade Minister Craig Emerson told Sky today. “It is not getting bigger. If anything, the small group is getting smaller.”

“The reality is you’ve got two people running for this position, whether Kevin wants to admit it or not,” former Queensland state Labor Premier Peter Beattie said in an interview with ABC Radio yesterday. “It’s time there was a caucus meeting and the matter is dealt with once and for all,” he said, with the Feb. 28 resumption of parliament the most “practical” date. “Otherwise the damage to the Labor party’s campaign in Queensland will be simply immeasurable.”

Labor is on course to lose Queensland in a March 24 vote, polls indicate. A Galaxy poll conducted Feb. 15-16 showed Labor, led by Queensland Premier Anna Bligh, trailing the opposition by 20 percentage points ahead of the election. The survey of 800 people, which gave no margin of error, shows the Liberal- National coalition with 60 percent and Labor with 40 percent in the two-party preferred voting system.

‘Pretty Sick’

“Most Australians are getting pretty sick and tired of the leadership speculation federally,” said Bligh. “The sooner this is resolved one way or the other, the better.”

A Queensland loss would follow Labor’s defeat last year in New South Wales, the most populous state. The next federal election isn’t due until next year.

Cabinet ministers have rallied behind Gillard. “There is no doubt in the minds of lots of caucus members that the leadership speculation is a real distraction,” Minister for Workplace Relations Bill Shorten said in an ABC interview last night. “She will sort out the issues of leadership speculation but she will do it at a time when she thinks it isn’t taking too much away from everything else that we’ve got to get done.”

Rudd, attending a Group of 20 foreign ministers’ meeting in Los Cabos, Mexico, told reporters yesterday that reports of his challenging Gillard are “based on an untruth” and denied he has sought anyone’s support for the job.

Rudd Preferred

A Feb. 2-4 Nielsen poll revealed 57 percent of voters surveyed preferred Rudd as Labor leader, compared with 35 percent for Gillard. The survey of 1,400 people had a margin of error of plus or minus 2.6 percentage points.

“If I was Rudd I would hold my fire right now because I think there are two more flash points where he would be in a much better position to challenge -- one is after the Queensland election, the other one is after the introduction of the carbon tax” in July, said Nick Economou, a political analyst at Melbourne’s Monash University and co-author of “Media, Power and Politics in Australia.”

Gillard’s support among voters as preferred prime minister fell 3 percentage points to 37 percent, with 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 46 percent for Abbott’s Liberal-National coalition. The survey of 1,141 people had a margin of error of plus or minus 3 percentage points.

Former Boxer

Abbott, 54, a former amateur boxer who studied for the priesthood in the 1980s, has said 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.

The Australian dollar has 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, in 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.

“Every day the coalition is preparing for government while the government is preparing for another leadership change,” Abbott told reporters in Sydney yesterday. “What we need is a government that is getting on with the job, not a government that’s in the business of cannibalizing itself.”

‘Great Reformer’

The opposition chief is the “big beneficiary” of Labor strife, former Victoria state Labor Premier Steve Bracks wrote in an opinion piece in the Australian newspaper yesterday. While initiatives that “place Julia Gillard as one of Labor’s great reformers” haven’t been popular, an early election would forego advantages from tax cuts kicking in later this year, he wrote.

Greens leader Bob Brown today called on Gillard to assert her authority as she had the backing of the majority of the party. Australians were tired of the leadership turmoil, he said in an ABC Radio interview today.

“I’m picking it up everywhere,” he said. “People want to get on with the good governance of this country.”

--With assistance from Jacob Greber in Sydney and Indira A.R. Lakshmanan in Los Cabos, Mexico. Editors: Chris Anstey, Peter Hirschberg

To contact the reporters on this story: Jason Scott in Canberra at jscott14@bloomberg.net; Michael Heath in Sydney at mheath1@bloomberg.net

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


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