Bloomberg News

Rudd Quits as Foreign Minister Signaling Gillard Challenge

February 22, 2012

(Updates with Gillard comment in fourth paragraph.)

Feb. 22 (Bloomberg) -- Kevin Rudd resigned as Australian foreign minister, increasing speculation he will challenge Prime Minister Julia Gillard for the nation’s top job as support for her government hovers near a record low.

“There is one overriding question for my colleagues and that is who is best placed to defeat Tony Abbott,” Rudd said in Washington, referring to the leader of the Liberal-National opposition who is favorite to win elections due in 2013. Rudd, 54, told reporters he will return home to consult on his future and make another statement before parliament resumes next week.

Rudd’s move follows an escalation of tension in the ruling Labor party in the past 10 days that featured one Cabinet member telling him to “put up or shut up” and a lawmaker calling for the resignation of 50-year-old Gillard. The country’s first female leader, who herself ousted Rudd in a June 2010 party coup, has seen her minority government slide in opinion polls as she struggles to win public support for planned taxes on carbon emissions and mining profits.

Gillard said Rudd hadn’t contacted her to discuss his resignation. “I am disappointed that the concerns that Mr. Rudd has publicly expressed this evening were never raised with me,” she said in an e-mailed statement, adding she plans to hold a press conference tomorrow. Sky News reported that Gillard will tomorrow announce a leadership ballot to be held Feb. 27, without citing its source.

Abbott ‘On Track’

Australia’s dollar fetched $1.0681 as of 6:27 p.m. in Sydney, from $1.0663 yesterday in New York. Ten-year government bond yields were little changed after Rudd’s announcement at 4.10 percent, according to Bloomberg Bond Trader prices.

Abbott “does not have the temperament or the experience” to become prime minister, Rudd told reporters in Washington. “But at present, and for a long time now, he has been on track, to do just that.”

The opposition leader, a former amateur boxer who studied for the priesthood in the 1980s, leads Gillard as preferred prime minister among voters, with 40 percent support to her 37 percent, according to a Newspoll survey conducted Feb. 10-12. Labor’s primary vote rose 2 points to 32 percent, behind Abbott’s coalition on 46 percent. The survey of 1,141 people had a margin of error of plus or minus 3 percentage points.

‘Deeply Demeaning Attitude’

Rudd is “throwing down the gauntlet,” said Norman Abjorensen, a Canberra-based political analyst at the Australian National University. “His resignation speech looked like a leadership policy speech. He’s making a very high-profile campaign for the leadership.”

If Rudd challenges, he would need the support of 52 of the 103 lawmakers in the Labor party to beat Gillard and return to the top job. He was ousted by his own party when he couldn’t muster enough support to contest a challenge by Gillard amid criticism of his autocratic style and poor poll ratings.

Rudd has the backing of 40 lawmakers in the party caucus, the Australian newspaper reported Feb. 18, without saying where it obtained the information. Gillard’s backers estimate she has 45 votes, with the rest undecided, the paper said.

“The party has given Kevin Rudd all the opportunities in the world and he wasted them with his dysfunctional decision making and his deeply demeaning attitude towards other people including our caucus colleagues,” Deputy Prime Minister and Treasurer Wayne Swan said in an e-mailed statement. “He sought to tear down the 2010 campaign, deliberately risking an Abbott prime ministership, and now he undermines the government at every turn.”

Closest Election

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.

Rudd, who was in Washington for meetings with U.S. officials after attending a Group of 20 forum in Mexico, said Gillard failed to repudiate lawmakers’ suggestions this week that he was being disloyal to the party.

“I can only reluctantly conclude that I cannot continue to serve as foreign minister if I do not have the prime minister’s support,” Rudd said. “I therefore believe the only honorable thing and the only honorable course of action is for me to resign.”

After the nation’s closest election in seven decades in August 2010, Gillard was forced to cobble together a minority government with the backing of independent lawmakers and the Greens, giving her a majority of one in the lower house of parliament. Labor risks triggering the collapse of that arrangement if Rudd takes the helm, according to independent lawmaker Tony Windsor.

‘All Bets Are Off’

“I did a deal with the current prime minister,” Windsor told Sky News today after Rudd’s resignation. “If the Labor party suddenly wants to change arrangements in the middle of the stream, all bets are off.”

The renewed bout of wrangling over the leadership came after the Australian Broadcasting Corp. aired a documentary on Feb. 13 questioning Gillard’s version of when she decided to challenge Rudd for the party leadership in 2010. The ABC, citing unidentified Labor sources, said her staff prepared a victory speech two weeks before the coup. Gillard has maintained she decided on the day to mount a challenge.

Both have flagged achievements during their tenures as prime minister in public appearances in recent days. Rudd, a Mandarin speaking former diplomat, highlighted in an interview with Sky News broadcast Feb. 19 that as leader from 2007 to 2010, Australia stayed out of recession during the global financial crisis and his government prevented “mass unemployment.”

Labor Lawyer

The prime minister, a former labor lawyer, said her record includes “nation-changing reform” through the carbon levy and mining-tax legislation. Companies including BHP Billiton Ltd. have warned the measures risk hurting investment and job growth.

Australia’s A$1.4 trillion economy averaged a 2 percent expansion last year, the central bank estimated Feb. 10. Gross domestic product is predicted to increase 3.5 percent this year, it said.

Abbott has said Australians can’t afford the carbon tax and 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 65 percent against the U.S. dollar in the past three years.

Australian bookmaker Sportsbet.com.au, which says it’s the nation’s largest online betting agency by revenue, is offering to return A$1.33 on every A$1 bet that Gillard will win a leadership contest, and A$3.15 for Rudd.

Soap Opera

Rudd likened the constant leadership speculation to a soap opera and said it was distracting from the business of government.

“I also believe it’s affecting the business community,” he said. “It is important that business confidence is maintained in Australia, the economy and jobs are core to what any responsible government is about.”

“The challenge has been laid down now,” said Andrew Hughes, who conducts research in political marketing at the Australian National University. “I don’t think Rudd will win this time, but he may by the end of the year. The risk for him is if he get’s thrashed next week.”

--With assistance From Michael Heath and Angus Whitley in Sydney. Editors: Edward Johnson, Peter Hirschberg

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

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


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