Bloomberg News

Gillard Seen Prevailing Over Rudd in Australia’s Labor Leadership Ballot

February 26, 2012

Australian Prime Minister Julia Gillard and predecessor Kevin Rudd face off in a leadership contest today, with the victor needing to revive the Labor party’s lagging ratings before elections due in 2013.

Gillard is the favorite to win the ballot of Labor lawmakers at 10 a.m. local time in the nation’s capital, Canberra, with a tally of voting intentions compiled by the Australian and Age newspapers showing the prime minister with a 2-to-1 margin. Rudd, who resigned as foreign minister last week as he sought to reclaim the nation’s top job, vowed yesterday that Gillard would have his “unequivocal support” should she prevail.

“All the indications show Gillard should win comfortably,” said Zareh Ghazarian, a political analyst at Melbourne’s Monash University. “After the ballot, she’ll be looking to get some traction with voters in getting her message across and try to turn the polls around.”

After weeks of political infighting, whoever wins needs to rebuild public support as the government tries to implement unprecedented taxes on mining profits and carbon emissions that the Liberal-National opposition says it would scrap. The prime minister must hold together a minority government that relies on the support of independent and Green party lawmakers, while narrowing the opposition’s double-digit lead in opinion polls.

Snap Election

Tensions have simmered within the party since Gillard toppled Rudd in a June 2010 party-room coup amid complaints about the autocratic style of his 2007-2010 prime ministership and concern over his slumping poll ratings.

Gillard cobbled together a minority government after the closest election in seven decades in August 2010. Any collapse in that arrangement risks triggering another national vote before 2013 that opinion surveys indicate the conservatives would win.

The Labor party’s primary vote of 35 percent trails opposition leader Tony Abbott’s coalition by 10 percentage points, according to a Newspoll published in the Australian today. The survey of 1,152 people conducted Feb. 23-26 had a margin of error of plus or minus 3 percentage points.

Abbott, 54, a volunteer lifeguard who once studied for the priesthood, says his coalition is ready for an election and presents a “stable and united team.” He hasn’t ruled out calling a no-confidence vote among lawmakers in the lower house of parliament that could trigger an early election if successful.

“I think for Australia’s sake, this government should go,” Abbott told reporters yesterday.

Ministerial Lineup

If Gillard wins today, one of her first tasks will be to consider whether her ministerial lineup needs its second overhaul in three months. She would have to select a replacement for Rudd as foreign minister and may choose to sideline Cabinet colleagues who declared they would vote against her in the ballot, such as Resources Minister Martin Ferguson and Kim Carr, minister for manufacturing.

Rudd, 54, defended his decision to contest the ballot, saying the party needed to choose a “new leadership course, which has some prospect of saving the Australian Labor government from electoral annihilation.”

“Sometimes you’ve got to take a stand, even though you think it’s going to be really tough,” he said in an interview with Channel 7 television today. “I’m resting very calm in my skin this morning.”

Rudd has promised not to mount a second challenge to Gillard if she wins. He may find a way out of that pledge should she fall further behind in polling later this year, according to Nick Economou, a political analyst at Melbourne’s Monash University.

‘Lightning Rod’

“Rudd is a lightning rod for dissatisfied Labor members, of which there’ll probably be a growing number as the year goes on,” said Economou, co-author of “Media, Power and Politics in Australia.” “The fundamental problem is she’s on track for election defeat, and as long as that’s the case, there’s always a big possibility of a challenge to her leadership.”

The victor’s efforts to boost Labor’s poll ratings may be hampered by an economy that recorded its worst annual job growth in 19 years in 2011, when house prices slumped by a record 4.8 percent.

While the biggest mining boom in a century is helping the economy sustain a two-decade long expansion, a currency that has gained 23 percent since Gillard took office in June 2010 is hurting manufacturing. The local dollar bought $1.0703 at 7:57 a.m. in Sydney today, after reaching $1.1081 on July 27, the highest level since it was freely floated in 1983.

BlueScope Steel Ltd. (BSL), the country’s largest steel producer, in August closed its export division. Toyota Motor Corp. (7203) and General Motors Co. have cut jobs in Australia this year, citing the currency’s strength, while Alcoa Inc. (AA) is reviewing the future of an aluminum smelter.

‘Slow Lane’

“A big chunk of the Labor voting base is in the slow lane of Australia’s two-speed economy,” said Shane Oliver, Sydney- based head of investment strategy at AMP Capital Investors Ltd., which has $100 billion under management. “Australia has to make the adjustment related to the strength in the mining sector, and trying to resist that is futile, but it’s a difficult balancing act for the government and whoever wins the ballot.”

The job market has shown signs of revival this year as employers added the most workers in 14 months in January and the unemployment rate unexpectedly declined to 5.1 percent, compared with the 7.9 percent average for advanced economies last year.

Interest Rates

The Reserve Bank of Australia kept its benchmark interest rate at 4.25 percent on Feb. 7, the highest among major developed nations, after lowering borrowing costs by a quarter percentage point twice late last year.

The central bank is likely to cut rates once more as risks to global growth remain, said Paul Bloxham, chief economist for HSBC Holdings Plc in Sydney and a former RBA official who predicts the economy will then accelerate next year. “The challenge for the government is that the next election is likely to occur in 2013 and it’s quite possible we’ll be in an environment where interest rates are rising.”

As parliament resumes in Canberra today, a Gillard government would aim to implement taxes on carbon emissions and resources profits as it strives to return the budget to surplus by 2012-13.

Under a law coming into effect on July 1, the government will charge about 500 polluters A$23 a ton for discharges until the set price gives way to a cap-and-trade system in 2015. A 30 percent tax on iron ore and coal profits is forecast to raise A$7.7 billion in the first two years. The mining tax bill is expected to be approved in the upper house where the government has the support of Greens, who hold the balance of power.

Narrowing the Gap

Today’s Newspoll shows Labor narrowing the gap with the coalition in the primary vote, cutting four percentage points from the 14-point margin in the previous poll on Feb. 10-12. Its 35 percent support in the primary vote was the highest in almost a year, Newspoll data shows. Gillard, with 36 percent, trails Abbott, on 38 percent, as preferred prime minister.

Australian bookmaker Sportsbet.com.au, which says it’s the nation’s largest online betting agency by revenue, is offering to return A$1.03 on every A$1 bet that Gillard will win the leadership contest. It will pay A$10 for Rudd. One better has wagered A$300,000 on a Gillard victory, Haydn Lane, a spokesman for sportsbet.com.au, said in an e-mailed statement.

“This is comfortably the biggest bet in Australian political history,” said Lane. “Four times as many individual punters have backed Rudd, but the ones with the biggest wallets all believe Gillard is across the line.”

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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