Bloomberg News

Gillard Gets Post-Budget Boost as Labor Narrows Opposition Lead

May 14, 2012

Australian Prime Minister Julia Gillard

Julia Gillard, Australia's prime minister. Photographer: Ian Waldie/Bloomberg

Australian Prime Minister Julia Gillard, facing an election due next year, has regained ground from the opposition in an opinion poll after last week’s budget promised to hand out extra cash to households.

The ruling Labor Party’s primary vote climbed three percentage points to 30 percent and the opposition Liberal-National coalition’s backing slumped six points to 45 percent, according to a Newspoll released in today’s Australian newspaper. On a two-party preferred basis, which takes into account the country’s preferential voting system, the opposition’s lead shrank to 10 points from 18.

Today’s poll signals Gillard’s strategy of appealing to Labor’s core support of lower-income earners may be paying off. Her minority government is attempting to deflect the impact of scandals that have threatened its parliamentary control by promoting itself as a sound manager of the economy.

“The tactic to come up with a battlers’ budget has stemmed the bleeding for the government,” said Zareh Ghazarian, a political analyst at Monash University in Melbourne, using Australian slang for the working class. “Some of the core constituency that deserted Labor have liked what they’ve seen from the handouts but the polls show the government is still well short of where it needs to be before the election.”

The Newspoll survey of 1,204 people, conducted May 11-13, had a margin of error of plus or minus 3 percentage points. Support for Labor hit a record low of 26 percent in a Newspoll taken on Sept. 16-18 last year. The previous poll was conducted April 27-29.

Cutting Rates

Gillard’s government unveiled a federal budget on May 8 that aims to return to surplus next year and scrapped a planned cut in company taxes to fund payouts for low-and middle-income earners. Labor is aiming give the central bank, which cut interest rates on May 1, the flexibility to lower borrowing costs in a nation where almost 90 percent of mortgages are at variable rates.

The Newspoll shows voters evenly split on the question whether the budget would be good or bad for the Australian economy, at 37 percent each. On a question on how the budget would affect their financial position in the next year, 31 percent of voters between the ages of 18 and 34 said they would be worse off, compared with 47 percent over 50 years old.

Treasurer Wayne Swan’s budget includes a payment to families of as much as A$820 ($818) for each child in high school, while families with two children will receive an extra A$600 a year from July 2013 using revenue from the mining tax. The government has also introduced an insurance plan for the disabled and boosted its national dentistry health-care coffers by A$513 million to reduce waiting lists at dentists.

Gillard’s Challenges

Most benefits are allocated on a sliding scale that excludes higher-income earners.

“The budget was an appeal to Labor’s base, and while it may have spurred its vote with lower-income groups, the poll shows older, wealthier people are against it,” Newspoll Chief Executive Officer Martin O’Shannessy said in a phone interview today. “That’s creating a division that may be difficult for the government to manage come the next election.”

Gillard, Australia’s first female prime minister, is fighting to overcome setbacks that have weakened her control of the 150-seat lower house.

“Opinion polls come and go but what never seems to change is this is a dishonest and incompetent government,” Abbott, a 54-year-old Rhodes Scholar and former amateur boxer, told reporters in Brisbane today. Gillard’s government is living on “borrowed time,” he said.

Economic Management

Gillard received a fillip on May 1, when the Reserve Bank of Australia lowered its benchmark rate, the highest among major developed economies, by half a percentage point, to 3.75 percent. She said last month that a rate cut “could deliver widespread benefits for households and business.”

Australia’s unemployment rate fell to 4.9 percent from 5.2 percent in March, the lowest since April 2011.

The economy is being powered by demand for energy and minerals located in the nation’s north and west from emerging countries including India and China, driving a more- than 30 percent rise in the local currency in the past three years. That’s put pressure on non-resource industries such as manufacturing and tourism in the most-populous states of New South Wales and Victoria.

“The jury’s out over whether this poll boost can be lasting but it’s certainly comes as a relief for the government,” said John Warhurst, a political analyst at the Australian National University in Canberra. “It shows Gillard’s bid to use cash handouts to cut through the negativity surrounding the government may have had a positive impact.”

Minority Government

Gillard, 50, has needed the support of independent lawmakers and the Green party to keep Labor in power and pass legislation following the 2010 election that was the closest in seven decades. She has battled charges by the Tony Abbott-led opposition that she’s beholden to the Greens and broke a campaign pledge to oppose the carbon levy.

While she won a February leadership challenge by Kevin Rudd, whom she ousted as Labor leader and prime minister two years ago, her position has been damaged by scandals that have threatened to bring her minority government undone.

Tony Crook, a National party member of parliament for Western Australia who voted as an independent, joined the opposition coalition when parliament reconvened on May 8. Peter Slipper, the parliamentary speaker on whom Gillard had relied to solidify her control of the house, last month stepped aside to deal with fraud and sexual harassment claims that he denies.

Credit Card

Gillard on April 29 asked Labor lawmaker Craig Thomson to quit the party in the wake of allegations he used a union credit card to pay for prostitutes while working for the Health Services Union before becoming a lawmaker in 2007. Thomson, who has denied the claims, said he will continue to vote with the government and will make a statement regarding the claims to parliament later this month.

“The government’s still highly unlikely to be re-elected by it’s not just a question of winning or losing -- it’s how competitive it can be in the election,” Warhurst said. “It’s all about saving seats and some of the Labor backbenchers may think they’ve got a chance to do that now. In the short term, it takes some of the heat off Gillard and will quiet down any leadership talk.”

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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