Bloomberg News

Long Campaign Looms on Gillard’s Australia Election Surprise

January 30, 2013

Australian Prime Minister Julia Gillard

Australia's Prime Minister Julia Gillard during an interview in her office in Canberra, Australia. Photographer: Ian Waldie/Bloomberg

Australia is set for its longest election campaign, with Prime Minister Julia Gillard counting on a record of growth and low unemployment to overcome a shortfall in support for her minority Labor government since March 2011.

Gillard, 51, yesterday fixed the vote for the lower house of parliament and half the Senate for Sept. 14, 11 weeks before it had to be held. While incumbents typically set ballots weeks before the date, Gillard probably opted for a prolonged contest to focus voter attention on the character of opposition head Tony Abbott, who she leads in polls as preferred prime minister.

“Labor believes the harder people look at Abbott, the less they’ll like him, and setting an election will focus people’s minds” on him, said Zareh Ghazarian, a politics lecturer at Monash University in Melbourne. “The government has done remarkably well with the economy, but its achievements have been drowned out. Some of it comes back to Abbott’s ability to muddy any sort of positive message the government has put out.”

At stake is the legacy of taxes on carbon and mining profits that Abbott vows to scrap, along with a strengthening in worker rights. Another potential fault line in the contest: Abbott’s championing of “family” values against the unmarried, childless prime minister, who has labeled him a sexist and misogynist.

Public Support

While the government has trailed in polls for more than 20 months, its performance has improved since the implementation of the carbon legislation July 1, after Abbott’s predictions of the measure creating a “wrecking ball” for growth failed to bear out. Gross domestic product will rise 3 percent this year, compared with 1.54 percent for advanced economies as a group, according to October forecasts from the International Monetary Fund.

Hours after Gillard announced the date, Australia’s benchmark stock index closed higher for a 10th day, capping its longest winning streak since October 2003 and underscoring rising confidence in the economic outlook as demand in China, Australia’s biggest export destination, strengthens.

Labor rose 3 percentage points to 49 percent on a two-party preferred basis, with Abbott’s Liberal-National coalition falling 3 points to 51 percent, according to a Newspoll survey published Jan. 15. The measure is the best gauge of which major party is likely to win the seats required to form a government.

On the question of who would make the better prime minister, Gillard extended her lead over Abbott by 3 points to 45 percent compared with his 33 percent.

Rate Cuts

Helping the administration is the central bank’s half- century low benchmark interest rate, in a nation where most mortgage borrowers have adjustable rates. The sixth rate cut in 14 months in December also helped business sentiment jump by the most in more than a decade, a private report showed this week.

Gillard has highlighted her government’s commitment to bring back a fiscal surplus as creating room for Reserve Bank of Australia Governor Glenn Stevens to lower borrowing costs.

While Stevens’s term at the RBA’s helm expires Sept. 17, days after the election, the government has the power to either reappoint him or name a successor three months before his time is up. Under government conventions, the administration will refrain from making an appointment during a caretaker period that begins Aug. 12.

Rate Cuts

The government should hold off announcing the next head of the central bank until after the election, opposition finance spokesman Andrew Robb said in an interview with Bloomberg Television from Canberra today.

“We’re in uncharted waters,” Robb said. “We should work through some of these issues because normally these things in an election campaign would be put off until there is clarity about who is going to form the next government. That should apply in this case as well.”

For all the economic stability that Australia has enjoyed compared with a crisis-hit Europe, deflationary Japan or post housing-collapse U.S., the government hasn’t pulled ahead in opinion polls.

One complication is the nation’s strong currency, which has surged 21 percent against the U.S. dollar in the 31 months since Gillard ousted predecessor Kevin Rudd as prime minister. The gains have hurt tourism and manufacturing, contributing to the worst back-to-back years of job growth since the Asian financial crisis, with much of the drag among workers who form Labor’s traditional support base.

Plan Coming

Gillard yesterday said the Aussie’s strength needs to be addressed. In contrast with Switzerland or Japan, the nation has avoided a policy of weakening its exchange rate to aid export competitiveness.

“We have to have a plan which can withstand the possibility of a persistently strong dollar into the future, not simply rely on the economic assumption that our dollar will fall,” Gillard said in yesterday’s Canberra press conference, without elaborating.

Insecurity arising from the high Australian dollar, falling productivity growth and an expected “growth hole” in the nation’s investment pipeline needs to be addressed in the election, Innes Willox, chief executive of the Australian Industry Group, the nation’s top business lobbying group, said in an e-mailed statement yesterday.

“Australia now faces an eight-month election campaign which will mean that some significant investment decisions by business will be put on hold,” Willox said.

Policy Reversal

Gillard’s re-election chances have been undermined by coalition attacks on her integrity linked to her reneging on a pledge not to implement a carbon tax, in return for support from the Australian Greens party that she needed to form a government. Three months after winning the prime minister’s job in a party coup against Rudd in June 2010, Gillard assembled a minority government with support from the Greens and independents.

A former labor lawyer, the nation’s first female prime minister in 2010 ran against an opposition leader who repeatedly told voters he was a supporter of family values. In one speech, he said “the most conservative instinct of all” is to have a family. Gillard has faced what she said in a September 2011 interview was a nation with a “blokey” culture.

Gillard accused Abbott of “repulsive double standards when it comes to misogyny and sexism,” last year in parliament, and said he had been “catcalling across this table at me as I sit here as prime minister.” She produced quotes she attributed to Abbott that she said offended her “on behalf of the women of Australia.”

Spousal Support

A former journalist and amateur boxer who studied for the priesthood, Abbott was born in London to Australian expatriate parents. In the past year, the Sydneysider Catholic has been interviewed several times with his wife Margie, who has highlighted his relationship with his three daughters and defended him against Gillard’s claims of misogyny.

Abbott, 55, is a Rhodes Scholar who canceled some of his annual summer holidays this month to fulfill his commitments as a volunteer firefighter, battling blazes that destroyed homes and threatened lives on Australia’s east coast.

The opposition chief won the party leadership in December 2009 on opposing a carbon emissions trading system, which his predecessor Malcolm Turnbull had supported for Australia, the developed world’s biggest polluter of greenhouse gases per capita. Today Abbott reiterated that he would be prepared to call a double dissolution election should he win power in September and his bid to dismantle the carbon tax be blocked in the Senate.

Immigration Policy

“The coming election will be a referendum on the carbon tax,” Abbott said in a speech in Canberra today. “Above all, it will be a referendum on economic management because stronger economic growth is what government has to deliver.”

Abbott says the government’s immigration policy contributed to a surge in asylum seekers. More than 600 refugees have drowned in the waters between Indonesia and Australia in the past three years, according to a government-commissioned report. His opposition coalition has also vowed to cut public sector jobs, create a “Green Army” to improve the environment, and increase payments to new parents.

“He’s got vague promises out there frankly that don’t add up,” Anthony Albanese, who manages the government’s affairs in the lower house of parliament, told Australian Broadcasting Corp. radio today. “He’s been able to get away without proper scrutiny and this will, I think, change that game.”

‘Pre-Emptive Strike’

Australian Electoral Commission records show the federal campaign will be the longest according to data going back to 1951.

“Gillard’s pre-emptive strike makes her look like a leader,” said Andrew Hughes, who conducts political-marketing research at the Australian National University in Canberra and is predicting a narrow win for the coalition. “Polls show Labor is still in trouble so it should use this year to sell its positive economic record and differentiate itself against Abbott, known to some voters for his ‘Mr. Negative’ image.”

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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