Bloomberg News

Gillard Calls Leadership Vote as Labor Mulls Return to Rudd

March 21, 2013

Australia's Prime Minister Julia Gillard

Julia Gillard, Australia's prime minister. Photographer: Mark Graham/Bloomberg

Prime Minister Julia Gillard called a ballot for the leadership of the Labor party after a senior member of her government said it can’t win elections due in six months from its current position in opinion polls.

The ballot of the Labor caucus for a new leader and deputy leader of the governing party will take place at 4:30 p.m. local time in Canberra today, Gillard told parliament.

Simon Crean, who led Labor in the early 2000s, earlier urged former leader Kevin Rudd to stand against Gillard and said he will nominate himself for the deputy position, currently held by Treasurer Wayne Swan. Gillard has battled to improve Labor’s position in opinion polls before the Sept. 14 election, weighed by scandals involving party lawmakers and a decline in government revenues as a surging local currency hurts the nation’s manufacturing industries.

“The only alternative to another Rudd-Gillard showdown now is if one of them stands aside and lets the other win the prize unchallenged,” said Andrew Hughes, who conducts political- marketing research at the Australian National University in Canberra. “That would also mean that the other would have to leave town -- permanently.”

No-Confidence Vote

Opposition leader Tony Abbott, whose Liberal National coalition has led in opinion polls for almost two years, failed to garner the outright majority needed on the floor of parliament for a vote of no-confidence in the government.

“The people of Australia deserve a strong and stable government,” Abbott said. “This cannot go on.”

Rudd’s office said it had no immediate comment, when asked if he would stand against Gillard.

Australian stocks reversed declines after Crean’s call for a leadership ballot, while bonds and the Aussie dollar were little changed. The benchmark S&P/ASX 200 Index (AS51) of shares rose 0.1 percent to 4,974.0 as of 2:51 p.m.

The Australian dollar bought $1.0375 from $1.0379. Ten-year government bond yields were 3.58 percent, maintaining their advance from 3.51 percent.

A Newspoll survey of 1,143 people published March 12 in the Australian newspaper showed a Rudd-led Labor getting 56 percent support on a two-party preferred basis and the opposition under Abbott getting 44 percent.

The poll, with a margin of error of plus or minus three percentage points, forecast a 52-48 percent split in favor of the opposition with Gillard as Labor leader. The two-party preferred measure is designed to gauge which party is likely to win enough seats to form a government.

Rudd Ousted

The leadership ballot comes 33 months after Rudd was ousted by Gillard in a late night party-room coup. Rudd challenged to regain the leadership in February last year and lost that ballot by 71 votes to 31 in the Labor caucus.

While Rudd enjoys greater support than Gillard among the general public, he faces antipathy from Labor’s senior ranks over his leadership style. Swan last year described him as a man of “great weakness” who had demeaned his party colleagues during his three-year tenure as prime minister.

Rudd, 55, has remained on the backbench since resigning as foreign minister to challenge Gillard last year. The Mandarin- speaking former diplomat, enjoyed record-high popularity ratings after defeating John Howard’s long-running Liberal-National coalition government in 2007, boosted in part by his apology to the indigenous Aboriginal population for systematic abuses by the state.

Mining Tax

His ratings fell as Labor members complained about his autocratic attitude, and they plummeted further when mining companies helped finance an advertising campaign against his plan for a 40-percent tax on resource profits.

Gillard, 51, enacted a 30-percent mining levy after taking office in 2010, and has since struggled to convince Australians that the resource tax, as well as one on carbon emissions, will benefit them. The government announced Feb. 8 that the mining levy had raised A$126 million in its first six months, less than 10 percent of the A$2 billion the Treasury forecast for the year to June 30.

Even as the economy expanded in 2012 at its fastest pace in five years, unemployment has been rising in areas where Labor has been traditionally strong. While Chinese demand for iron ore and coal has driven a mining boom in the country’s north and west, manufacturing and retail areas in Australia’s east have struggled to remain competitive, with the Aussie dollar in the past two years averaging 30 cents above the level of the prior two decades.

Manufacturing Downturn

While Gillard’s administration has warned about the impact of the exchange-rate’s appreciation, it and the Reserve Bank of Australia have refrained from any Swiss or Japanese-style attempt to rein in the currency. Philip Lowe, the central bank’s deputy governor, said March 19 that the strength of the currency, along with higher savings levels, had in fact helped stabilize the economy.

Much of the manufacturing downturn has hit electorates with a track record of voting Labor, further eroding the popularity of Gillard’s government. One casualty was Rosella, a saucemaker founded before Australia became a nation in 1901, announced the shuttering on March 1 of its plant with the loss of 70 jobs in an industrial area of Sydney.

Gillard’s record in pushing through groundbreaking legislation, including the world’s first compulsory plain packaging for cigarettes, has been overshadowed by scandals involving Labor lawmakers.

In one case, Craig Thomson, a former national secretary of the Health Services Union, faces charges that he misused a union credit card to pay for prostitutes, air travel and cash advances between 2002 and 2007, before he entered parliament. Thomson, who resigned from Labor last year and remains in parliament as an independent lawmaker, denies the allegations.

Fragile Support

Labor’s fragile support base is also evident at the state level, where it only holds power in the two least populous of Australia’s six states. Since the 2010 election, Labor has lost 109 seats at a state and territory level, where there are a total of 598 seats.

“Labor needs to gain the attention of voters who have stopped listening to them, and changing leaders again may be their best hope of doing that,” said Zareh Ghazarian, a lecturer in politics at Monash University in Melbourne. “The party now has to devote every inch around the new leader to arrest the slide in opinion polls.”

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

To contact the editors responsible for this story: Edward Johnson at ejohnson28@bloomberg.net; Peter Hirschberg at phirschberg@bloomberg.net


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