Gillard Vows to Stay Australia Leader Amid Rudd Speculation

Julia Gillard predicted she will survive 2012 as Australia’s leader and Foreign Minister Kevin Rudd played down speculation he is planning a challenge, after days of wrangling that undermined the governing Labor party.

“I’m getting on with the job with the strong support of my caucus colleagues,” Prime Minister Gillard told reporters in Canberra today. Rudd, who is attending a Group of 20 foreign ministers’ meeting in Los Cabos, Mexico, told reporters that reports of his challenging Gillard are “based on an untruth” and denied he has sought anyone’s support for the job.

Cabinet ministers rallied behind Gillard after a lawmaker in the governing Labor party, Darren Cheeseman, broke ranks yesterday to call for the prime minister, the nation’s first female leader, to quit and hand the job back to Rudd. The disarray in Labor may boost the opposition Liberal-National coalition which is gearing up for an election next month in the state of Queensland that opinion polls say it will win.

Rudd, asked if he would challenge Gillard if there were a “leadership spill” in which she opened the floor for contenders within the party, told reporters: “That is not a prospect because we have a prime minister and I am the foreign minister.”

‘Completely Distracted’

The leadership rivalry has “the entire government -- from backbenchers to ministers -- completely distracted and is absolute political manna from heaven for Mr. Abbott,” said Haydon Manning, an associate professor in the Department of Politics and Public Policy at Flinders University in Adelaide, referring to opposition leader Tony Abbott. “The constant speculation just cripples the government.”

Australian equities rose in tandem with shares across the region on signs Europe is nearer a deal for a second Greek bailout. The S&P/ASX 200 Index (AS51) rose 1.4 percent to 4,256.1 at the close, compared with a 0.8 percent gain for the MSCI Asia Pacific Index as of 5:07 p.m. in Tokyo. The so-called Aussie dollar, the world’s fifth most-traded currency, rose 0.6 percent to $1.0773.

“It has the potential to sneak up on investors and at some stage people will have to reassess the risk they apportion to investing in Australia,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne, referring to the political strife.

Since forming a minority government following an August 2010 election, Gillard, 50, a former union lawyer, has seen her party’s support drop in polls after she pushed legislation on climate change and natural-resources taxes. Gillard has struggled to sell the initiatives, which were one condition for gaining support from independent and Green party lawmakers.

Running Behind

The decline, with a Newspoll survey this month putting Labor 14 percentage points behind the opposition Liberal- National coalition, has been seized on by opponents of Gillard. Labor lawmaker Cheeseman said yesterday the party couldn’t win the next election, due in late 2013, with Gillard in charge. His seat, in the same state of Victoria as Gillard’s, is the most marginally held in Australia, according to the Australian Electoral Commission.

Rudd, 54, said in an interview broadcast over the weekend that he’s changed the autocratic style that helped lead to his downfall in a late-night party coup in June 2010, and has learned to better delegate and consult with staff.

“We have a prime minister who is leading us,” Rudd said in an interview with Sky News broadcast yesterday. A challenge is not “on,” he said, without ruling out the possibility of one.

Rudd Leads Poll

A Feb. 2 to Feb. 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 has “either got to put up or shut up,” Simon Crean, a former Labor leader who is minister for regional Australia, told Australian Broadcasting Corp. radio today. “If Kevin Rudd can’t be part of the team, let him exit the team.”

A Galaxy poll conducted Feb. 15 to Feb. 16 showed Labor, led by Queensland Premier Anna Bligh, trailing the opposition by 20 percentage points ahead of the Queensland vote on March 24. The survey of 800 people, which gave no margin of error, shows the Liberal-National coalition with 60 percent and Labor with 40 percent in the two-party preferred voting system.

In contrast with the fortunes of some leaders, Gillard is facing the internal political strife amid economic strength. Consumer confidence in the country rose to the highest level since November, a private survey showed last week, and the nation’s unemployment rate dropped to 5.1 percent, compared with the 7.9 percent average for advanced economies last year measured by the International Monetary Fund.

Econony’s Growth

Australia’s A$1.4 trillion ($1.51 trillion) economy grew 2.5 percent in the year through the third quarter of 2011, a period that spans the first full 12 months of Gillard’s premiership, according to the latest figures available from the Australian Bureau of Statistics.

“One of the ironies of it all is this isn’t a dysfunctional government -- it’s getting things done,” said Nick Economou, a political analyst at Melbourne’s Monash University and co-author of “Media, Power and Politics in Australia.” Any failure to resolve the leadership issue “distorts the message they’re trying to get across,” he said.

Carbon Tax

Among Gillard’s legislative achievements is a carbon tax that she said before the 2010 election she would oppose, along with a 30 percent tax on coal and iron-ore profits. Mining companies including BHP Billiton Ltd. (BHP) have warned the measures will hurt investment and job growth in the nation, which has seen its exports led by Chinese demand for its natural resources.

Gillard had another legislative victory on Feb. 15 when Australia’s lower house passed legislation to introduce means- testing of rebates for private-health insurance. That and the mining tax bill are forecast to be approved in the upper house, where the Greens hold the balance of power.

A “small group” of Labor lawmakers is destabilizing the government with speculation about the leadership, Trade Minister Craig Emerson told the ABC.

‘Be a Mug’

A comeback for Rudd would be an historic turnaround. Labor lawmakers who opposed his autocratic style of leadership moved to depose him on poor poll ratings driven by his own effort to pursue a tax on resources profits.

“I’ve certainly reflected a lot on the last several years and you’d be a mug if you didn’t learn something from the past,” Rudd said in the interview with Sky, which followed a video uploaded on YouTube that shows him during his term as prime minister swearing and blaming others for having the wrong wording as he tried to pre-record a speech in Chinese. The former diplomat is fluent in Mandarin.

Gillard, who has denied her office was responsible for leaking the YouTube video, faced setbacks last month including independent lawmaker Andrew Wilkie’s decision to withdraw support for the government, reducing its parliamentary majority to one, and opposition demands for an inquiry into Labor’s role in clashes between police and aboriginal protesters.

Rudd has the backing of 40 of the 103 Labor 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, the paper said. The foreign minister will be overseas for meetings in Mexico, Washington, London, Tunisia and Malaysia until about Feb. 26, according to his office. Parliament returns in the capital, Canberra, the next day.

‘Well Short’

“Kevin hasn’t got the numbers to challenge,” Crean told the ABC today. “He’s well short of anywhere near a majority.”

Gillard’s support among voters as preferred prime minister fell 3 percentage points to 37 percent, with opposition leader Abbott rising 3 points to 40 percent, according to the Newspoll survey conducted Feb. 10 to Feb. 12. The Labor Party’s primary vote rose 2 points to 32 percent, behind 46 percent for Abbott’s Liberal-National coalition. The survey of 1,141 people had a margin of error of plus or minus 3 percentage points.

“I would find it easier to work with Kevin Rudd than Julia Gillard,” Wilkie told Sky News yesterday, adding he had discussed the possibility of Rudd returning as prime minister in a meeting with him in November. “Kevin clearly wants the job back.”

Abbott has said Australians can’t afford the carbon tax. The opposition leader has highlighted that last year the nation recorded its worst jobs growth in 19 years as currency appreciation made manufacturers uncompetitive.

‘Cannibalizing Itself’

“Every day the coalition is preparing for government while the government is preparing for another leadership change,” Abbott told reporters in Sydney today. “What we need is a government that is getting on with the job, not a government that’s in the business of cannibalizing itself.”

The Australian dollar has strengthened more than 60 percent against the U.S. dollar in the past three years, making products less competitive in overseas markets. BlueScope Steel Ltd. (BSL), the country’s largest steel producer, in August shuttered its export division. Toyota Motor Corp. and General Motors Co. have cut jobs in Australia this year, citing the currency’s strength, while Alcoa Inc. is reviewing the future of an aluminum smelter.

Australian bookmaker Sportsbet, which says it’s the nation’s largest online betting agency by revenue, is offering to return A$1.90 on every A$1 bet should Rudd be Labor leader at the next election, down from A$2.35 yesterday. A winning bet on Gillard would return $2.10.

“Most Australians are getting pretty sick of the leadership speculation federally,” said Queensland Premier Bligh, who is campaigning for state elections on March 24. “The sooner this is resolved one way or the other the better.”

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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