Gillard-Rudd Rift Makes Australia Labor Agenda a Harder Sell as Vote Nears

Fallout from the second leadership contest for Australia’s ruling party in 20 months will leave the victor needing to overcome near-record low public support and resuscitate the government ahead of elections due next year.

Supporters of Prime Minister Julia Gillard are seeking to discredit former leader Kevin Rudd, who criticized her leadership after arriving back in Australia today, ahead of a Feb. 27 referendum in the Labor caucus on her post. Treasurer Wayne Swan said Rudd had “demeaned” colleagues, and Defense Minister Stephen Smith said the government was “frozen” under him in 2007-2010. Chris Bowen, immigration minister, said that Rudd should run again, and that it’s not good for Labor to be trashing reputations.

“Regardless of who wins, it will be very hard to convince voters to trust and believe in the Labor brand,” said Andrew Hughes, who conducts research in political marketing at the Australian National University in Canberra.

At stake for Labor after the contest is convincing voters its legislation to tax carbon emissions and mining profits -- opposed by business groups -- will pay off for the nation. The party was 14 percentage points behind the opposition Liberal- National coalition in a poll earlier this month, even amid falling unemployment and rising consumer confidence.

Appeal to Voters

“Julia has lost the trust of the Australian people,” Rudd told reporters today in Brisbane, declaring that he will contest the ballot. “I want to finish the job the Australian people elected me to do.”

Rudd, who resigned this week as foreign minister on a trip to the U.S., said he would not challenge Gillard a second time if he loses the vote and instead would serve as a backbench lawmaker.

Gillard, 50, has sought to make the coming vote the end of her rivalry with Rudd, whom Labor ditched in June 2010 after he backtracked on his own carbon-tax proposal and pursued a form of mining tax that some in his own party opposed.

“This is not an episode of Celebrity Big Brother,” Gillard told reporters in Adelaide today. “This is about who should be prime minister.”

Opposition leader Tony Abbott, 54, told reporters today that he “just can’t believe the poison in the Australian Labor party.” The Liberal-Nationals have pledged to scrap the mining and climate-change measures. The mining tax has yet to become law, awaiting a vote in the Senate.

The Australian dollar was unchanged following Rudd’s announcement, with the currency buying $1.0739 at 2:46 p.m. in Sydney, 0.2 percent above yesterday’s close. Australia’s benchmark 10-year bond yield was 4.10 percent, six basis points higher than the previous close.

Gillard’s Risk

Rudd’s declaration that he will not challenge the prime minister a second time may remove the risk for Gillard that history could repeat itself. Former Labor Prime Minister Paul Keating unseated Bob Hawke 20 years ago on his second attempt in six months.

Gillard pledged during a news conference in her hometown of Adelaide yesterday to “renounce any ambition” for leadership if she loses.

The winner of the Feb. 27 vote may take heart from another Keating precedent. Labor was behind in polls through much of 1992 after the intra-party battles the previous year. It then regained the lead and won re-election in March 1993, turning voters’ focus to the Liberal-National coalition’s proposal for a 15 percent goods and services tax.

‘Lance the Boil’

A “decisive” win by Gillard could “lance the boil and then Gillard can get back to her message of being a good reformer and legislator,” said Malcolm Mackerras, a political analyst at the Australian Catholic University in Canberra and author of books including “Australian Political Facts.” “Then the government might just get back on track and have a chance of winning the next election.”

As lawmakers began declaring for either Gillard or Rudd, the Australian newspaper tallied 66 in favor of the prime minister, with 31 against and six undecided.

“It would be disastrous for Labor if Rudd could get more than 30 votes because the party would be entering the nightmare zone as he will see that as a mandate to keep up his campaign of destabilization,” Mackerras said.

Swan’s Comments

Swan, treasurer since Labor returned to power after 11 years in opposition in 2007, is among Gillard supporters with stakes to lose should backing swing toward Rudd. He said in a statement after the foreign minister resigned that when Rudd was leader he had wasted opportunities with “dysfunctional decision making and his deeply demeaning attitude towards other people, including our caucus colleagues.”

Both Swan and Gillard the past two days said Rudd had undermined Labor’s August 2010 election campaign, which ended with the closest result since 1940. Gillard assembled a government through the support of independents and Greens, and now has a majority of one.

Tensions simmered since Rudd’s ouster in June 2010. Last September, Gillard said “I’m not going anywhere” after media reports cited unnamed Labor officials urging her to consider resignation in the wake of a decline in poll ratings. The infighting intensified after Gillard declined in an interview with the Australian Broadcasting Corp. last week to specify whether she knew her staff was preparing, two weeks before Rudd’s overthrow, a victory speech she subsequently delivered.

Leadership Questions

Abbott has sought to reinforce his message that the Gillard administration lacks legitimacy because of the 2010 election result, telling reporters that Rudd was the last prime minister with a mandate from the voters.

Besides undoing the carbon and mining taxes, Abbott’s platform includes reviewing the government’s national broadband network plan and reversing means-testing on rebates for private health insurance -- legislation that Gillard won passage of on Feb. 15 in the lower house.

Abbott also plans to introduce a parental leave program financed by an increase in the company tax rate. During the 2010 campaign, he made “family” values one of his themes. Gillard is the first Australian prime minister who isn’t married, and she doesn’t have children.

Shift in Cabinet

One immediate outcome of Feb. 27 may be a shift in Cabinet members as the winner considers the comments made and votes cast in the contest.

“There has to be and will be a major reshuffle,” predicted Hughes. “Voters will have to get used to new ministers in different portfolios.”

Rudd today urged voters to “pick up the telephone, speak to your local members of parliament” as he looks to boost the number of members of parliament willing to back him.

“Rudd’s started something that he’s got to finish by challenging,” said John Warhurst, a professor at Australian National University in Canberra. “His tactics of calling on the Australian people to get behind his comeback is to emphasis his supposed popularity with voters and get members to think about not who they may prefer to lead them, but who may have a better chance at winning the next election.”

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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