Gillard Clears Legacy of 2010 Unease in Australia Labor Leadership Victory

Australian Prime Minister Julia Gillard’s re-election as leader of the ruling Labor party may defuse public unease over how she came to power, giving greater scope to build voter support ahead of elections due next year.

Gillard’s 71-to-31 victory over Kevin Rudd in a party vote put a stamp on her position after the June 2010 uncontested race that followed Rudd’s ouster by Labor colleagues. Avoiding a public explanation of Rudd’s shortcomings last time was “an error, and it made it very difficult for the Australian public to understand what happened,” she said after yesterday’s win.

The next opportunities to galvanize the party come with the prime minister’s plans for a cabinet reshuffle and the government’s annual budget, due in May. Gillard sought to underscore differences with opposition chief Tony Abbott yesterday, pledging to implement an unprecedented levy on carbon emissions and pursuing an overhaul of health insurance.

“There’s no doubt about it -- Julia Gillard has now twice convincingly defeated Kevin Rudd,” said Malcolm Mackerras, a political analyst at the Australian Catholic University in Canberra. “There’s a real contest between Gillard and Abbott now, and while I would still say Abbott is more likely to win, it is a real contest.”

A poll released yesterday showed while Labor has narrowed a gap with Abbott’s Liberal-National coalition, it remains behind. The shortfall shrank by 4 percentage points from earlier this month to 10 percentage points in the Newspoll survey. The government’s 35 percent support was the highest in almost a year.

Dollar Slips

The Australian currency rose as much as 0.2 percent to $1.0784, the highest since Feb. 20, before trading at $1.078 at 5:03 p.m. in Sydney. The benchmark S&P/ASX 200 Index, which retreated 0.9 percent yesterday, closed 0.1 percent lower. Yields on 10-year government bonds declined 6 basis points, or 0.06 percentage point, to 3.98 percent, Bloomberg Bond Trader prices showed.

With Rudd sidelined, Gillard, 50, undertakes her second reshuffle of ministers in three months, with Rudd’s former post of foreign minister needing a permanent replacement. The prime minister, a former labor attorney, gave no indication she’ll take retribution on supporters of Rudd, a Chinese-speaking former diplomat who headed the government 2007-2010.

Resources Minister Martin Ferguson, Infrastructure and Transport Minister Anthony Albanese, Immigration Minister Chris Bowen and Manufacturing Minister Kim Carr had indicated before yesterday’s vote that they intended to back Rudd.

Photographer: Mark Graham/Bloomberg

Tony Abbott, Australia's opposition leader. Close

Tony Abbott, Australia's opposition leader.

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Photographer: Mark Graham/Bloomberg

Tony Abbott, Australia's opposition leader.

Gillard yesterday said at a news conference that decisions will be made “in coming days,” and that “my focus will be on having a team based on merit and the ability to take the fight up on behalf of Labor to our conservative opponents.”

Media Focus

The caucus vote was the culmination of months of tension within the party that escalated when Gillard, in an interview with the Australian Broadcasting Corp. this month, declined to specify whether she knew her staff was preparing, two weeks before Rudd’s 2010 overthrow, a victory speech that she subsequently delivered.

Local media’s continued focus on the 2010 drama was also evidenced in September, when Gillard said she was “not going anywhere” in the wake of News Ltd. newspapers reporting that senior government figures they didn’t identify urged her to quit.

Rudd’s downfall came amid declining poll ratings in the aftermath of proposing a 40 percent tax on “super profits” of resource projects in Australia that some in his own party opposed, and after he shelved a plan for a carbon-trading system.

‘Humiliate’ Rudd

Attorney General Nicola Roxon, a Gillard supporter, said last week that Labor colleagues at the time desisted from detailing Rudd’s shortcomings out of a desire not to “humiliate” him. “In the long run we would have done better to discuss those issues at the time,” she said.

Abbott, 54, a volunteer lifeguard and former amateur boxer who once studied for the priesthood, yesterday kept up his pressure for an election. The last one, in August 2010, was the closest since 1940, and left neither of the main groups with a majority. Gillard, the first female prime minister, assembled a coalition with independent lawmakers and the Green party.

“The only way that we can get real change in this country is with an election,” Abbott said at a press conference.

Abbott yesterday called on the independents who support the government to indicate they would back a no-confidence motion, which if successful could force an early election. His coalition has pledged to scrap the carbon-emission plan, and a tax on mining that Gillard won passage of in the lower house, after she brought BHP Billiton Ltd., Rio Tinto Group and other iron-ore and coal producers into negotiations.

Abbott Question Marks

The opposition leader has failed to sell his own candidacy for government leadership to the public, with the Newspoll showing 57 percent of voters were dissatisfied with his performance. Gillard still trails Abbott by 36 percent to 38 percent as preferred prime minister. The poll of 1,152 people had a margin of error of plus or minus 3 percentage points.

“There are question marks over Tony Abbott as leader,” said Andrew Hughes, who conducts political-marketing research at Australian National University in Canberra. “How much further ahead would the coalition be if they had a popular leader?”

Meantime, Rudd’s pledge to support Gillard through the next election failed to convince all observers. Haydon Manning, an associate professor in the Department of Politics and Public Policy at Flinders University in Adelaide, said “I can’t see him sitting quietly on the backbench. He’ll try to keep himself in the front of the minds of the Australian voters.”

Unfinished Agenda

The prime minister’s unfinished agenda includes submitting the mining tax for final approval to the Senate, where the Green party holds the balance of power, and assembling a national disability-insurance program. The administration plans legislation for the rollout of a A$36 billion ($38 billion) government-owned high speed Internet network.

Also on the list: measures to strengthen the domestic shipping industry through tax incentives for Australian- registered vessels, parliamentary documents show. Parliament goes on a six-week hiatus from March 22.

As the new Cabinet prepares its budget, pressure may come from companies hurt by exchange-rate gains. The currency has risen 45 percent against the dollar in the past five years, propelled by a mining boom predicted to last decades as the urbanization of hundreds of millions of people in China and India drives demand for iron ore, liquefied natural gas and coal.

Bold Government

BlueScope Steel Ltd., 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. Alcoa Inc. is reviewing the future of an aluminum smelter.

“Resisting the ‘siren song’ from struggling non-mining sectors of the economy seeking assistance would be a challenge for even the most popular government,” said James McIntyre, a senior economist in Sydney at Commonwealth Bank of Australia.

Another challenge will be maintaining the cohesion of an administration lacking a majority.

“Given the extraordinary difficulties placed on the minority government in negotiating legislation through parliament, it’s been an effective government and a fairly courageous one,” said Norman Abjorensen, a political analyst at Australian National University in Canberra. The leadership speculation hurt her ability to get her message through, he said.

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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