Gillard Names Former State Premier Carr Foreign Minister, Replacing Rudd

Australian Prime Minister Julia Gillard brought a former premier of the nation’s most-populous state into the Cabinet as she shuffled posts in the wake of her victory over political rival Kevin Rudd.

Former New South Wales Premier Bob Carr, 64, who oversaw the Sydney Olympic Games and was the state’s longest continuously serving leader, takes Rudd’s former post as foreign minister once he assumes a vacant seat in the Senate. Robert McClelland, an ex-attorney general who backed Rudd, was removed from Cabinet, while other supporters kept their jobs.

Gillard, the nation’s first female prime minister, is battling to galvanize the party after weeks of infighting that culminated in the challenge from former leader Rudd four days ago. Trailing the Liberal-National opposition by 10 points in opinion polls, her administration is seeking to build public support behind an agenda that includes unprecedented taxes on mining profits and carbon emissions due to take effect July 1.

“By appointing Carr, Gillard has really stamped her authority on the party,” said Zareh Ghazarian, a political analyst at Melbourne’s Monash University. “She’s carrying on the momentum she got from the start of the week in her big win against Rudd.”

The Australian dollar was at $1.0796 as of 2:03 p.m. in Sydney, little changed from $1.0795 before Gillard’s announcement. The benchmark S&P/ASX 200 Index, which fell 1 percent yesterday, was up 0.3 percent. The benchmark 10-year government yield was unchanged at 4.08 percent.

Swan’s Role

Deputy Prime Minister and Treasurer Wayne Swan, who attacked Rudd ahead of the Feb. 27 party-caucus vote for having “demeaned” colleagues when he was prime minister from 2007 to 2010, kept his posts. In an article published today, Swan said tycoons at Australian resource companies are threatening the nation’s democratic process by attempting to use their wealth to shape policy.

The mining and carbon-emission levies have incurred opposition from business groups. Gillard, 50, leads a minority government that relies on independent and Green party lawmakers to pass legislation.

Carr, who led New South Wales from 1995 to 2005, said he couldn’t say no to the job offer.

“When the prime minister asked me I said ‘I’m enlisted,’” he said at a press conference in Canberra with Gillard. An international-affairs enthusiast, Carr has a Malaysian-born wife and helped found the Chester Alan Arthur Society of Sydney, a group of Labor members who quiz each other on U.S. political trivia, according to Washington-based Brookings Institution analysts.

Senate Seat

Carr will take the Senate seat vacated by former Assistant Treasurer Mark Arbib, who stepped down after the leadership ballot in a move intended to help heal party divisions. Craig Emerson will continue to act as minister for foreign affairs until Carr becomes a senator, Gillard said.

Opposition lawmakers attacked former labor lawyer Gillard earlier this week amid media reports that she’d been forced to back down from offering Carr the post under pressure from senior party members. The Australian newspaper and others reported that Cabinet members Simon Crean and Stephen Smith argued the job should go to one of her supporters.

“The party machine seemed to be bucking against her,” Monash’s Ghazarian said. “This may exacerbate questions over her trustworthiness, but she’s obviously decided it’s better to be seen to be strong.”

Abbott’s Criticism

Under questioning from opposition lawmakers yesterday, Gillard said she had spoken to Carr, prompting criticism that she had been evasive in answers earlier in the week and that she lacked authority with her colleagues. Opposition leader Tony Abbott reinforced that theme today, saying “all week Julia Gillard denied that she had played any part in a deal to bring Bob Carr to Canberra.”

Abbott, 54, also said in the e-mailed statement that “her actions reflect a lack of confidence in any of her colleagues to represent Australia overseas.”

McClelland lost his housing and emergency management portfolios. Martin Ferguson remains in the portfolio of resources and energy and Chris Bowen stays as immigration minister. Both indicated before the leadership ballot they would vote for Rudd.

Brendan O’Connor will be promoted to Cabinet and take Arbib’s small business portfolio as well as becoming minister for housing and homelessness.

Tattoo Offer

David Bradbury, a Gillard supporter who said before the ballot he’d consider getting a tattoo showing his support for the prime minister, was promoted to assistant treasurer.

Attorney-General Nicola Roxon takes on the additional portfolio of emergency management. The new ministerial team will be sworn in by the governor-general on March 5.

McClelland told reporters in Sydney today that Gillard confirmed to him that he was being demoted because of his strident backing of Rudd in the challenge. He will remain in parliament, he said.

“This is Gillard’s last chance to produce a solid, cohesive team that can start boosting her performance in the opinion polls and have a chance to win the election,” said Andrew Hughes, who conducts political-marketing research at the Australian National University in Canberra.

Rudd, who was ousted as prime minister in a June 2010 party room coup by Gillard, stepped down as foreign minister on Feb. 22 to challenge her for the nation’s top job. He was defeated 71 to 31 in a party ballot on Feb. 27.

The new Cabinet faces the challenge of boosting public support for the government.

Narrowing Gap

A Feb. 27 poll showed Labor has narrowed the gap with the Liberal-National coalition by 4 percentage points, to 10 percentage points. The government’s 35 percent support was the highest in almost a year, according to the Newspoll survey of 1,152 people, which was conducted Feb. 23-26 and had a margin of error of 3 percentage points.

While Australia’s economy has outperformed its developed- nation peers, with its 5.1 percent unemployment rate more than 3 percentage points less than America’s, an appreciating currency has created headwinds for some industries, adding to Gillard’s challenges to boost Labor’s poll ratings.

The biggest mining boom in a century has propelled the currency, which has gained more than 20 percent since Gillard took office in June 2010. BlueScope Steel Ltd. (BSL), the country’s largest steel producer, shuttered its export division in August. Toyota Motor Corp. and General Motors Co. have cut jobs in Australia this year, citing the currency’s strength, while Alcoa Inc. (AA) is reviewing the future of an aluminum smelter.

Gillard Agenda

The prime minister’s 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 ($39 billion) government-owned high-speed Internet network.

Swan, in his article in The Monthly magazine, said “a handful of vested interests that have pocketed a disproportionate share of the nation’s economic success now feel they have a right to shape Australia’s future to satisfy their own self-interest.”

Parliament will resume March 13 before going on a six-week hiatus from March 22. The budget, in which the government plans to announce a surplus for the fiscal year starting July 1, will be delivered May 8.

To contact the reporters on this story: Michael Heath in Sydney at mheath1@bloomberg.net; 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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