Victoria’s Liberal Party Premier Quits Before National Poll

Victorian Premier Ted Baillieu stepped down as leader of Australia’s second-most populous state after the resignation of a party lawmaker jeopardized his government’s parliamentary majority.

“It became apparent to me that a change of leadership is in the best interests of the government,” Baillieu told reporters in Melbourne yesterday in a televised news conference. Baillieu, who will remain a member of the state parliament, was replaced as Liberal Party leader by Denis Napthine, who was minister for major projects, ports, racing and regional cities.

Baillieu, who led a state where demand shrank last quarter, quit after lawmaker Geoff Shaw, under investigation for alleged misuse of government funds, resigned from the Liberals yesterday, threatening the government’s one-seat control of the lower house. Tony Abbott, the federal Liberal Party leader who is favored in polls to win national elections due in September, paid tribute to Baillieu’s government, saying it had put state finances on a “sustainable footing.”

“It doesn’t help Abbott’s case that the state division in Victoria is embroiled in turmoil,” said Zareh Ghazarian, a politics lecturer at Monash University in Melbourne. “If Baillieu had to fall on his sword, it’s better for the Liberals to happen now than closer to the federal election.”

Slow Lane

Victoria is in the slow lane of Australia’s two-speed economy -- a division the central bank uses to separate resource-rich regions in the north that are powering growth, from the tourism, manufacturing and retail industries of the southeast that are teetering under a high currency. Its unemployment rate in January reached 6.1 percent, higher than the national average of 5.4 percent, according to the Australian Bureau of Statistics.

While Australia’s economy, fueled by resource investment, expanded 0.6 percent in the fourth quarter from three months earlier, final demand in Victoria contracted 1.1 percent in the same period, data released by the bureau yesterday shows.

State revenue will fall in the next four years due to “external economic shocks,” the government said in its annual budget forecast in May. It estimated a budget surplus of A$155 million ($159 million) for the year to June 30 as it sought savings of A$1 billion over four years through measures including cutting 600 public service jobs.

Looking Forward

“My sense of the Victorian community is that they have been very concerned by state Liberal cutbacks,” Prime Minister Julia Gillard said in a Sydney radio interview today. “The real fear for the future is if Mr. Abbott was elected that they would be joined by very big federal cutbacks.”

Napthine paid tribute to Baillieu and said he looked forward to providing a strong and stable government for the state. The state’s next election will be held in November 2014.

“This is a great honor, a great privilege and a great challenge,” Napthine told reporters yesterday.

In the previous 2010 election, Baillieu led his Liberal- National coalition to a 45-43 seat victory over Labor, which had held power for more than a decade.

Baillieu asked Victoria’s Independent Broad-based Anti- corruption Commission on March 4 to investigate his chief of staff, Tony Nutt, whom he didn’t fire or suspend.

“What is clear is that this government is an absolute circus,” opposition leader Daniel Andrews said in an Australian Broadcasting Corp. television interview today. “Many Victorians will wake up this morning completely unclear about what’s gone on.”

To contact the reporters on this story: Jason Scott in Canberra at jscott14@bloomberg.net; Brett Foley in Melbourne at bfoley8@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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