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Gillard to Face Rudd in Australia Labor Leadership Showdown

Australia's Prime Minister Julia Gillard
Julia Gillard, Australia's prime minister. Photographer: Mark Graham/Bloomberg

June 26 (Bloomberg) -- Australian Prime Minister Julia Gillard called a ballot for the leadership of the ruling Labor party for 7 p.m., setting up a third showdown with Kevin Rudd less than three months from an election that polls show she will lose in a landslide.

Gillard called on Labor’s 102 lawmakers to endorse her leadership and said the loser of the party-room vote should quit parliament at the planned Sept. 14 election to allow the winner to helm a united party. Rudd said he would contest the vote and also pledged to exit parliament if he loses. Workplace Relations Minister Bill Shorten, a key party powerbroker, said he will support Rudd.

“It’s in the best interests of the nation and in the best interests of the Labor party for this matter to be resolved,” Gillard, 51, said in an interview with Sky News. “Tonight is the night and this is it.”

The winner faces the task of uniting Labor and turning around opinion polls that show opposition leader Tony Abbott is set to win the election. Labor hasn’t led in polls for more than 18 months and trails the Liberal-National coalition by 14 percentage points as a slowing economy and high currency hurt manufacturing in its political heartland.

‘Nation’s Sake’

“For the nation’s sake I believe it’s time for this matter to be resolved,” said Rudd, 55, who was ousted by Gillard in a party room coup three years ago and failed to topple her in a February 2012 challenge. There are “tens and thousands of ordinary Australians, members of the Australian public, who have been asking me do this for a very long time,” he told reporters in Canberra.

Speculation about a challenge to Gillard intensified as Rudd this month started campaign appearances in marginal seats, with news footage showing enthusiastic voters greeting him. Opinion polls show a return by Rudd would bolster Labor in the election.

The party has been wracked by months of infighting over how to arrest its waning popularity amid questions over the legitimacy of the minority government and attacks on Gillard’s trustworthiness.

Abbott, 55, widened his lead over Gillard as preferred prime minister to 12 percentage points, the largest margin between the two leaders, according to a Newspoll published in The Australian newspaper on June 24. The coalition led Labor 57 percent to 43 percent on a two-party basis, designed to gauge which party is most likely to form a government under Australia’s preferential voting system.

“I believe that Kevin Rudd being elected tonight provides the best platform for Labor to be competitive at the next election,” Shorten told reporters in Canberra. “The future of this nation and the Labor party is at stake here.”

Economic Stewardship

The winner of the leadership ballot will have to rebut opposition attacks on Labor’s economic stewardship after the government failed to meet its pledge of a budget surplus in the current fiscal year.

Gillard had sought to improve her minority government’s electoral fortunes by announcing A$9.8 billion ($9.1 billion) in extra funding for schools over six years from 2014-15 and a new levy that will collect A$20.4 billion for the disabled by mid-2019. While some states have said they will financially support those plans, others have rejected them.

Even as the economy expanded in 2012 at its fastest pace in five years, unemployment has been rising in areas where Labor has been traditionally strong. While Chinese demand for iron ore and coal has driven a mining boom in the country’s north and west, manufacturing areas in the east have struggled, with the Aussie dollar in the past three years averaging about 30 cents above the level of the prior two decades.

Currency Policy

While Gillard’s administration has warned about the impact of the exchange-rate’s appreciation, the government and the Reserve Bank of Australia have refrained from any Swiss or Japanese-style attempt to rein in the currency.

Much of the manufacturing downturn has hit electorates with a track record of voting Labor, further eroding the popularity of Gillard’s government. One casualty was Ford Motor Co., which announced on May 23 it would end production in the country after nine decades, with the loss of 1,200 jobs.

Gillard’s record in pushing through groundbreaking legislation, including the world’s first compulsory plain packaging for cigarettes, has been overshadowed by scandals involving Labor lawmakers. In one case, Craig Thomson, a former national secretary of the Health Services Union, faces charges that he misused a union credit card to pay for prostitutes, air travel and cash advances between 2002 and 2007, before he entered parliament. Thomson, who resigned from Labor and remains in parliament as an independent lawmaker, denies the allegations.

Support Base

Labor’s fragile support base is also evident at the state level, where it only holds power in the two least populous of Australia’s six states.

Rudd’s announcement that he will contest the ballot tonight contradicts his March 22 comments that “there are no circumstances” in which he would return to the Labor leadership and a pledge of “100 percent support” to Gillard. A year earlier, she won a ballot against him by 71 votes to 31 in the Labor caucus.

While Rudd has greater support than Gillard among the general public, he has faced antipathy from Labor’s senior ranks over his leadership style. Treasurer Wayne Swan last year described him as a man of “great weakness” who had demeaned his party colleagues during his tenure as prime minister from 2007-2010.

Former Schoolmates

The animosity between Swan and Rudd -- former schoolmates and political allies before they fell out -- raises the risk of a new treasurer being appointed if Gillard is toppled. Swan backed Gillard when she ousted Rudd in 2010, and in return she kept him in the treasury portfolio where he had overseen Australia’s response to the global financial crisis.

Rudd, a Mandarin-speaking former diplomat, remained on the backbench since resigning as foreign minister to challenge Gillard last year. He enjoyed record-high popularity ratings after defeating John Howard’s long-running Liberal-National coalition government in 2007, boosted in part by his apology to the indigenous Aboriginal population for systematic abuses by the state.

His ratings fell as mining companies helped finance an advertising campaign against his plan for a 40-percent tax on resource profits.

Mining Tax

Gillard, enacted a 30-percent mining levy after ousting Rudd, and has since struggled to convince Australians that the resource tax, as well as one on carbon emissions, will benefit them.

While polling data suggests Rudd would boost Labor’s popularity if he retains the leadership, “whether that would last very long is questionable,” said Peter Chen, who teaches politics and public policy at the University of Sydney. “The opposition has been brewing up a lot of very aggressive advertising to deploy if that occurs. The somewhat more positive view of Labor under Rudd that the public has expressed is set to be tested because it’s always been a hypothetical.”

To contact the reporter on this story: Jason Scott in Canberra at jscott14@bloomberg.net

To contact the editor responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net

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