June 27 (Bloomberg) -- Wayne Swan quit as Australia’s treasurer and deputy prime minister as fallout from the return to leadership of his friend-turned-enemy Kevin Rudd began.
Swan, 58, had been treasurer since Rudd’s 2007 victory returned Labor to power after nearly 12 years in opposition, and became deputy prime minister in June 2010, when he backed Julia Gillard’s ousting of Rudd in a backroom party coup. Chris Bowen was sworn in as the new treasurer, just the nation’s third in 17 years.
“I want to say what a privilege it has been to serve as deputy prime minister and also as treasurer in a Labor government that has represented the very, very best of Labor tradition,” Swan told reporters late yesterday. “Almost alone amongst developed economies, we avoided a deep recession.”
Australia’s stretch of recession-free years was extended to 22 under Swan as he and Rudd met the global credit crunch following Lehman Brothers Holdings Inc.’s 2008 collapse with cash handouts and bank guarantees. As much of the developed world grappled with anemic growth, Swan had to manage a mining boom that sent the local currency soaring and crimped the manufacturing industry, whose workers form the core of Labor party support.
“Wayne, whatever our differences have been, I acknowledge your contribution here,” Rudd said yesterday, referring to the long hours the two worked together during Rudd’s first stint as leader to prevent Australia falling into recession in 2008-2009.
Swan refrained from intervening as the Aussie -- which recorded its longest stretch above parity with the U.S. dollar since it was freely floated in 1983 -- slashed company tax receipts and forced him to abandon a pledge to return the budget to surplus, damaging his economic credibility. A plan to raise taxes on mining-sector profits faltered under Rudd as companies including BHP Billiton Ltd. campaigned against it, while a scaled-back version formed by Swan and Gillard will reap A$1.8 billion ($1.68 billion) less in revenue for the year to June 30 than previously forecast, budget documents showed May 14.
Rudd, 55, regained the leadership as lawmakers tired of Labor’s consistent poor showing in opinion polls under Gillard. A Newspoll survey published June 24 in the Australian newspaper showed the opposition Liberal-National coalition leading 57 percent to 43 percent on a two-party preferred basis.
Along with Rudd and his new deputy, Anthony Albanese, Bowen was sworn in today in Canberra.
There’s unlikely to be any formal government budgetary or fiscal policy changes ahead of the election, currently scheduled for Sept. 14, said Warren Hogan, chief economist at Australia & New Zealand Banking Group Ltd.
“There will be new policies announced, I’m sure, under a new PM in an election campaign, but we’ve obviously just had a budget, there’s no scope for a mini-budget,” he said. “The pre-election outlook will be done by Treasury independent of the political parties so I really don’t see it as being significant for markets.”
Swan diverged as treasurer from a modern Australian tradition of dominating parliament and policy debate and making himself the central figure in the government, as Peter Costello did in John Howard’s 1996 to 2007 administration and Paul Keating did in Bob Hawke’s government from 1983 to 1991.
“He didn’t have the impact of Keating and Costello,” said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore. “But they were wildly ambitious prime ministers in waiting. Wayne Swan never saw the Treasury as a stepping stone to the top job.”
Both Swan and Rudd attended Nambour High School in the northeastern state of Queensland in the 1970s, where Swan captained the rugby league team and Rudd led its debating team.
“Wayne was very, very cool. I was very, very not,” Rudd said during the 2007 election campaign when the duo visited the school.
An arts graduate of the University of Queensland, Swan worked as a council sewerage maintenance worker before lecturing at the Queensland Institute of Technology.
He started in politics as an adviser to then-federal Labor leader Bill Hayden from 1978 to 1980. Swan and Rudd helped return Labor to power in Queensland in state elections in 1989, ending 32 years of conservative rule.
Swan, a father of three, was elected to federal parliament in 1993 when he won the Brisbane seat of Lilley. He lost it in 1996 and regained it in 1998, the year Rudd entered parliament for the first time. He said yesterday he would recontest the seat at the upcoming election.
As opposition lawmakers, Swan and Rudd shared an apartment in Canberra until their friendship soured.
Rudd said he did everything he could to “bury the hatchet” with Swan after winning the Labor leadership in 2006, even as Swan campaigned against him, according to an interview published in the Australian newspaper in February 2012. Upon defeating the Howard government, Rudd appointed his former school-mate to the nation’s top economic post and backed him through early difficulties, he said in the interview.
When confronted by Lehman’s collapse and the ensuing credit crunch, Rudd and Swan responded with measures that included distributing more than A$10 billion in cash handouts to consumers and for the first time in the country’s history guaranteeing all bank deposits and the wholesale funding of its biggest lenders. Swan was named Euromoney magazine’s finance minister of the year in 2011 for helping navigate the economy through the 2009 global downturn.
TD’s Beacher said plaudits for Australia’s successful response to the crisis belong with then-Treasury Secretary Ken Henry, who is credited with crafting the plan, and Reserve Bank of Australia Governor Glenn Stevens, who slashed the benchmark interest rate by 425 basis points to a then 50-year low of 3 percent between September 2008 and April 2009.
In June 2010, when factional leaders ousted Rudd as prime minister, Swan didn’t inform his former flatmate he had switched his support to Gillard. “I had to phone him,” Rudd said in the Australian report. “I suppose he found the prospect of higher office more tempting. It’s been a sad end to a friendship that went back a long way.”
Tensions between Swan and Rudd exploded on Feb. 22 last year when Rudd mounted an unsuccessful challenge against Gillard. The then-treasurer accused Rudd of trying to “tear down” Labor’s 2010 election campaign, having a “deeply demeaning attitude” toward Labor party colleagues and of “dysfunctional decision making” prior to his ouster as leader.
More recently, Swan’s fortunes have faded. A Newspoll taken May 17-19 showed Shadow Treasurer Joe Hockey overtaking Swan on the question of who is more capable of managing the economy. Hockey surpassed Swan for the first time since he became Treasury spokesman for the opposition Liberal-National coalition in February 2009, leading 39 percent to 35 percent. That’s even as unemployment remains at 5.5 percent.
Swan in late December abandoned a pledge to return the budget to surplus this fiscal year and in May projected a deficit of A$19.4 billion.
To contact the reporter on this story: Michael Heath in Sydney at email@example.com
To contact the editor responsible for this story: Stephanie Phang at firstname.lastname@example.org