Through the Wire

Australia's Rudd Ousts First Female Leader Gillard to Take Top Job

June 26, 2013
| Asia and the Pacific

June 26 (Bloomberg) -- Kevin Rudd defeated Julia Gillard in their third face-off to head Australia’s governing Labor party in three years, ushering the political demise of the nation’s first female prime minister just months from an election.

Rudd won by 57 votes to 45 in a ballot of the Labor caucus, party official Chris Hayes said. Gillard congratulated Rudd and said she would not stand at the next election. “I understand at the Caucus meeting today the pressure finally got too great for many of my colleagues,” she told reporters in Canberra.

Ousted by Gillard in a backroom coup three years ago, Rudd faces the task of clawing back a 14 percentage point deficit in opinion polls to Tony Abbott’s opposition. He will need to unite a party wracked by infighting, with several ministers quitting their posts, overcome a public perception of Labor as untrustworthy and decide which of Gillard’s signature policies to adopt or jettison. He would require the support of independent lawmakers in parliament if Abbott calls a no- confidence vote.

“While he’s more popular with voters, the deficit Labor faces in the polls means a win for the party still seems highly unlikely,” said John Warhurst, a political analyst at the Australian National University in Canberra.

Autocratic Style

Rudd, 55, has been criticized by colleagues including Wayne Swan -- who resigned as treasurer -- for an autocratic style, raising questions over whether Labor can rally behind him before an election scheduled for September.

“It’s a task I resume with humility, with honor, and an important sense of energy and purpose,” Rudd told reporters in Canberra. “I intend to lead a government that brings people together and gets the best out of them.”

He pledged to work closely with Australian business as the nation adjusts to the end of a resources boom driven by China, and said the manufacturing sector had a “big future.”

While opinion polls suggest Rudd would boost Labor’s popularity, “whether that would last very long is questionable,” said Peter Chen, who teaches politics and public policy at the University of Sydney. Rudd’s return would lift Labor by 11 percentage points in the primary vote to 40 percent, compared with the Liberal-National coalition’s 42 percent, according to a Nielsen survey published in Fairfax newspapers June 17.

Economic Slowdown

With signs of a slowdown in the world’s 12th-largest economy, including worsening employment prospects and a waning of the mining boom, momentum remains with Abbott’s conservative coalition, which hasn’t ruled since 2007.

Rudd will face questions about his own trustworthiness, having said on March 22 “there are no circumstances” in which he would return to the Labor leadership and pledging “100 percent support” for Gillard. A year earlier, she won a ballot against him by 71 votes to 31 in the caucus.

“The opposition has been brewing up a lot of very aggressive advertising to deploy,” Chen said. “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.”

Gillard Legacy

Gillard’s defeat came hours after she won parliamentary backing for A$9.8 billion ($9.1 billion) in extra federal funding for schools over six years from 2014-15, adding to legislative accomplishments that failed to translate into public support for Labor. She had also advocated a new levy that will collect A$20.4 billion for the disabled by mid-2019.

In an interview in April, Gillard, 51, said her legacy is secure after introducing a carbon price and improving education, which is “closest to my heart.”

“I believe this will be remembered as a time in which we got all the elements right to seize the opportunities of this century of change in the region,” Gillard said at the time. “When I’m an older person and sitting back in the retirement home watching our nation, I will be seeing a stronger nation because we have done those things.”

It is unclear if Rudd will support some of Gillard’s big- ticket policy items that she struggled to sell to voters, including the nation’s first levy on greenhouse-gas emissions and a tax on mining company profits that will reap A$1.8 billion less in revenue for the year to June 30 than previously forecast, according to budget documents released May 14.

Cabinet Changes

Climate Change Minister Greg Combet announced his resignation from the Labor ministry, with Swan replaced as Labor’s deputy leader by Anthony Albanese. Agriculture Minister Joe Ludwig stepped aside.

While Rudd has greater support than Gillard among the general public, he has faced antipathy from Labor’s senior ranks over his leadership style. 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.

The animosity between Swan and Rudd -- former schoolmates and political allies before they fell out -- sees the government needing a new treasurer with an election not far off. Swan backed Gillard when she toppled 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.

“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 said tonight. “Almost alone amongst developed economies, we avoided a deep recession.”

Challenge Speculation

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

Speculation about a challenge to Gillard intensified as Rudd this month made campaign appearances in competitive districts, with news footage showing enthusiastic voters greeting him.

Momentum swung to Rudd when party powerbroker Bill Shorten, who as recently as this morning said he supported the prime minister, called a press conference 30 minutes before the ballot to say he’d switched his allegiance.

The trigger for the leadership challenge was recent polls showing Labor faced electoral wipe out: Abbott widened his lead over Gillard as preferred prime minister to 12 percentage points, the largest margin between the two party 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 the preferential voting system.

Economic Stewardship

Rudd 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.

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.

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 30 cents above the level of the prior two decades.

The Australian dollar traded at 92.76 U.S. cents at 9:22 p.m. in Sydney, little changed from before the leadership announcement.

Much of the manufacturing downturn has hit electorates with a track record of voting Labor, further eroding the popularity of the 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.

Party Scandals

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 sits in parliament as an independent, denies the allegations.

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 may be better at selling Labor’s message to voters than Gillard, said Nick Economou, a political analyst at Monash University in Melbourne.

Even so, “he is a double-edged sword. He ran a really poor government, he was a poor leader in government and a poor leader of his troops. Where he is very good is on the stump and in communicating,” Economou said.

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