UPDATE: Australia PM Gillard Defends Damaging Cabinet Leaks

28th Jul 2010 06:01

(Adds detail, wraps in Liberal tax announcement) By Rachel Pannett Of DOW JONES NEWSWIRES CANBERRA (Dow Jones)--Australia's Prime Minister Julia Gillard encountered the biggest test yet Wednesday in her bid for a second term for her center-left Labor government, as her campaign was troubled by damaging internal leaks and an opposition tax proposal that trumped Labor's corporate tax cut plans. In a sign Labor is still nursing deep party rifts from the sudden ouster of Kevin Rudd as prime minister in a Labor putsch on June 24, Gillard was forced to defend her record against allegations she opposed increases to old-age pensions and a paid parental leave scheme when they were put to Labor's cabinet under Rudd. The leaks, which surfaced from within her own party ranks, could destabilise the government ahead of an Aug. 21 general election. They may also play into the hands of Tony Abbott, leader of the main opposition Liberal-National coalition of center-right parties, who already is pitching his campaign on family-friendly policies like a more generous paid parental leave scheme than one already legislated by Labor in June. Abbott's campaign stops so far--visiting a child care center with his usually publicity-shy wife Margie and taking his 21-year-old daughter Louise on the election trail Tuesday--appeared nuanced to underscore the Catholic father-of-three's starkly different personal life to that of Gillard, who has a de-facto partner and no children. Gillard admitted Wednesday she sought assurances that the two taxpayer-funded welfare policies--worth a combined A$50 billion over the next decade--were affordable before giving them her support. "I supported these measures because they were affordable. If they had not been affordable I would not have supported them," Gillard told reporters in Adelaide. But in a feisty defense of what she called a "hard-headed" approach to policy, Gillard said she will not at any time apologise for having "a rigorous approach" to welfare reforms, adding: "I am not a soft option." Gillard wouldn't speculate on the source of the cabinet leaks. The inner circle of the Rudd cabinet was concentrated on just four players: Rudd, Gillard, Treasurer Wayne Swan and Finance Minister Lindsay Tanner. Rudd declined to comment Wednesday on cabinet deliberations. Through a spokesman, the former prime minister said he is "committed to the re-election of the government". But Abbott seized upon the leaks, calling Labor a "deeply dysfunctional government" that shouldn't be re-elected. Andrew Robb, campaign spokesman for the Liberal-National coalition, said Labor was a party "racked by payback and vendetta" following last month's leadership coup. Gillard's Labor government holds only a slim lead over the main opposition Liberal-National coalition, according to the latest voter poll. The widely-watched Newspoll, published in the Australian newspaper Monday, showed Labor leads the coalition by 52% to 48% on a two-party preferred basis--down from a 55%-45% lead a week ago. The Australian, like The Wall Street Journal, is owned by News Corp. With both sides wrestling for the title of best economic manager in the run up to the election, Abbott sought to trump Labor Wednesday with a policy that will cut corporate tax rates to 28.5% from the current 30% in the financial year starting July 1, 2013. That betters a Labor policy which would cut the rate to 29% in the same year. Labor's policy also is reliant on the successful passage of a controversial plan to introduce a new 30% levy on mining profits. That levy still faces some industry opposition despite Gillard brokering a deal with the country's biggest miners BHP Billiton Ltd. (BHP.AU), Rio Tinto Ltd. (RIO.AU) and Xstrata Plc (XTA.LN) in early July to cut the headline rate from an originally proposed 40% rate and apply it only to iron ore and coal, not all minerals. The Liberal-National coalition has said it will oppose the proposal in the upper house Senate, where Labor is unlikely to hold a majority even if it retains control of the lower House of Representatives in next month's election. Labor argues that Abbott's corporate tax cut will be erased by his plan to impose a new 1.7% levy on the country's biggest companies to fund a generous paid parental leave scheme. Abbott's program would pay either stay-at-home parent the equivalent of the mother's full salary prior to the child's birth--capped at a maximum salary of A$150,000 a year--for six months. Labor's taxpayer-funded scheme, scheduled to begin Jan. 1, would pay only the equivalent of the minimum wage to either parent for 18 weeks. In one bright spot, Gillard may sidestep the ignominy of an interest rate hike in the midst of her campaign, after second quarter inflation data published earlier Wednesday showed Australian inflation pressures were more moderate than expected. The consumer price index rose 0.6% in the second quarter and rose 3.1% from a year earlier, the Australian Bureau of Statistics said Wednesday. Private sector economists had expected the index to rise 1.0% over the quarter and to rise 3.4% from a year earlier. Economists said the result virtually removes the threat of an interest rate hike when the Reserve Bank of Australia board next meets on Aug. 3. -By Rachel Pannett, Dow Jones Newswires; 61-2-6208-0901; [email protected] (END) Dow Jones Newswires July 28, 2010 01:01 ET (05:01 GMT)