UPDATE: Australia PM Rudd Fights For Survival In Party Revolt

23rd Jun 2010 16:57

(Recasts, combined stories, adds context, analysis) By Rachel Pannett Of DOW JONES NEWSWIRES CANBERRA (Dow Jones)--Australia's Prime Minister Kevin Rudd is fighting for his political life after a mutiny broke out in his governing party Wednesday that could see the once-popular leader replaced by the country's first woman prime minister. "I was elected by the people of Australia to do a job," a defiant Rudd told a late-night news conference after Deputy Prime Minister Julia Gillard challenged him for leadership. He said he would take on the Welsh-born 48-year-old former trial lawyer in a ballot Thursday morning for leadership of the governing center-left Labor Party, a post that carries with it the premiership. But the fight looks tough for Rudd, who swept to power in November 2007, ousting the long-ruling Liberal-National coalition of center-right parties. He has seen his popularity slide in recent months after a series of policy missteps. Gillard's insurgency is backed by the Labor Party's right wing but also by key unions on the left, which many commentators say gives her the numbers to topple Rudd. Her challenge marks an unprecedented fall for the man who ended nearly 12 years of conservative government in Australia. The party fears Rudd, a 52-year-old Chinese-speaking former diplomat, will lead them to defeat in national elections that could come as soon as August. "At this stage, it looks as though Australia will have a new prime minister tomorrow morning," said strategist Roland Randall at TD Securities in Singapore. "In Australian politics, it is almost unprecedented that a first-term prime minister is dumped by his own party." But Randall said in a note to investors that "for markets, this should not be destabilising event" as the ballot was being held right away, and as Rudd and Gillard aren't far apart on policies. Driving Rudd's reversal have been a decision to shelve a proposed carbon cap-and-trade system meant to fight climate change and a planned tax on "super profits" by Australia's mining companies--a critical industry for the resource-rich country. The tax, which the government thought would win popular support by spreading the wealth from the booming mining sector, has instead backfired dramatically as the public worries it will damage Australia's credibility as an investment destination. Mining giants BHP Billiton Ltd. and Rio Tinto Ltd. warned billions of dollars worth of investment is at risk and have led a fight against the 40% levy, arguing it would make Australia one of the highest-taxed jurisdictions in the world. This criticism has resonated with many ordinary Australians who own shares in mining companies, often through pension funds. Mining, a top export sector, helped Australia sidestep the global recession, thanks to demand from developing countries like China and India for the country's vast stores of iron ore and coal. Still, Wednesday's political uprising came as a shock. As recently as Monday, Finance Minister Lindsay Tanner said talk of Gillard taking on Rudd was "complete nonsense." Just hours before Rudd's news conference, key Labor figures were denying that any challenge was afoot. Gillard, who hadn't recently expressed any desire for the top job, seemed a reluctant fighter. "I confirm that I will be a candidate in tomorrow's ballot," she told reporters after Rudd's announcement. "I haven't got any other statement at this time." Rudd, striking a presidential tone, sought to portray himself as above party squabbles. "I was not elected by the factional leaders of the Australian Labor Party to do a job--though they may be seeking to do a job on me," he said. He said he is "quite capable" of winning the 2300 GMT ballot, pointing to his stewardship through the global financial crisis, which Australia shrugged off with only a briefly slowdown in economic growth. The prime minister said he was "fundamentally proud" of "navigating this economy through the worst crisis the world has seen" and of "keeping hundreds of thousands of Australians in jobs that would otherwise have been on the unemployment queue." Rudd's desperate plight would have been unthinkable just a year ago when his approval rating was well above 60%. A prominent poll this week found Labor eking out a 52%-48% edge against the Liberal-National bloc, calculated on the basis of Australia's preferential voting system. On a straight match-up, Rudd's party was trailing 35% to 40%. Critics say Rudd has squandered the political goodwill awarded to him for bringing Labor in from the political wilderness with a landslide victory. The career bureaucrat's aloof demeanor and tendency to immerse himself in policy has drawn parallels with U.S. President Barack Obama, with whom he struck up an early friendship. Rudd's presidential style and tendency to announce rather than consult with the party on policy has also irked some. It may have made it easier for his detractors to level blame and ultimately undermine him once his authority was called into question. Gillard, elected to Parliament in 1998, has risen swiftly through the Labor ranks and holds the key portfolios of education, employment, and workplace relations in the current government. She has shown sharp political elbows in the past. When a political opponent said in 2007 that the unmarried lawmaker wasn't qualified to lead the country because she had chosen not to have children, Gillard shot back that her accuser was "a man of the past, with very old-fashioned views." Markets initially took the Labor Party mutiny in their stride, with the Australian dollar trading higher overseas as the initial shock wore off. Rio Tinto and BHP shares rose in London trading on speculation a leadership change could cause Labor to revisit its controversial mining-profits tax proposal. If Gillard wins, said analyst Randall, "markets are likely to rally" on hopes that she'll drop the mining tax. Unlike Rudd, he said, "Gillard has not been steadfastly inflexible in her position and would not look weak if she chooses to compromise on the tax." -By Rachel Pannett, Dow Jones Newswires; 61-2-6208-0901; [email protected] (Lyndal McFarland in Melbourne contributed to this article.) (END) Dow Jones Newswires June 23, 2010 11:57 ET (15:57 GMT)