Australia politics: Snap election

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FROM THE ECONOMIST INTELLIGENCE UNIT

Australia’s new prime minister, Julia Gillard, has called a general election for August 21st. The move comes less than a month after she replaced Kevin Rudd as the head of the ruling Labor Party—a leadership change that has boosted Labor’s popularity and caught the opposition Liberal-National coalition off-guard. The Economist Intelligence Unit expects Labor to win the federal election.

Mr Rudd was dropped by his own party on June 24th, owing to concerns that he would be unable to lead Labor to victory in the national election due to be held by early 2011. Although Labor was still ahead of the opposition coalition (on a two-party-preferred basis) on the eve of Mr Rudd’s departure, it appeared increasingly likely that it would lose the election if he remained in power. According to a local polling firm, Newspoll, support for Labor had fallen to just 35% by the end of April, and remained stuck at that level. Private polling by the Labor Party is reported to have shown that the drop in its support was directly linked to Mr Rudd and could not be reversed while he remained at the helm.

Ms Gillard’s appointment has revived Labor’s standing in polls of voting intention. According to Newspoll, primary support for Labor rebounded to 42% after Ms Gillard took office. Since then, Labor has continued to gain ground. The most recent Newspoll survey, published on July 19th, showed that the incumbent party is now the preferred choice of 55% of voters, with a 10-percentage-point lead over the opposition coalition.

Labor’s sharp gains reflect Ms Gillard’s efforts to resolve the policy blunders that resulted in Mr Rudd becoming the first prime minister in Australia’s history to be ousted by his own party during his first term in office. Voters were clearly disenchanted with Mr Rudd’s apparently sudden decision to put aside proposed measures to tackle climate change, which he had previously described as “the greatest moral challenge of our time”. There was also considerable scepticism regarding the decision, announced in late April, to raise the excise duty on tobacco by 25%. That announcement was widely viewed as an attempt to distract attention from the postponed Climate Pollution Reduction Scheme (CPRS).

Mr Rudd’s popularity was also dealt a blow when he announced in early May that Labor planned to introduce a resource rent tax (the Resource Super Profits Tax, RSPT) on mining profits by mid-2012. This proposal not only outraged the mining sector, but also sparked broader concern regarding the impact of the tax on the economy. Voters feared that lower returns from mining and a reduction in the value of mining stocks would further undermine the value of superannuation balances already battered by the global financial crisis. The electorate was further alienated when the government decided to abandon its policy of shunning the use of political advertising in order to roll out advertisements to counter the mining industry’s anti-RSPT campaign. These policy reversals and apparently ill-considered new policies were the last straw for the public, especially after Labor’s bungled home-insulation scheme and problems with the implementation of its school-building scheme had already led many voters to conclude that the government was administratively incompetent.

Labor’s rebound

Ms Gillard has worked hard to restore Labor’s reputation over the past few weeks. Whereas Mr Rudd was renowned for relying on his own counsel and ignoring ministers who had fallen out of his favour, the new prime minister has said that she will restore the status of the cabinet as a body for policy discussion and review, making use of the talents of her ministers. One of her first acts was to hold a cabinet discussion focused on the RSPT. She has also announced the withdrawal of government advertising on the mining issue and the immediate commencement of negotiations with mining firms on the planned resource rent tax. Local media reports suggest that a compromise has already been reached, with bosses agreeing to a 40% tax on profits above a threshold higher than that proposed by Mr Rudd. If such a deal quietens the row with the mining bosses, it will do much to repair the government’s image.

Ms Gillard’s repair work leaves the leader of the opposition, Tony Abbott of the Liberal Party, facing a stiff challenge. Since he became Liberal leader in December 2009, his straight-talking approach and attacks on unpopular policies have struck a chord with voters. Mr Abbott has been a strong critic of the CPRS, describing it as “a great big tax”, and has vowed to scrap the planned mining tax if elected. However, Ms Gillard’s efforts to sideline or defuse these proposals will demand a new approach from Mr Abbott, whose combative style contrasts with the constructive and collaborative manner Ms Gillard has displayed during her first month in office.

Mr Abbott’s low personal popularity will be a liability during the election campaign. For all Mr Rudd’s travails in the weeks before he left office, voters still preferred Mr Rudd to Mr Abbott by a margin of 46% to 37% in a poll taken just before the former stepped down. And Mr Abbott’s approval ratings are even further behind Ms Gillard’s. According to the latest Newspoll survey, 57% of voters support Ms Gillard as prime minister and Mr Abbott’s approval rating has fallen to 27%—the lowest level since he became opposition leader. Combined with Ms Gillard’s rehabilitation of her party’s image, Mr Abbott’s poor standing with voters suggests that the federal election is Labor’s to lose.