HOWARD STILL WELL BEHIND AS INTEREST RATES

C O N F I D E N T I A L CANBERRA 001624

SIPDIS


NOFORN
SIPDIS

E.O. 12958: DECL: 11/09/2017
TAGS: PGOV AS
SUBJECT: HOWARD STILL WELL BEHIND AS INTEREST RATES
DOMINATE WEEK FOUR

REF: (A) CANBERRA 1612 (B) CANBERRA 1595 (C) CANBERRA

1596

Classified By: POLITICAL COUNSELOR JAMES F. COLE. REASON: 1.4 (D)


1. (C/NF) SUMMARY: The interest rate rise announced by the
Reserve Bank this week (ref. a),has paradoxically, turned
the political debate to the Coalition's strength - economic
management - but given the ALP ammunition to undermine the
Coalition's credibility on this important issue. The
Coalition has decided to use interest rates as a "cut through
issue" by launching attack advertisements on the ALP -
virtually identical to those used in 2004. Although this
strategy could backfire, the Coalition has no choice as its
other tactics are not working, and it is still a long way
behind with only two weeks to go. The Liberal Party will hold
its official campaign launch in Brisbane on Monday November
12 while ALP will hold its official campaign launch in the
same city two days later. At this stage, Howard would need
an unprecedented comeback to win this election. END SUMMARY.

THE POLLS


2. (C/NF) The poll conducted the weekend of the Garrett gaffe
did not indicate a significant shift in voter sentiment (Ref
b). On November 8, "The Australian" published state-by-state
(excluding Tasmania and the Northern Territory) re-analysis
of the last two Newspolls. This indicated a 5.2 percent
swing against the Coalition in NSW, 6 percent in Victoria,
11.1 percent in Queensland, 12.4 percent in South Australia
and 5.4 percent in Western Australia. On a uniform basis,
these swings would mean the ALP would gain 6 seats in NSW, 4
seats in Victoria, 14 in Queensland, 5 in South Australia and
2 in Western Australia. Added to likely gains in the
Northern Territory (1) and Tasmania (2),this suggests a
landslide 34 seat gain by the ALP - though most ALP contacts
and observers still remain cautious at this point.

SEATS STATUS IN VICTORIA


3. (C/NF) A Victoria Liberal MP told poloff recently that
though Deakin (5 percent),La Trobe (5.9 percent) and
Corangamite (5.3 percent) were worrisome for the party, the
general view from each side is that none of these seats will
change hands as there are local issues and candidates that
make it tough for the ALP. However, with the polls strong
for the ALP and the two Victorian seats - Deakin and McMillan
(5 percent) - the 17th and 18th most marginal Coalition
seats, it is not surprising that the ALP is giving extra
attention to these seats. That the Prime Minister and his
Ministers have spent more time in these seats than expected
indicates the Liberals have concerns.

ALP LIKELY TO PICK UP TWO SEATS IN TASMANIA


4. (C/NF) Embassy Canberra and Consulate Melbourne Pol
Officers visited Tasmania this week where the Coalition holds
two marginal seats. Bass, in the north-east of the state,
appears an almost certain gain for the ALP despite the work
of the Liberal MP who the ALP concede is an "excellent
campaigner". Polling shows the Green vote in this seat has
risen significantly on the back of voters' concerns about a
controversial proposed pulp mill which has divided the
community. Because both the ALP and the Liberals support the
pulp mill project, the Greens have retaliated by announcing
its "how to vote" tickets would not preference the ALP in any
seats in Tasmania. However, analysis from the last election
shows The Greens preference flow to the ALP is only slightly
lower in the absence of favorable "how to vote" tickets.
With polls indicating the ALP and Coalition almost level on
QWith polls indicating the ALP and Coalition almost level on
the primary vote, Greens preferences are likely to deliver
the ALP the seat. A much tighter result is expected in
Braddon where the takeover of a state-government public
hospital by the Federal Government has put the Liberals back
in the race.

CAMPAIGN HEADQUARTERS - ALP


5. (C/NF) According to a contact inside ALP campaign
headquarters, the opposition's campaign is running smoothly
in contrast to 1996 and 2004 when Keating and Latham did not
follow campaign headquarters' advice. Source gives
significant credit to Rudd's Chief of Staff, David Epstein, a
former Chief of Staff to former ALP leader Kim Beazley, who
is on the road with Rudd and acts as a liaison with campaign
headquarters for Rudd. Morale in ALP headquarters is
optimistic, but not over-confident as the "business end" of
the campaign - the last two weeks - has yet to begin. The
source believes the last two weeks will determine whether it
is a close election or a landslide to Rudd akin to the Howard
victory in 1996. He says "it is always dangerous ground" for
the ALP when political debate shifts to interest rates. He
said ALP focus groups showed its latest advertisement -
featuring a woman complaining about Howard being out of touch
on cost of living pressures ) was a winner.

CAMPAIGN HEADQUARTERS - COALITION


6. (C/NF) A contact inside Coalition campaign headquarters
reports that staff have been ordered to not comment on the
campaign following an article in "The Bulletin" magazine
which quoted one campaign insider complaining that "Abbott
cost us two days" (ref. C). Another Liberal source was
quoted as saying that &it was clear that by the end of the
second week, we weren't traveling well at all. We just
weren't moving.8 The article also reported that Liberal
research showed the party in danger of losing four seats in
Victoria. The contact, however, said the article was
"rubbish", that the Coalition has the right issues to attack
the ALP and that "two weeks is a long time in politics".
However, he did not appear optimistic.

RUDD REMAINS ON TRACK FOR VICTORY


7. (C/NF) COMMENT: At this stage, Howard would need an
unprecedented comeback to win this election. The polls have
remained rock-solid for Rudd since he became leader, as was
the case in the lead up to the Howard landslide in 1996.
There will be a big advertising blitz by both parties in the
final two weeks of the campaign, a period in which a large
proportion of voters "lock in" their votes. But nothing
appears to have altered the apparent "mood for change" that
is propelling Rudd's poll numbers. Although there is
relatively little daylight between the parties on most
policy issues, the Rudd "brand" is still attracting the
numbers over Howard. END COMMENT.