RUDD HONEYMOON MEETS BUDGET REALITIES

UNCLAS SECTION 01 OF 02 CANBERRA 000287

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TAGS: PGOV SOCI AS
SUBJECT: RUDD HONEYMOON MEETS BUDGET REALITIES


1. (SBU) SUMMARY: From March 7-12, the dominant political
issue was speculation over whether the Rudd Government would
axe budget allocations for carers (family members who care
for invalids) and seniors in his fight against inflation.
With Rudd overseas for most of this period, the Government
did not handle this issue well, allowing the Opposition to
whip up fear in the care-dependant community and land blows
on Rudd in the parliament. Rudd finally had to guarantee the
funds would be paid. Desperate to boost his leadership
credentials, Liberal leader Brendan Nelson exploited this
issue ruthlessly, delivering his best speech in Parliament
since he became leader. Nelson portrayed himself as the
compassionate former doctor defending vulnerable Australians
against a "bureaucratically ruthless" Prime Minister. When
Rudd embarks on his two and a half week overseas trip March
27, the Government will need to defend itself more adroitly.
The carers and seniors issue was possibly the beginning of a
long line of negative stories that Rudd will have to deal
with as he takes the axe to government spending in the May
budget. END SUMMARY

THE BUDGET-CUT STORY BREAKS


2. (U) On Friday, March 7 "The Australian" newspaper claimed
the Rudd Government planned to scrap an AUD $1600 budget
bonus paid to carers. This bonus had been paid by the Howard
Government in its last four budgets. The next day the same
newspaper ran a story claiming that a $500 budget bonus
payment to pensioners and some self-funded retirees would
also be scraped. The Howard Government had provided this
handout at its last budget. Over the next three days, there
were a number of media reports of struggling carers and their
physically and mentally disabled loved ones. Over the
weekend, Nelson visited the terminally-ill 73 year-old man
who had tipped off "The Australian" to the issue.

ALP SHOOTS ITSELF IN THE FOOT


3. (U) The day the carers story broke, the Government's
response (with Rudd in the South Pacific) was that it did not
speculate on budget matters. The responsible minister, Jenny
Macklin, said: "I know people want an answer today, but there
is a budget process to go through." Parliamentary Secretary
for Disability Services Bill Shorten, while visiting a new
home for young people with disabilities, said: "the
Government, of which I am part of, has a very clear policy
that it isn't going to get drawn into debate about what is in
or not in the Budget." This did nothing to allay carers'
fears and ensured the story would continue over the weekend.
The next day the ALP also had to deal with reports the
seniors bonus would be scraped. The response from Macklin's
office was that $500 payments had not been built into the
forward estimates and the Howard government had not made any
provision in the budget to continue the payments. Again,
this poured fuel on the public relations fire.


4. (U) That evening, Rudd - in the Solomon Islands - said
that there was a budget process underway, but that carers and
seniors would not "be left in the lurch." This helped with
the negative publicity, but it failed to kill the story which
continued over Sunday and Monday. On Tuesday, March 11, Rudd
gave "an absolute guarantee that those carers will not be a
dollar worse off" while refusing to clarify whether the
bonuses would continue to be paid in a lump sum. This
provided more ammunition for the Opposition, which pointed
out that many carers and seniors were counting on receiving
Qout that many carers and seniors were counting on receiving
lump sums in the budget.

NELSON FIRES UP


5. (SBU) In Parliamentary Question Time on March 11, Nelson
attacked: moving a censure motion against the "Prime Minister
and the Government for its plans to cut the benefits received
by 400,000 carers and more than 2 million seniors." Nelson's
speech was, according to many observers, his best so far as
Opposition Leader. The Censure motion was defeated along
party lines but Nelson appeared for the first time the real
winner. That night, Rudd, through a spokesman, said that the
bonuses would be paid upfront. A Newspoll published March 18
showed Nelson making some points in the polls, albeit from
seven to only 10 percent. Rudd, however, with a 70 percent
approval rating continued his massive lead in this area.

THE KEVIN RUDD SHOW MEETS BUDGET REALITIES


6. (SBU) COMMENT: This dust-up over budget payments to carers
and seniors highlights two issues the Rudd Government will
have to face. Thanks to the booming economy, the Howard
Government had thrown a lot of money around to buy votes and

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Rudd must now cut the budget in order to curb inflation.
Nelson and the Coalition will exploit every budget grievance,
as the ALP did when the Howard Government slashed spending in
its early years. With the former government having lavished
money on almost all segments of Australian society in the
hopes of winning political support, the negative media
stories, and Opposition portrayals of Rudd as a "heartless
bureaucrat," are only beginning. The second problem for the
Government is that its response to the media firestorm
floundered until Rudd returned from his Pacific-Island trip.
While the Government was still forced to backdown, Rudd's
initial comment -- that the carers and seniors would be taken
care of despite any budget cut -- was a much more sure-footed
answer than "we do not comment on future budgets" and took
some of the heat out of the Opposition's attacks. The other
members of the Government will need to demonstrate that it is
not just the "Kevin Rudd Show," particularly with the star
heading on the road for two and a half weeks on March 27.

CLUNE