CONSERVATIVE PARTIES PONDER A MERGER

C O N F I D E N T I A L CANBERRA 000370

SIPDIS

SIPDIS

E.O. 12958: DECL: 04/09/2018
TAGS: PGOV AS
SUBJECT: CONSERVATIVE PARTIES PONDER A MERGER


Classified By: Political Counselor James F. Cole for reasons 1.4 (b)
and (d).


1. (SBU) SUMMARY: The November election loss has created
unprecedented momentum for a merger between the Liberal and
National parties (who are in coalition at the federal level).
The departure of former Prime Minister and Liberal Party
leader John Howard, who opposed a merger, and the situation
of being in opposition nationally and in every state and
territory in Australia have emboldened Coalition MPs to push
for a union. Supporters argue that the National Party is in
irrevocable decline due to demographic changes; and that one
brand name, a pooling of resources and decreased
administration costs would enable the conservative parties to
better compete financially with the Australian Labor Party
(ALP) and the unions. Opponents of the merger believe a
combination with the Nationals would drag the Liberal Party
too far to the Right and leave a vacuum for another
country-based party to fill. Further complicating matters,
the state branches of each party (who often oppose each
other) would need to agree to any merger. This issue has the
potential to cause significant disharmony in the Coalition
and, as a result, has implications for Brendan Nelson's
leadership. Momentum for a merger will increase if the
Nationals perform badly in an imminent by-election caused by
the departure of Nationals MP and former Howard Government
Agriculture Minister Peter McGauran, who announced his
resignation on April 3 from his federal seat in Victoria. END
SUMMARY.


HOWARD DEFEAT CLEARS THE WAY


2. (SBU) John Howard vehemently opposed a merger of the
Liberal and National parties, believing it would lead to the
creation of a country-based party similar to Pauline Hanson's
nativist One Nation Party that threatened to siphon off
support for mainstream conservative parties in the late
1990s. In 2006, along with then Nationals' leader Mark
Vaile, Howard played a major role in scuttling plans by the
Liberal and National branches in Queensland to form the "New
Liberals" to take on the dominant ALP state government. With
the Howard Government defeated, the merger is back on the
agenda in Queensland and some Federal Liberal MPs are
promoting a national merger with the Nationals.


DOES THE NATIONAL PARTY HAVE A FUTURE?


3. (C/NF) Supporters of a merger argue that the National
Party's demise is inevitable and that the party should merge
with the Liberals while it still has some pride left.
Liberal Party moderate and Shadow Minister for Health and
Aging Joe Hockey argues that the Nationals have lost their
unique association with farming communities. The National
Party (then Country Party) was formed in 1920 to represent
the interests of non-city people, particularly farmers. Now,
however, demographics are working against the Nationals. The
number of farmers and agricultural workers has declined
substantially; people in rural areas have migrated to large
regional towns; and relatively affluent retirees from the
city are moving into former National Party seats on the New
South Wales and Queensland coasts. National Party Federal
Director Brad Henderson conceded to Poloffs in March that the
Nationals face a huge challenge to remain viable. In the
1987 election, the Nationals won 19 seats in the federal
Parliament and 11.52 percent of the national vote. In 2007,
they won only 10 seats and 5.49 percent of the vote (NOTE: by
contrast the Green Party won 7.79 percent of the vote). In
terms of seats won, 2007 was the Nationals' worst election
Qterms of seats won, 2007 was the Nationals' worst election
result.


4. (SBU) While there is a federal coalition between the
Liberal and National parties, there is much less cooperation
at the state level. The two parties in Victoria and West
Australia are at each others throats, and in Queensland,
where the National Party is stronger, the parties run
separate campaigns in state elections. The announced
retirement last week of National Party Federal MP Peter
McGauran will likely trigger a June or July by-election in
his Victorian seat of Gippsland. The by-election will be
seen by some as a referendum on the Nationals future. While
McGauran won with a 5.9 percent margin in 2007 and the
National Party has a good local candidate, the Victorian
Liberal Party is planning to run its own candidate and Prime
Minister Kevin Rudd's continuing popularity threatens to give
the ALP an extra boost.


AUSTRALIA'S CONSERVATIVES MUST UNITE


5. (SBU) A longstanding supporter of a merger is South
Australian Senator and Shadow Defense Minister Nick Minchin,
ironically one of Howard's strongest supporters. In a speech
at the Young Liberal's National Conference in January, he
maintained that conservatives could "no longer afford the
luxury of two separate organizations on the right-hand side
of Australian politics." He said the National and Liberal
parties had to unite to compete with a resurgent ALP backed
by the largesse of the unions. The business community was
sick of funding two center-right parties, Minchin stated, and
it was hoping to see a merger. He argued against the
Queensland parties merging unilaterally, however, because it
would just create a third mainstream center-right party.
Minchin said national leadership would be required to get the
state branches of the respective parties to agree to unite.
Opposition and Liberal Party Leader Brendan Nelson has said
he is sympathetic towards a merger but will wait for an
internal review of the National Party, due to be handed down
shortly, before committing to a position.


THE SKEPTICS


6. (C/NF) MP Christopher Pyne, like Minchin a South
Australian but from the more moderate wing of the Liberal
Party, told poloffs in February that he opposes a merger
because the parties are too different. Pyne said city voters
would desert the Coalition if the Liberals formed a party
with the Nationals. The Nationals were a conservative party
whose philosophy would be incompatible with the "liberalism"
of the Liberal Party. Like Howard, Pyne maintained a merger
could lead to the formation of another country-based party,
as does former Cabinet Minister Tony Abbott who says "as a
practical proposal it is fraught with peril." Liberal
leadership aspirant Malcolm Turnbull has expressed doubt over
whether a Queensland merger would increase overall support,
while Queensland Liberal Senator Sue Boyce has said "Liberal
does not equal conservative, nor should it ever."


COMMENT: A GOOD IDEA OR AN ACT OF DESPERATION?


7. (C/NF) A noted academic authority on the Liberal Party
told us this week that conservatives are trying to decide how
to position themselves politically against a cautious,
center-right Prime Minister, and on-going internal reviews by
the Liberal and National parties are part of that process.
There are two factors driving the merger proposal, both
centered in Queensland. In theory, if the Liberal and
National Parties both run a candidate in a federal
parliamentary seat, their supporters will preference the
other candidate in the second round. To a significant
extent, that did not happen in the federal seat of Flynn in
Queensland last November. Many Liberal voters preferenced
the ALP candidate in the second round, and he narrowly won
the seat. In Queensland state politics, the National Party
holds more seats than the Liberal Party and their coalition
is not as strong as it is in other jurisdictions. As a
result, the parties do not present a united, stable
opposition and therefore do not provide the voters with a
clear alternative to the ALP.


8. (C/NF) There is significant opposition in both parties to
a merger. In Victoria and Western Australia, particularly,
the Liberals and Nationals relationships are tense. In
addition, the merger issue cannot be divorced from the
Liberal Party's factional and leadership issues. There is
suspicion among some Liberal moderates, including Malcolm
Turnbull's supporters, that Minchin (generally regarded as
head of the Liberal Right) wants a merger because an influx
of Nationals would drag the party to the right on social
policy and make it more difficult for Turnbull to seize the
leadership. If the conservatives do pursue a merger, it will
Qleadership. If the conservatives do pursue a merger, it will
be a lengthy process which will create grievances and bring
to the surface longstanding rivalries. The ALP, meanwhile,
as it did when the Coalition was last in office, will tell
voters: "If you can't govern yourself, you can't govern the
country."

MCCALLUM