BUDGET RECEIVES MIXED REVIEWS AS LIBERALS SQUABBLE

UNCLAS SECTION 01 OF 02 CANBERRA 000521 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: PGOV AS SUBJECT: BUDGET RECEIVES MIXED REVIEWS AS LIBERALS SQUABBLE REF: CANBERRA 500 ¶1. (SBU) SUMMARY: Two national polls released May 20 indicate the Rudd government's popularity has not been affected by last week's budget. Both polls, taken after the budget was announced, have the Australian Labor Party (ALP) leading the Coalition 57 percent to 43 with Kevin Rudd thrashing Brendan Nelson as preferred Prime Minister. However, the polls also indicated that a sizable proportion of voters do not support the budget, particularly old-age pensioners. The Coalition's attack on the budget has been overshadowed by a leaked e-mail in which Shadow Treasurer Malcolm Turnbull advised Nelson that the Coalition's proposal to cut petrol excise (reftel) was bad policy. Nelson and Turnbull are now busy battling each other, instead of taking advantage of older voters' unhappiness with the ALP. END SUMMARY MIXED BUDGET RESPONSE BUT NO BOUNCE FOR NELSON ¶2. (U) A Newspoll conducted May 16-18, has the ALP maintaining its 57-43 lead on the two-party preferred vote. Rudd led Nelson 70-12 as preferred Prime Minister (it was 72-9 in the previous Newspoll). However, dissatisfaction with Rudd has reached a record high of 23 percent. Newspoll also polled attitudes to the budget. Relative to previous budget surveys, Rudd's first budget does not appear to be particularly popular. While 49 percent said it was good for the economy, 23 percent said it was bad (it was 60-12 for the Howard Government's last budget). On the question of whether the budget would make them financially better off, 29 percent said it would and 32 percent said it would not (it was 36-14 for Howard's last budget). The budget was extremely unpopular with those earning less than $A30,000 (a large number of them old-age pensioners). Sixteen percent said they would be better off and 47 percent said they would be worse off. However, Treasurer Wayne Swan now leads Turnbull 40-26 on economic management (the previous poll had Turnbull leading 35-29). PENSIONERS REVOLT BUT OPPOSITION FAILS TO CAPITALIZE ¶3. (U) On Friday May 16, hundreds of angry pensioners protested in Melbourne over the failure of the budget to provide for an increase to old-age pensions. On the defensive, Rudd pointed out that the budget increased the utilities allowance from $A107 to $A500 and provided them with a $A500 one-off payment. Holding out hope for pensioners, he said income support would be reviewed in the comprehensive review of the tax system which had been announced in the budget. This did not placate pensioners or the media. Seeking to capitalize on this discontent, the Coalition's Aging Spokesperson announced on May 16 that she was circulating a petition calling for an increase to the aged pension. However, she was publicly rebuffed by Turnbull who said such an increase was not currently Coalition policy. Subsequently, there were headlines such as "Opposition muddle over pension rise." "YOU'VE GOT MAIL" ¶4. (SBU) On Monday May 20, "The Australian" newspaper reported that prior to Nelson's budget reply, Turnbull had sent Nelson's Chief of Staff an e-mail arguing against Nelson's proposal to cut petrol excise by five cents per liter. For the next two days, this was the top political story, overshadowing the fallout from Rudd's budget. Behind the scenes, the Nelson and Turnbull camps blamed each other for the leaked e-mail. Turnbull released a media statement denying his office's involvement and publicly supported the excise cut saying "I'm part of the team" and describing it as Qexcise cut saying "I'm part of the team" and describing it as "good policy." Deputy Liberal Leader Julie Bishop has tried to downplay the division over fuel excise, saying that "debate within the party is normal and healthy." Former foreign minister (and ex-Liberal Party opposition leader) Alexander Downer called for "discipline." Former Minister Nick Minchin, a key Nelson supporter, said it was a reminder "to be careful what you put in writing." LIBERAL DISHARMONY PAR FOR THE COURSE ¶5. (SBU) COMMENT: Fortunately for the Coalition, both polls were taken before the latest Liberal saga. The Liberal Party has a reputation for maintaining its cohesion more successfully in government than in opposition. Former prime minister John Howard feuded for years with leadership rival Andrew Peacock in the 1980s, during the Hawke-Keating governments. Liberal MPs are despondent about the e-mail affair. It has created the image of an Opposition not fit to govern and diverted scrutiny from Rudd's budget. The CANBERRA 00000521 002 OF 002 animosity between Nelson and Turnbull, and their respective staffs, is making it difficult for them to work together. Nelson is unlikely to sack Turnbull because this may provoke Turnbull into moving an immediate leadership challenge. Turnbull probably has the numbers in the Liberal Party caucus to win a contest but his inability to be a team player has not endeared himself to his colleagues this past week. STETTENBAUER