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

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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