HOCKEY REPLACE BISHOP AS SHADOW TREASURER

UNCLAS SECTION 01 OF 02 CANBERRA 000157

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV ECON AS
SUBJECT: HOCKEY REPLACE BISHOP AS SHADOW TREASURER


1. (SBU) SUMMARY: Following months of public criticism in the
media and private criticism by her colleagues, Deputy
Opposition Leader Julie Bishop yesterday resigned as Shadow
Treasurer, clearing the way for Liberal Leader Malcolm
Turnbull to replace her with strong media performer Joe
Hockey. Bishop replaces Helen Coonan in the Foreign Affairs
portfolio and Coonan assumes Hockey's previous portfolio of
Finance. The same day, former Liberal Party Leader Brendan
Nelson announced he would not be re-contesting his seat.
There are rumors former Treasurer Peter Costello declined an
offer from Turnbull to replace Bishop as Shadow Treasurer.
Speculation that Costello will pursue the Liberal leadership
persists, with a new opinion poll indicating he is the
preferred over Turnbull as Leader. The replacement of Bishop
is widely seen as an acknowledgment that the Coalition is
losing the key political debate on the economy.
END SUMMARY.

KNIVES OUT FOR BISHOP


2. (U) Bishop, who has been Deputy Opposition Leader since
the Coalition entered Opposition, became Shadow Treasurer
when Turnbull became Opposition Leader five months ago (by
tradition, Deputy Leaders chose their portfolio). However,
in one of her first interviews, she appeared not to know the
official interest rate. Soon after, she faced allegations
that she had plagiarized the "Wall Street Journal" in one of
her speeches, and one of her staff apparently wrote an essay
in her name for a book on the future of the Liberal Party.
Bishop recently quoted a controversial economic theory - the
Laffer curve - to argue that cutting taxes ultimately
increases government revenue. While the Government and the
press reveled in her misfortune, unnamed Liberal MPs publicly
bemoaned her performance.

THE CHANGES


3. (U) On February 16, Bishop, 52, announced her resignation
as Shadow Treasurer. She said "ongoing commentary on my role
has been a distraction from the scrutiny that should have
been applied to the government's reckless economic
performance." Subsequently, Turnbull announced that he had
appointed Joe Hockey, 43, as Shadow Treasurer. Bishop
replaces Helen Coonan in the Foreign Affairs Portfolio, and
Coonan replaces Hockey in Finance. Due to Hockey's increased
workload, Education Spokesman Christopher Pyne relives him of
the position of Manager of Opposition Business in the
Parliament - a role dealing with parliamentary tactics and
procedures. Stephen Parry takes over from Coonan as Manager
of Opposition Business in the Senate. Turnbull praised
Hockey, one of the more popular figures in the Coalition and
a media favorite, as "formidable." Hockey was a Cabinet
Minister during the Howard government, holding the positions
of Minister for Human Services, and Minister for Employment
and Workplace Relations.

NELSON PULLS THE PLUG WHILE COSTELLO LINGERS


4. (U) That evening, former Liberal Brendan Nelson told his
Liberal electorate branch that he would not be recontesting
his seat because it was time for "renewal." He did not
inform Turnbull, who deposed him as leader, prior to his
announcement. There are media reports that Turnbull offered
former Treasurer Peter Costello the Shadow Treasury
Portfolio. Liberals are divided over whether an offer was
actually made. Meanwhile, a new poll released February 17
indicates Costello is preferred over Turnbull as Liberal
leader 37 to 26 percent, with Australian Labor Party (ALP)
voters preferring Costello 37 to 22 percent. Speculation
Qvoters preferring Costello 37 to 22 percent. Speculation
about Costello's future has intensified.

SHE HAD TO GO


5. (SBU) COMMENT: Bishop acted in the best interests of the
Coalition. It is likely Turnbull, a close friend, was
reluctant to axe her. The economy - the Coalition's
traditional strong suit - is dominating political debate but
the Government has closed the gap in the polls on economic
management, and the majority of voters support Rudd's
handling of the economic crisis. Bishop, her credibility in
tatters, was unable to score any political points against
Treasurer Wayne Swan - widely regarded as the Government's
weak link. Hockey is jovial, popular, and has media "cut
through." He will apply a lot more pressure on Swan.
Another Liberal moderate from Sydney, he should work well
with Turnbull. However, the speculation surrounding Costello
is an unwanted distraction. Although they dislike each
other, it is entirely possible that Turnbull offered Costello
the Treasury portfolio. Costello has by far the most

CANBERRA 00000157 002 OF 002


economic credibility in the Coalition. In April, Costello
must decide if he will recontest his parliamentary seat at
the next election. If he decides to stay on, and if
Turnbull's polling numbers do not improve as the economy
continues to deteriorate, Costello could be seen as the
savior of the Liberal Party by this December.

CLUNE