COSTELLO TO QUIT POLITICS

UNCLAS CANBERRA 000560 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: AS PGOV SUBJECT: COSTELLO TO QUIT POLITICS ¶1. (U) Summary: Former Treasurer Peter Costello has announced that he will not contest the next general election, bringing to an end speculation he will seek the Opposition Leadership. It strengthens Malcolm Turnbull's hold on the Opposition leadership, and means his attack on the government will no longer be undermined by "leadership speculation". Subsequently, it is almost certain Turnbull will lead the Coalition to the next election. End Summary. COSTELLO'S ANNOUNCEMENT ¶2. (U) On June 15, Peter Costello - Treasurer 1996-2007 and Deputy Liberal Leader 1994-2007 - released a statement announcing he would not seek re-election for his Melbourne parliamentary seat of Higgins. The deadline for nominations was June 30. Costello reiterated what he said in November 2007 - that it was time to pursue other interests, and that it was in the party's long-term interests for others to step forward. Costello will continue his work on the International Advisory Board of the World Bank. Think-tank head and former Howard staffer John Roskam has said that he will nominate for Higgins. FAREWELL PETER ¶3. (U) In parliament, Prime Minister Rudd acknowledged Costello's intellectual ability. Opposition Leader Malcolm Turnbull praised Costello's record as Treasurer, particularly the removal of $A96 billion of government debt. Costello - humorous and a little emotional - defended his economic record, acknowledged the economic reforms of the Hawke/Keating ALP governments, and declared "Australia's best years are in front of it," if properly governed. Prior to Costello's announcement, there was a growing view that Costello would remain in politics and challenge for the Liberal leadership. This was diverting attention from Turnbull's determined attack on the government's economic policies. Some right-wing MPs, whom dislike Turnbull, were hoping Costello would take the leadership. Last month, one of them told us that Costello had the numbers to defeat Turnbull. RUDD VERSUS TURNBULL ¶4. (SBU) COMMENT: Before the 2007 election, the ALP formed a "Costello contingency unit" in case Howard resigned as Prime Minister. Similarly, the ALP has believed there was a strong likelihood Rudd would be facing Costello at the next election. ALP National Secretary Karl Bitar told us earlier in the year he was certain Costello would take the leadership - it was just a question of when. Other ALP figures expressed similar views. Costello's announcement is good news for the ALP, as well as for Turnbull. With the economy dominating political debate, some ALP MPs told us Costello would have posed much more formidable opposition than Turnbull. ¶5. (SBU) COMMENT (CONT): Some Liberal MPs may feel betrayed. Apart from his post-election November 2007 announcement, in which he declared he would not accept the party leadership, Costello has never unequivocally ruled out seeking the leadership. And since the beginning of the year, Costello has noticeably lifted his media profile on the economic debate, spurring many to believe that he was preparing a leadership challenge. Again, Costello will be accused of lacking courage and deserting the Liberal party when it desperately needed him. Never having the numbers to challenge Howard, Costello probably rejoiced in the irony of becoming the preferred alternative of the party's Right. He probably seriously contemplated remaining in parliament, but likely bowed to the unlikelihood of defeating Rudd (only one first-term government has been defeated since World War One). It is a disappointing day for Costello. Even before he Q It is a disappointing day for Costello. Even before he entered politics in 1990, he was touted as a future Prime Minister. Similar to former ALP leader Kim Beazley, some will label him "the best Prime Minister Australia never had". END COMMENT.