WESTERN AUSTRALIA POLITICS: THE RUDD-BARNETT DUET

C O N F I D E N T I A L SECTION 01 OF 02 PERTH 000030

SIPDIS

DEPARTMENT FOR EAP/ANP

E.O. 12958: DECL: 5/13/2019
TAGS: PGOV AS
SUBJECT: WESTERN AUSTRALIA POLITICS: THE RUDD-BARNETT DUET

REF: (A) 08 PERTH 53, (B) CANBERRA 357, (C) 08 PERTH 16, (D) 08 PERTH 50, (E) 08 PERTH 42

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CLASSIFIED BY: Kenneth Chern, Consul General, AmConGen Perth,
State.
REASON: 1.4 (b),(d)




1. (C) Summary: Western Australia (WA) looms large on the
federal radar as talk escalates about the state's importance in
the next federal election. With Labor currently holding only
four of 15 WA federal seats, analysts view WA as a potential
pivot for federal Labor to retain power by offering a chance to
increase that number. Labor operatives see gains in the west as
a hedge for Prime Minister Rudd against likely losses in eastern
states. The Prime Minister has engaged WA state Liberal Premier
Colin Barnett in an asymmetric but pragmatic duet from which
both men can benefit, but which threatens to drive a wedge
between the WA and federal Liberals. The global financial
crisis is testing Barnett's ability to deliver on his election
promises, but as he engages shrewdly with Canberra, business and
governmental observers credit him with a steady hand, eight
months after leading to power a state party most observers
regarded as unready to govern (ref A). End Summary.

THE PRAGMATIC PREMIER


2. (C) As the sole Liberal state premier in a matrix of
Australian state and federal Labor regimes, Colin Barnett has
developed good working relations with Prime Minister Rudd.
Barnett runs his own agenda keeping WA's interests at the fore,
realizing that the federal Liberals are unlikely to gain office
soon. His bid for federal funding from the "Building Australia"
infrastructure initiative for the Ord River agricultural
development scheme in WA's far north Kimberley region - the top
of his "wish list" - has received a fair hearing. Visiting the
area last December, Rudd enthusiastically described the Ord
River area as the "new breadbasket for Australia." In April, WA
leaders welcomed the announcement of an expanded national
broadband program (ref B). Treasurer Troy Buswell told the
Consul General that he was pleased with this initiative, as it
would not only spare the state from laying out funds for
broadband, but also enhance WA's bid to land the Square
Kilometer Array, a vast radio telescope project on which a
19-nation consortium will make a siting decision in 2012 (ref
C). Along similar lines, Barnett publicly welcomed Canberra's
A$21 billion (US$15 billion) stimulus, countering the attacks of
federal Opposition Leader Malcolm Turnbull on Prime Minister
Rudd's fiscal plan. Barnett's bipartisan approach works well
with Canberra and his good relations assure that financial
benefits and federal assistance for major infrastructure funding
will flow through, despite the tough budgetary decisions looming
ahead.

THE PREMIER AND THE PRIME MINISTER


3. (C) An energy industry representative with close political
connections remarked to the Consul General that Premier Barnett
and Prime Minister Rudd, "quality people" from opposite sides,
were "two bulls with an affinity and complementary DNA."
Another well-connected business leader told the CG that Rudd is
getting on well with Barnett in order to annoy the federal
Liberals, split them from Barnett, and bid for WA seats in the
federal election. It is an asymmetric relationship, but the
public perception of good WA state-federal ties also boosts
Barnett in the eyes of his electorate, although this in no way
helps Opposition Leader Turnbull. This businessman noted that
WA would be a very important battleground in 2010. With only
four of 15 WA federal seats in Labor hands, there was a real
opportunity to win additional seats. This was key, since Labor
cannot control the global financial crisis and needs to win
every seat it can. Federal Labor figures, paying close
attention to WA, have asked this businessman whether the
Liberal-National alliance that runs WA will hold, and where the
stress points are. The businessman says the answer lies in the
affordability, at a time of budget cuts, of the Royalties for
Regions scheme that the National Party imposed on Barnett as a
condition for allying with the WA Liberals to provide a
parliamentary majority (ref D). If the Liberals are careless,
he added, Rudd will be able to drive a wedge between their WA
state and federal parties. If the Liberals had a second
premier, the businessman concluded, it would be harder for the
Prime Minister to play this game; the two Liberals might be able
to "square off" against Rudd, and Labor premiers might also get
annoyed with his tactics.

THE PIVOT OF THE FEDERAL ELECTION?


4. (C) Former Deputy Prime Minister and Opposition Leader Kim
Beazley told the Consul General that federal Labor, keen to pick

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up additional WA seats in 2010, are targeting the
closely-contested Swan and Cowan electorates in particular. WA
performed badly in 2007, giving only a 46.7% vote to Labor,
against their national figure of 52.7%. Beazley noted that
there is "low-hanging fruit" ripe for the picking and that WA is
coming into sharper focus amid increasing fears that seat losses
might be inevitable in New South Wales. Beazley's comments were
substantiated as the Rudd government headed west for a rare
community Cabinet meeting in the battleground Cowan electorate
on April 22, bringing along the entire federal Cabinet.
Addressing the local business community on the same trip, Rudd
reaffirmed his intention to visit the state more regularly and
to stay mindful of WA's importance to the national economic
well-being. In an April 14 editorial, "The Australian," the
national daily broadsheet, opined that the west was "vital to
Rudd's chances" for re-election, and that gains there could be
achieved to offset possible losses in New South Wales. Beazley
told us that after WA Labor's disastrous state campaign last
year, federal Labor has already taken control of the coming
federal campaign in the state: it will be run by Foreign
Minister Stephen Smith and Immigration Minister Chris Evans,
along with MP Gary Gray.

PLACATING PERTH AND THE REGIONS


5. (C) Thrust into state party leadership just weeks before the
2008 WA election, Premier Barnett is gaining a reputation as a
steady hand. However, confronting the economic downturn, his
government faces dilemmas in maintaining its creditworthiness
while delivering on its commitments, including Royalties for
Regions - the provision of 25% of resources royalties to areas
outside Perth. Treasurer Buswell's early announcement of 3%
cuts across all government departments to avoid a budget blowout
has met fierce bureaucratic resistance, particularly in the
health and education sectors, and major city projects already
have been scrapped in favor of the Ord River project in the
Kimberley, a natural gas hub in the same region, and the Oakajee
iron ore port project at Geraldton in the Murchison region (ref
E). Over time, one business leader notes, there is a risk: the
evident goodwill in metropolitan Perth toward the regions will
sour, and the WA Labor Opposition will contend that money is
being wasted to build hospitals in sparsely populated places
while people in the city are denied adequate medical facilities.
This in turn would strain the alliance between Barnett and WA
Nationals leader Brendon Grylls, whose advocacy of Royalties for
Regions played well in rural WA and gave him the balance of
power that he tipped to Barnett in WA's parliament. It is
notable that the May 12 federal budget added further handouts to
the state coffers with the promise of additional infrastructure
expenditure, including A$339 million (US$238 million) for the
Premier's pet project at Oakajee and A$236 million (US$165
million) for Perth inner-city development projects. Little
wonder that Barnett and his Treasurer, Buswell, who writes the
checks to pay the nurses, teachers, and police, ignore the
criticisms of the Federal Opposition leadership and gladly
accept succor from Canberra. As Buswell recently confided to
the CG, "You have to be nice to the federal government, they've
got the money!"

COMMENT


6. (C) WA, Australia's most conservative state, defied the
national trend by moving toward the Coalition in the 2007
election. Up to five Liberal seats are therefore competitive
enough to attract serious Labor attention, and a four-day visit
by the Prime Minister. As columnist Peter Van Onselen wrote in
"The Weekend Australian" May 3, "Labor may have its problems in
states such as NSW, weighed down by maladministration and
scandals surrounding federal marginal seats. But the west is a
different story. It is an opportunity, and Rudd knows it." For
his part, Premier Barnett has no choice but to acknowledge
Rudd's largesse, whether through stimulus or infrastructure
projects in far-flung areas of the state. He recognizes that
what is good for Rudd is not necessarily bad for him, as both
seek support for the benefits they bring to WA. By the same
token, Barnett has made some limited criticisms of the federal
Labor government for spending funds too quickly. The challenge
for Barnett is to maintain his balance, his credibility, and his
base of support even as the Prime Minister moves toward a play
for WA votes, and continued national leadership, at the expense
of Barnett's federal Liberal counterparts. End Comment.
CHERN