FORMER OPPOSITION LEADER COMMENTS ON RUDD AND AN

C O N F I D E N T I A L SYDNEY 000060


E.O. 12958: DECL: 03/11/2019
TAGS: PGOV PINR MASS AS
SUBJECT: FORMER OPPOSITION LEADER COMMENTS ON RUDD AND AN
EARLY ELECTION

REF: CANBERRA 213

Classified By: Political Officer Casey Mace for reasons 1.4 (b) and (d)

Summary
--------------


1. (C/NF) Prime Minister Kevin Rudd has taken a tactical,
rather than strategic approach to the economic crisis,
according to former opposition leader Brendan Nelson. As a
result, Nelson predicts Rudd will back off of other strategic
efforts, like the proposed emissions trading scheme and
defense procurement, to fuel the perception that he is doing
everything possible to mitigate the economic downturn. In a
private meeting with us on March 6, Nelson also offered his
views on the unlikely prospects of an early federal election
in 2009, the Turnbull-Costello rivalry within the opposition,
the dismal future of the National Party, and the poor
performance of Joel Fitzgibbon as Defense Minister. Although
Nelson's critical appraisals of his political rivals -- Kevin
Rudd, Joel Fitzgibbon, and Malcolm Turnbull -- must be taken
with a grain of salt, his close relationship with Peter
Costello and his familiarity with the political pressures in
Canberra make his views informative. End Summary.

Rudd's Tactics on the Economy, Climate Change, and Defense
-------------- --------------


2. (C/NF) Nelson maintained that Rudd's economic policy is
focused on short-term political gain. For example, Nelson
claimed, Rudd has timed his stimulus packages to avoid two
quarters of negative growth, which is Australia's official
definition for a recession. Nelson dismissed Rudd's recent
nine-page economic think piece in the "Monthly," which some
observers termed socialist in outlook, as a political
instrument rather than a strategic manifesto. Nelson
believes Rudd wrote the article, in part to appease the left
wing of the Labor party, and in part to saddle the Liberal
party with the blame for the current fiscal crisis in
Australia. Nelson said that the U.S. should not be worried
that Rudd is about to reengineer the Australian economy,
despite some of the more "socialist" innuendoes in the piece.


3. (C/NF) As a consequence of Rudd's tactical approach,
Nelson said he believes that Rudd is planning to delay the
introduction of the Carbon Pollution Reduction Scheme (CPRS),
although he admitted that he has been unable to convince his
colleagues of this in the opposition. He believes Rudd added
the massive funding for "pink bats" (ceiling insulation) to
his stimulus package in order to curry some favor with the
Green groups in advance of delivering the bad news that he
will delay the CPRS. Another indicator, suggested Nelson, is
that AIG's Heather Ridout (who is close to Rudd) has abruptly
changed her tune, and now wants the government to delay the
CPRS.


4. (C/NF) Nelson said that he thinks the Defense White Paper
is being crafted to give the Rudd government the ability to
delay and/or cancel some defense procurements that will weigh
heavily on a federal budget that is entering deficit. He
said that he has told Fitzgibbon that one way to save costs
is to purchase additional F-18 Super Hornets and fewer F-35
Joint Strike Fighters for a "hi-low" mix. Nelson said media
reports/speculation that the Navy would increase the
submarine fleet to 20 submarines was nonsense fuelled by
lobbyists. He thinks the fleet will remain at 6 submarines,
with the possible addition of two more. Nelson cautioned that
Labor Party Governments have never ranked Defense as high a
priority as the Coalition did when it was in power under John
Howard.

Early Election Prospects
--------------


5. (C/NF) Nelson does not think Rudd will call an election
before the end of the year. (Elections are due by November
2010; Nelson did not comment on the chances of an early
election in 2010.) Calling an election more than a year
early is too much of a gamble for Rudd, who is conservative
by nature. Nelson said that an early election always swings
at least a one-percent protest vote away from the government
of the day. Rudd's parliamentary majority is not that big.
Despite this, Nelson maintained that the opposition would not
be able to win an early election. The opposition's disunity
and policy inconsistency under Turnbull's leadership has
prevented it from gaining any traction with the electorate.
In a separate meeting, opposition backbencher Michael Johnson
shared a similar view on the opposition's bleak chances in a
2009 election. Johnson, who represents a relatively safe
Coalition seat in Brisbane, said that "the Liberal party is
in the DNA of my electorate, and I'm even worried that I
could lose in an election this year."


Future of the Coalition
--------------


6. (C/NF) Leadership of the opposition remains an open
question. Costello "does not like" Turnbull, said Nelson,
"which is putting it mildly." Costello was "furious" when
Turnbull defeated Nelson in the leadership spill last
September. Although he said that he did not know whether
Costello would challenge Turnbull for the leadership, Nelson
believes he has the numbers if he wants it. He pointed out
that Costello is probably relishing how uncomfortable he is
making Turnbull by permitting speculation that he will
challenge him for the leadership. Moreover, Costello could
allow the leadership question to hang over Turnbull for
months. Even though he might have decided to retire from
Parliament, Costello could renominate for his parliamentary
seat when the Liberal Party starts the nomination process
(probably around July of this year) and withdraw late in the
process to "torment" Turnbull.


7. (C/NF) Coalition partner the National Party is a dying
force federally, Nelson said. He said that the aspirations of
most of the voters in regional Australia are essentially the
same now as the aspirations of urban voters, eliminating the
need for two separate conservative parties. He opined that
the Nationals have three options: die a slow death through
attrition, merge with the Liberals, or become a small party
(like the Greens) which represents a handful of remote
electorates. He suggested that leaders like Barnaby Joyce
prefer the third option.

Defense Minister Fitzgibbon on Borrowed Time
--------------


8. (C/NF) Fitzgibbon is a "nice-enough" guy, said Nelson,
but "he is out of his depth intellectually." Poorly handling
the current military pay fiasco (reftel),Fitzgibbon should
not have publicly deflected the blame for the fiasco to the
military chiefs, especially when 3000 uniformed Australians
are deployed in war zones. Nelson said the military and
Australian defense department had made a series of
bureaucratic blunders when he was Defense Minister, but he
always believed he had to accept the responsibility. He
thinks Rudd will shuffle Fitzgibbon out of defense before
Christmas, as part of a larger reshuffle.

Comment
--------------


9. (C/NF) Nelson is not the most objective of observers,
which he jokingly acknowledged during our meeting. By and
large, the business community and the broader public have
given Rudd high marks for his measures to shore up the
economy. And so far, Australia continues to outperform many
of the other OECD countries on measures like GDP growth and
unemployment. Rudd's economic essay has elicited strong
criticism from conservatives, but it was telling that Nelson
dismissed it as nothing more than a political instrument.
The emissions trading scheme is truly testing Rudd's
political skills - the environmental lobby says his plan is
too weak, powerful industrial sectors like mining have argued
that it is too costly, and a growing number of MPs from both
the opposition and within the Labor party argue that it is
too early. Nelson may be right that Rudd has added green
measures to his economic stimulus packages to buy some
political capital with environmentalists, but it is hard to
imagine that Rudd would unilaterally take the decision to
delay the introduction of his emmissions trading scheme --
one of his key campaign promises. It is more likely that he
would allow the Senate to block the legislation, if he wanted
to delay its introduction, so that he could deflect the blame
for its delay.


10. (C/NF) Nelson confirmed what we have heard from others
about Costello's animosity towards Turnbull. Just like when
Turnbull preyed on Nelson for the leadership spot, rumors of
an ouster distracts and divides the party. Unlike Turnbull,
who everyone knew would make his move on Nelson eventually,
Nelson admitted that Costello remains coy and could rile
Turnbull (and the party) for months. Finally, others have
echoed similar misgivings with Fitzgibbon's performance as
defense minister. Fitzgibbon's days as defense minister may
indeed be numbered. End Comment.


BORDEN