Wikileaks Leaks BAG Archives: Australia Related (Part-2)

58001
6/13/2008 2:13
08CANBERRA609
Embassy Canberra
CONFIDENTIAL//NOFORN
06CANBERRA1943

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C O N F I D E N T I A L CANBERRA 000609 NOFORN SIPDIS E.O. 12958: DECL: 06/12/2018 TAGS: PGOV, PINR, AS

SUBJECT: DEPUTY PM JULIA GILLARD STAR IN RUDD GOVERNMENT

REF: 06 CANBERRA 1943 Classified By: DCM Daniel A. Clune for reasons 1.4 (b) and (d).

1. (C/NF) SUMMARY: Two stars have emerged in the government of Prime Minister Kevin Rudd: Rudd himself and Deputy Prime Minister Julia Gillard (who will be Washington for the June 23-25 American Australian Leadership Dialogue). Gillard became Deputy Leader of the Australian Labor Party (ALP) after she and Rudd deposed Kim Beazley in December 2006. In the run-up to the November 24 election, and during the campaign itself, Gillard was a loyal and competent deputy, so much so that Rudd went out of his way in his election victory speech to thank her. While she was not given the traditional number two job of Treasurer in the new government, Gillard was handed two important portfolios: industrial relations and education. Gillard, unlike Treasurer Wayne Swan or any other minister (except Finance Minister Lindsay Tanner), has increased her prominence and power since she became deputy prime minister and is now the clear number two (with a big gap before number three) in the Rudd Government. At this point, Gillard would have to be considered the front-runner to succeed Kevin Rudd as Prime Minister, which would make her Australia's first female Prime Minister. Several contacts caution, however, that Rudd is ambivalent about Gillard, who is not from Labor's Right Wing like he is, and he will avoid creating a potential rival. By the time Labor is thinking beyond Rudd, Gillard may well face more serious competition. END SUMMARY.

RUDD AND GILLARD ABOVE THE REST

2. (C/NF) Through the first seven months of the Rudd Government, Gillard is the only ALP politician who has approached PM Rudd in national prominence. She is the second most important person in the Government, with the rest of the ministers trailing far behind, and Australia's highest ranking woman. Gillard, who stumbled a bit when she announced Labor's industrial relations policy at the ALP national conference in April 2007, has since performed well, supporting Rudd during the election, running her ministry competently, and demonstrating a flair for showmanship and public speaking during Parliament's Question Time. Traditionally, the Treasurer, the second most important cabinet position, comes from the Right Faction of the Party in an ALP government. This practice partly explains why Wayne Swan received the position. To compensate, Gillard received two portfolios, education and industrial relations. Since the election, however, it is Gillard who has made the most of her position while Swan, uncomfortable on his feet and with economics, has struggled at times. After Rudd, she is now the most prominent minister in the government.

GILLARD THE PRAGMATIST

3. (C/NF) Many key ALP insiders have told poloffs that Gillard, who joined the ALP as a member of the Victorian branch's Socialist Left faction, is at heart a pragmatist. New South Wales Right powerbroker Mark Arbib (protect) described her as one of the most pragmatic politicians in the ALP. Michael Cooney (protect), from the ALP Right and a former senior adviser to ALP leaders Mark Latham and Kim Beazley, said she has been very impressive as a minister: knowledgeable on the issues, listens to advice from subordinates and civil servants and is not afraid to delegate responsibility. When we reminded Paul Howes (protect), head of the right-wing Australian Workers Union, that ALP Qof the right-wing Australian Workers Union, that ALP politicians from the Left, no matter how capable, do not become party leader, he said immediately: "but she votes with the Right." In 2002, when she was Shadow Immigration Minister, Gillard presented to the ALP National Conference a draft policy supporting the continuation of the Howard Government's policy of mandatory detention of unauthorized arrivals (of refugees like those on the "Tampa"). This upset the Left, but reflected the views of mainstream Australia.

GILLARD THE PRO-AMERICAN

4. (C/NF) Although long appearing ambivalent about the Australia-US Alliance, Gillard's actions since she became the Labor Party number two indicate an understanding of its importance. Poloffs had little contact with her when she was in opposition but since the election, Gillard has gone out of her way to assist the Embassy. She attended a breakfast hosted by the Ambassador for U/S Nick Burns who visited Canberra just days after the election. At our request, she agreed to meet a visiting member of the National Labor Relations Board, after prior entreaties by the board member's Australian hosts had been rebuffed. Gillard is now a regular attendee at the American Australian Leadership Dialogues (AALD), and will be the principal government representative to the AALD meeting in Washington at the end of June. (COMMENT: Although warm and engaging in her dealings with American diplomats, it's unclear whether this change in attitude reflects a mellowing of her views or an understanding of what she needs to do to become leader of the ALP. It is likely a combination of the two. Labor Party officials have told us that one lesson Gillard took from the 2004 elections was that Australians will not elect a PM who is perceived to be anti-American. END COMMENT)

GILLARD THE SOCIALIST

5. (SBU) In the late 1970s, Gillard joined the Socialist Left faction of the Victorian ALP. In the mid 1980s, she helped form "Socialist Forum" which contained disaffected members of the Socialist Left and former Communists. This group proposed ending the Australia-US Alliance, and introducing radical tax policies. In a Socialist Forum Pamphlet from the mid-1980s, Gillard describes herself as a "socialist and feminist." By the late 1980s, however, her involvement in Socialist Forum had significantly declined, although she remained a member until it dissolved in 2002. Gillard now downplays her involvement in Socialist Forum and describes the group as a "sort of a debating society." Indeed she good-humoredly waves away press attempts to raise the subject of her early political leanings.

THE RIGHT HELPS GILLARD

6. (SBU) In the early 1990s, Gillard and her supporters formed a group within the Socialist Left called the "Pledge Group." To the consternation of the Socialist Left leadership, it formed an alliance with the Right, and Gillard became Chief of Staff to then Victorian Opposition Leader (now Premier) John Brumby, who is from the Victorian Right of the ALP. In 1998, with the Right's support, she gained preselection for the federal parliamentary seat of Lalor, in Melbourne's western suburbs. Subsequently, the Socialist Left split and the Gillard group, part of the "Soft Left" faction, has remained outside the Socialist Left since. In March 2006, Gillard described factions as "a cancer eating away at the very fabric of the Labor Party." She called on ALP leadership figures to quit factions and for the ALP leader to have the power to directly appoint his/her front bench Indeed, Gillard has not attended faction meetings since she became Deputy ALP leader. After the election, Rudd broke ALP tradition and appointed his Ministry (apparently) without the approval of the factions. Since 2003, Gillard has been on good terms with a large number of Right Faction MPs - such as Simon Crean and Joel Fitzgibbon - whom she worked with to oppose Kim Beazley in leadership ballots.

COMMENT: SORRY, NO LEFTY ALP LEADERS

7. (C/NF) The ALP traditionally does not produce leaders from the Left of the party, but Gillard is a pragmatist who has appeal across factional lines. Conventional wisdom is that Rudd will be Prime Minister for eight or nine years and then hand over the leadership 12-18 months out from an election. Gillard twice seriously considered running for the ALP leadership. In January 2005, following Mark Latham's resignation, she pulled out when she realized Kim Beazley had the numbers. And in late 2006, she threw her support behind Rudd because she knew Beazley would have won a three-way QRudd because she knew Beazley would have won a three-way contest (notwithstanding the fact that Gillard would have received more votes than Rudd) and he would have defeated Gillard one-on-one. Gillard the pragmatist knew only Rudd was capable of receiving the necessary support to defeat Beazley.

8. (C/NF) Some Coalition MPs believed before the last election that Gillard was a weakness for Rudd. They thought she was too left-wing for mainstream voters, and her childlessness and unmarried status would hurt her with "working families." The Coalition targeted her during the election campaign but the down to earth Gillard is popular with ordinary Australians. An obstacle to Gillard assuming the leadership may be some key right-wing ALP MPs and union officials. Powerful, socially conservative union leaders such as Joe De Bruyn (head of the shopworkers union, the largest in the Australian Council of Trade Unions), Bill Ludwig (head of the Australian Workers Union), and Don Farrell (powerbroker and shopworkers union leader in South Australia and incoming senator) may attempt to thwart her. So could the head of the Victorian Right, Senator Stephen Conroy (who was a strong supporter of Kim Beazley and cannot stand Gillard), and the ambitious MP and former unionist Bill Shorten (also a strong supporter of Beazley who has Prime Ministerial ambitions). Much internal hostility towards Gillard can be traced back to her support of Mark Latham and her undermining of Kim Beazley's leadership. Last year, some ALP MPs were critical of the industrial relations policy she drafted for the ALP conference - a policy which alienated business and had to be re-drafted by Rudd.

9. (C/NF) Perhaps the biggest determinant in whether she becomes leader will be her performance as a Minister. Gillard has a huge workload as Minister for Education and Workplace Relations. She is responsible for implementing two of Rudd's key election promises - the "Education Revolution," and industrial relations changes, including the creation of a national industrial relations system. This will require her to deal with recalcitrant ALP state governments and unions that would like the ALP to stop their declining memberships by going further than Rudd promised. One contact who used to work for Rudd suggested that he gave Gillard the education reform portfolio to weaken her within the ALP, as any serious reform will antagonize the education unions and the state governments. A less credible education reform package will cement the notion that Gillard is captive of the traditional Labor Left, which would torpedo her viabilitiy as PM. John Howard's former chief of staff told us that with two portfolios, Gillard would be "too busy" to worry about anything other than her job. But Gillard is tough and highly intelligent. If she comes through this relatively unscathed, it will go a long way to ensuring she succeeds Rudd. In the public's eyes at present, Gillard, as the number two figure in the ALP, is Rudd's heir apparent. If this is the case when Rudd goes, it will be extremely hard for ALP MPs to deny her the leadership. It is unlikely the ALP would miss the opportunity to produce Australia's first female Prime Minister. MCCALLUM


193682
2/25/2009 7:23
09CANBERRA188
Embassy Canberra
CONFIDENTIAL//NOFORN
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C O N F I D E N T I A L CANBERRA 000188 NOFORN SIPDIS E.O. 12958: DECL: 02/24/2019 TAGS: PGOV, ELAB, AS

SUBJECT: ALP FACTIONS BIDE THEIR TIME

Classified By: Political Counselor James F. Cole for reasons 1.4 (b) and (d).

1. (SBU) SUMMARY: Despite the apparent desire of Australian Labor Party (ALP) leader and Prime Minister Kevin Rudd to end the power of ALP factions, the January outbreak of a dispute between members of the Right faction in Victoria is a reminder that they still control politics at the local level. Nationally, the factions have lost much of their relevance. Rudd ignored the factions in picking his cabinet ministers after the 2007 election. It is virtually impossible, however, to rise in the ALP without the patronage of a faction - the Prime Minister being a notable exception. Rudd, popular with the voters and the man who led the ALP to its first victory in 11 years, currently dominates ALP politics but once his popularity with the voters wanes, faction leaders believe their national influence will return. END SUMMARY.

VICTORIAN RIGHT SPLITS AFTER DEAL ON PARLIAMENTARY SEATS 2. (U) In January, a dispute broke out among members of Labor Unity, the principal right-wing faction in the state of Victoria. Labor Unity, which includes Premier John Brumby, Federal MP and former trade unionist Bill Shorten and Communications Minister Stephen Conroy, made a deal with the ALP Left in the state to protect sitting state and federal MPs from a nomination challenge. The reason for the agreement was to shut out a dissident element in Labor Unity that had defeated Shorten's and Conroy's preferred candidate in a nomination for a state seat, and had then attempted to oust ALP state secretary Stephen Newnham, an ally of Brumby's.

THE POWER IS IN THE PRESELECTION

3. (SBU) In Australia, nominations for state and federal parliamentary seats are called "pre-selections." Meetings are held at the district branches of each party and the members choose a candidate. Because this is a small-scale, parochial exercise, ALP pre-selections are controlled by those who can bring the most local ALP members to a meeting. The factions, and the unions which back each faction, can always ensure that enough members turn up to a branch meeting to determine the outcome (sometimes known as "branch stacking"). For this reason, even though the unions are now less than 20 percent of the workforce in Australia, they retain a disproportionate share of political power within the ALP.

UNIONS UNDERPIN FACTIONS

4. (U) Fundamentally, the power of the factions resides in the membership of their affiliated unions. The Australian Workers Union (AWU), the Shop Distributive and Allied Employees Association (SDA), and the Transport Workers Union (TWU) are major unions affiliated with the Right, while the Construction Forestry Mining and Energy Union (CFMEU), the Australian Manufacturing Workers Union (AMWU), and the Liquor Hospitality and Miscellaneous Workers Union (LHMU) are major unions affiliated with the Left.

5. (C/NF) The downfall of New South Wales (NSW) Premier Morris Iemma in 2008 illustrates the sway a union can have within a faction. The Iemma Government proposed to privatize the state's electricity system so that the sector could be modernized and the sales proceeds used to fund pressing infrastructure projects. The unions in NSW, which are in the NSW Right faction with Iemma, balked at the sale, knowing privatization would mean job cuts. When Iemma refused to back down, the unions forced the Right faction to withdraw its support for the Premier and he had to resign. Interestingly, AWU President Bill Ludwig, a Right faction QInterestingly, AWU President Bill Ludwig, a Right faction powerbroker in Queensland and one of the most powerful union leaders in the country, confided to us that he opposed the NSW unions' tactics with Iemma. He said that ALP governments have obligations to the general community, not just the unions, and voters turn on governments that appear beholden to unions.

GROWING CRITICISM

6. (SBU) During the ALP's years in Opposition (1996-2007), a growing number of MPs expressed concern that the factional system, based on power and personalities, was rewarding political hacks at the expense of talented candidates from the broader community. In early 2006, in a well publicized speech, Gillard claimed that factionalism was a "cancer eating away at the very fabric of the Labor party," and that it was about "who wins, not what they win for." She called for the ALP leader to have the prerogative to choose the cabinet. Before the election, Rudd declared he - not the Caucus - would choose the ALP ministry. Caucus approved this in March 2008, overturning more than 100 years of ALP tradition. Rudd and Gillard no longer attend faction meetings. (NOTE: Ironically, even though Rudd claimed he would pick his ministers without regard for the factions, his cabinet reflects the factional balance within the ALP: 11 from the Right and nine from the Left. End Note)

END OF COLD WAR BLURS DIFFERENCES

7. (C/NF) Over the last two decades, the ideological differences between the Left and Right have blurred, largely due to the collapse of Communism, and a recognition by the Left that a market economy, with appropriate safeguards, is the best way to raise living standards. For decades, foreign policy, particularly the American Alliance, was a key point of difference between the factions, but today key figures in the Left like Gillard are as supportive of the Alliance as the Right. According to ALP Senator Dave Feeney, a central figure in the Victorian factional dispute, there is no longer any intellectual integrity in the factions and he describes the current system as unpredictable and "byzantine." Feeney points out, for example, that there is no major policy issue on which he, a Right factional leader, differs from Gillard.

FACTIONS MAKE RUDD LEADER

8. (SBU) Ironically for Rudd, who won a seat in federal parliament without the support of a faction or the unions, he and Gillard would not have won the ALP leadership in December 2006 without the backing of some of the factions. Gillard was supported by the Left but she knew she would never get enough support from the Right to win so she backed Rudd as Leader. Meanwhile, most of the traditional union bosses from the Right, unhappy with Gillard and knowing Rudd was not a union man, supported Beazley. However, the head of the Right in New South Wales (NSW), State Secretary Mark Arbib, backed Rudd. Arbib is now the most powerful figure in the national Right. Rudd has taken him into his inner circle and on February 18 appointed him as a Parliamentary Secretary.

COMMENT: FACTIONS COULD KEEP GILLARD FROM LEADERSHIP

9. (C/NF) Two ALP Right factional leaders we have spoken to, AWU President Joe Ludwig and Senator Don Farrell, former head of the SDA in South Australia and the most influential powerbroker in that state, both agreed that Rudd's political power in the ALP is now unchallenged, but they opined that the factions would reassert themselves once Rudd's popularity declines. Although Gillard is currently Rudd's heir apparent, factional maneuvering could ultimately deprive her of the leadership. Right-wing powerbrokers, the key to winning the leadership, are likely to prefer one of their own - such as the leader of the Victorian Right, Bill Shorten - for the job. CLUNE


180418

12/16/2008 6:17
08CANBERRA1281
Embassy Canberra
CONFIDENTIAL

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C O N F I D E N T I A L CANBERRA 001196 NOFORN SIPDIS STATE FOR EAP AND P E.O. 12958: DECL: 11/20/2018 TAGS: PREL, PINR, PGOV, ECON, AS

SUBJECT: RUDD GOVERNMENT - ONE YEAR REPORT

Classified By: Ambassador Robert D. McCallum for reasons 1.4 (b) and (d).

SUMMARY ------- 1. (C/NF) The Rudd government has generally been competent and centrist during its first 12 months, notwithstanding some significant foreign policy blunders, and criticism over Rudd's media-focused management style. The Government is unified, has avoided scandal, kept its major election promises and has generally placated the unions and the factions with the Australian Labor Party (ALP). While it has held a consistent and comfortable lead over the Opposition in opinion polls, the Government's greatest first-term challenges are likely in front of it. It has to reconcile a slowing economy and rising unemployment with its commitment to addressing climate change. So far, the public appears well-satisfied with Rudd's handling of the global economic crisis, as evidenced by his near-record approval ratings. Due to his popularity, Rudd currently has immense authority within the ALP. Rudd is focused on developing good relations with the incoming U.S. Administration, and is eager to be seen as a major global player. END SUMMARY

RUDD KEEPS HIS PROMISES -----------------------

2. (SBU) Rudd has paid careful attention to delivering on his election promises. He signed the Kyoto protocol, withdrew combat troops from Iraq, delivered tax cuts, apologized to indigenous Australians, wound back the previous government's labor laws, initiated his "education revolution" and health reform, and has committed to implementing an emissions trading scheme in 2010. One blemish on his record is that while Rudd went to the election empathizing with the cost of living pressures facing "working families," his "Fuelwatch" and "Grocerywatch" price-monitoring initiatives have been widely ridiculed as ineffective.

NO SCANDAL, NO SACKINGS -----------------------

3. (C/NF) Unlike former PM John Howard's first term, in which five ministers and three parliamentary secretaries were sacked (as well as Howard's Chief of Staff), there have been no changes to Rudd's cabinet and ministry since it was sworn in almost one year ago. Even Opposition contacts have admitted surprise that a new government with largely inexperienced ministers has avoided scandals. After an unconvincing start, Treasurer Wayne Swan has improved. Deputy Prime Minister Julia Gillard, Finance Minister Lindsay Tanner and Climate Change Minister Penny Wong have been the star performers. ALP contacts often boast about the Government's depth, with ministers-in-waiting like Parliamentary Secretaries Bill Shorten, Maxine McKew and Greg Combet, and backbenchers like Mark Dreyfus and Mark Butler.

RUDD'S FOREIGN POLICY MISTAKES ------------------------------

4. (C/NF) Rudd, a former foreign service officer, has made a number of missteps on foreign policy. Repeatedly, Rudd has made snap announcements without consulting other countries or within the Australian government. Though these missteps loom large within the Canberra policy community, they have had little impact on Rudd's popularity with the Australian public. Significant blunders have have included: -- Foreign Minister Stephen Smith's February announcement that Australia would not support possible quadrilateral discussions between Australia, the United States, Japan and India out of deference to China. This was done without advance consultation and at a joint press availability with visiting Chinese Foreign Minister Yang Jiechi. -- Rudd's June speech announcing that he would push for the creation of an "Asia-Pacific Community" loosely based on the EU. This was done without advance consultation with either other countries (including Southeast Asian nations, leading Singaporean officials to label the idea dead on arrival) or within the the Australian Government (including with his proposed special envoy to promote the concept, veteran diplomat Richard Woolcott.) -- The PM's June announcement that Australia would set up an international commission on nuclear nonproliferation and disarmament intended to influence the Nuclear Nonproliferation Treaty (NPT) Review Conference. Rudd rolled out this proposal in Hiroshima during a photo-op heavy trip to Japan. His Japanese hosts were given insufficient advance notice and refused a request for a joint announcement. He did not consult in advance with any of the P5 countries. (An adviser gave Embassy Canberra a few hours advance notice of the announcement but without details.) Russia formally protested the lack of advance consultation. -- In September, the PM's Office asked for a meeting with the President while Rudd was in the United States for the UN General Assembly. After making an aggressive and ultimately successful push for a meeting, the PM's Office abruptly cancelled the meeting course two days later, saying that Rudd could not come to Washington. -- In October, the self-serving and inaccurate leaking of details of a phone call between the President and Rudd cast further doubt on Rudd's foreign policy judgment. Rudd's refusal to deny that his office was the source of the leak has confirmed to most Canberra observers that he showed exceptionally poor judgment in trying to aggrandize himself at the expense of Australia's most important relationship.

RUDD THE CONTROL FREAK ----------------------

5. (C/NF) There has been persistent criticism from senior civil servants, journalists and parliamentarians that Rudd is a micro-manager obsessed with managing the media cycle rather than engaging in collaborative decision-making. Rudd has centralized decision making on many key issues in his office, contributing to "policy paralysis." A recent press report referred to jokes that "ministers rush to get a Gillard signature on proposals when Rudd is overseas so they can avoid delay." Former ALP Prime Minister Bob Hawke told the press recently that Rudd needed to give his ministers more freedom, and an ALP insider told us that he expected ministers to try to create some "elbow room" in the next year. Some ministerial staff and public servants have complained about the workload and hours expected by Rudd and there has been substantial turnover in Rudd's office (including his Chief of Staff, David Epstein.) We have heard recurring complaints from contacts through the GOA that Rudd's office is disorganized and inexperienced -- his Chief of Staff and Press Secretary both in their late 20s -- with few willing to disagree with their boss. Centralized control and long working hours, however, are not uncommon in even the best run prime ministerial offices, and the fact remains that the Government appears to be functioning effectively, at least in the eyes of the electorate.

AN "ECONOMIC CONSERVATIVE" --------------------------

6. (C/NF) During the election campaign, Rudd managed to convince voters they could switch leaders despite the incumbent's strong record of economic growth because Rudd was an "economic conservative." For the first half of the year, Rudd defined the government's core economic challenge as fighting inflation. Since the global financial meltdown, it Qfighting inflation. Since the global financial meltdown, it has been the "war on unemployment." Calling the financial crisis the "economic equivalent of a rolling national security crisis," Rudd announced an economic stimulus package which will bring forward infrastructure spending, boost grants to first-time homebuyers, and provide one-off payments to families and pensioners. Due to the slowing economy, the Reserve Bank has lowered its cash rate 2 percent since September. Unemployment, virtually unchanged from a year ago, is projected to increase. His claims to being an "economic conservative" have not prevented Rudd from supporting an interventionist "industry policy" to prop up Australian manufacturers, particularly the automotive sector. This tendency was foreshadowed in Rudd's first press conference after unseating Kim Beazley as Opposition Leader in December 2006, when he said he "didn't want to be the prime minister of a country that didn't make things."

CLIMATE CHANGE --------------

7. (C/NF) One of Rudd's central campaign strategies was to tap the growing public concern about climate change and perception that the Howard government was not serious about the threat. Rudd gained an important electoral advantage by promising rapid action to sign the Kyoto Protocol, the creation of a national emissions trading scheme with a target of reducing Australia's 2050 emissions by 60 percent over 2000 levels, and the development of clean coal and greater renewable energy sources. In the first year, Rudd has kept to the form, if not the substance, of his promises. While the overwhelming majority of Australians still view Rudd and the ALP as the best party to deal with climate change, he has quietly broadened the decision-making process in Canberra and backed away from the most aggressive steps some have recommended on climate change. Where the debate was dominated early in the year by calls for tough action by Climate Minister Penny Wong and ANU economist Ross Garnaut, Rudd has listened to concerns from industry and economic modelers and relied increasingly on Industry Minister Carr, Energy Minister Ferguson, and Treasurer Swan to moderate cabinet policy debate. Rudd has lost some shine with the Australian climate lobby by heavily investing in support for the coal industry through clean coal research, and tacked to the middle on including high emissions intensity (and export earning) industries like LNG in support programs to soften the blow of the emissions trading regime. He has resisted, however, the urge to back down on the timeline for emissions trading and will introduce a less-costly emissions trading system next year.

UNIONS BEHAVING ---------------

8. (SBU) Despite the absence of an agreement with the unions on restraining wage growth (the last ALP Government under Bob Hawke and Paul Keating had used a national "Accord" to promote stability), there have been no major strikes and wages growth has remained moderate. Unions are pleased the Rudd Government abolished new statutory individual contracts, but they believe other aspects of its workplace reforms do not go far enough. Rudd is retaining secret ballots for strikes, tough penalties for illegal industrial action, keeping the building industry watchdog, not fully restoring unfair dismissal rights for small business employees, and is only re-establishing compulsory arbitration in rare cases. It appears the Australian Council of Trade Unions and most union leaders, despite not getting everything they want, will not disrupt the economy to achieve their aims, but rather work behind the scenes with Gillard to make changes at the margins. ALP and union contacts believe Rudd has unprecedented authority for an ALP leader and only when his popularity declines will the unions and the factions within the ALP be able to assert themselves.

RUDD MAINTAINS BIG POLL LEAD DESPITE NEW LIBERAL LEADERSHIP --------------------------------------------- --------------

9. (SBU) In the 2007 election, the ALP won 52.7 percent of the vote to the ruling Coalitions's 47.3 percent. Since then, Newspoll, the most influential and regularly conducted Qthen, Newspoll, the most influential and regularly conducted opinion poll, has consistently shown the Rudd Government with a large lead. Only once has the ALP's lead fallen below 55-45 (54-46 in October). When Malcolm Turnbull deposed Brendan Nelson as Coalition leader in September, the ALP still led 55-45. Despite Turnbull slightly closing Rudd's huge lead as preferred Prime Minister, the latest Newspoll has the ALP continuing to hold a 10 point lead. Rudd's satisfaction rating is an extremely high 65 percent.

COMMENT -------

10. (C/NF) Overall, the Rudd government has made a solid start, particularly on its domestic agenda, but its first term will largely be defined by its response to the global economic crisis. PM Rudd's foreign policy miscues should not obscure his strong interest in maintaining excellent relations with the United States and promoting a strong U.S. role in Asia. Before the financial meltdown, the Rudd Government had been criticized for lacking a central message, but the economic crisis has given the government a sense of direction. Rudd reacted swiftly to the start of the financial crisis in Australia with a widely-praised $A10.4 billion stimulus package. The danger for the PM is that the political debate has shifted to what traditionally has been the Coalition's strong suit - the economy. Although Australia's economy is largely at the mercy of international forces, the Coalition will ruthlessly exploit every piece of bad economic news while claiming the Howard government steered Australia through similar economic challenges. Rudd's standing in the polls reflects the Australian public's view that he is reasonable, diligent and acting in the national interest. While the Rudd government is on track to win a second term, ALP strategists are keenly aware that the ALP's margin of victory last year was only 2.7 percent and that there has been a voting swing against almost every first term government in Australia. MCCALLUM