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DE RUEHBY #0653/01 1820648
ZNR UUUUU ZZH
P 300648Z JUN 08
FM AMEMBASSY CANBERRA
TO RUEHC/SECSTATE WASHDC PRIORITY 9773
INFO RUEHBN/AMCONSUL MELBOURNE PRIORITY 5379
RUEHPT/AMCONSUL PERTH PRIORITY 3655
RUEHDN/AMCONSUL SYDNEY PRIORITY 3575
RHEHNSC/NSC WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 02 CANBERRA 000653 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV AS
SUBJECT: BY-ELECTION RESULT A WARNING FOR RUDD 
 
REF: A) CANBERRA 640 B) CANBERRA 530 
 
¶1. (SBU) SUMMARY: As predicted (see ref A), the National 
Party retained the rural Victorian seat of Gippsland at a 
by-election on June 28, although the 6.4 percent swing 
against the Australian Labor Party (ALP) was greater than 
expected.  Most observers are attributing the larger than 
expected swing to anger over petrol prices and cost of living 
increases.  In a seat with significant coal mining and 
coal-fired electricity generation, the Nationals and the 
Liberal Party seemed to have benefited by raising the specter 
of job losses under the ALP's proposed emissions trading 
scheme.  There were swings against the ALP across the 
electorate, including in blue collar areas dominated by the 
coal industry.  Meanwhile, reports surfaced over the weekend 
that former Foreign Minister Alexander Downer will announce 
his resignation from Parliament, perhaps as early as July 2. 
With the Liberal-National Coalition on firmer electoral 
ground, it will be easier for the Liberal Party to hold 
Downer's seat outside of Adelaide, and former Treasurer Peter 
Costello's seat in Melbourne, should he decide to leave this 
year.  END SUMMARY. 
 
THE RESULT 
 
¶2. (U) The Nationals won the two-party preferred vote 62.4 to 
37.6 - a swing towards it of 6.49 percent.  The Nationals 
primary vote fell by 8.4 percent to 40 percent most likely 
due to the presence of the Liberals standing for the first 
time in 25 years, who received 20.5 percent of the vote. 
With Liberal preferences overwhelmingly favoring the 
Nationals in the two-party preferred vote, the Nationals won 
an extremely comfortable victory.  The ALP's primary vote 
declined by 8.5 percent from the November 2007 election.  The 
average swing in a by-election in Australia is four percent 
against the government in power but the ALP had hoped to do 
better given the popularity of Prime Minister Kevin Rudd. 
The swing against Labor fueled media commentary on the 
national implications of the result.  In voting booths in the 
La Trobe Valley, the heart of Australia's brown coal mining 
and electricity generating industry, the vote for the ALP 
dropped by 7 to 10 percent. 
 
THE POLITICIANS AND MEDIA REACT 
 
¶3. (U) Rudd said the day after the vote that Gippsland voters 
had made their concerns about living costs "loud and clear." 
In Melbourne-based newspaper "The Age", respected commentator 
Michelle Grattan wrote that the government was living with 
the consequences of the cost of living expectations it raised 
before the election.  "The Australian" newspaper's editorial 
said the result was a warning that the loyalty of blue collar 
workers "could be sorely tested if the Government adopts 
climate change strategies that further escalate living costs 
substantially."   Opposition Leader Brendan Nelson, whose 
leadership position is now more secure, said that voters had 
woken up to Rudd being "all backswing and no follow-through." 
 
DOWNER FINALLY LEAVING? 
 
¶4. (SBU) Reports surfaced over the weekend that Downer would 
be announcing his resignation, perhaps as early as July 2. 
While rumors of his departure from Parliament have been in 
the media for several months (ref B), there are reports now 
that an announcement is imminent.  In fact, Downer's media 
advisor just left her job in Parliament to join a new 
consulting company in Adelaide, Bespoke Approach, that the 
former foreign minister is rumored to be joining.  This 
result in Gippsland augurs well for the Liberal Party's 
prospects in Downer's seat in Adelaide and Costello's seat in 
Qprospects in Downer's seat in Adelaide and Costello's seat in 
Melbourne, should he decide to leave. 
 
COMMENT: DISAPPOINTING RESULT FOR ALP 
 
¶5. (SBU) The result is disappointing for the ALP, but it 
would be premature to mark this as the beginning of a 
Coalition resurgence.  Opinion polls still show Rudd and the 
ALP comfortably ahead.  By-elections generally swing against 
the government, and the Victorian ALP head office imposed a 
weak candidate on an electorate in a conservative stronghold. 
 Gippsland's demographics vary significantly from that of the 
battleground outer-suburban seats where Australian national 
elections are won.  Nevertheless, the larger than expected 
swing suggests that "working families," while supporting 
symbolic gestures such as signing the Kyoto Protocol, may 
resist measures which threaten their jobs and put up prices. 
It is a vindication of Brendan Nelson's populist stances on 
cost of living issues, and takes pressure off his leadership. 
 It is also good news for the Nationals which are facing 
 
CANBERRA 00000653  002 OF 002 
 
 
doubts over their long-term viability. 
 
MCCALLUM