P 130501Z MAR 09
FM AMCONSUL SYDNEY
TO SECSTATE WASHDC PRIORITY 8825
INFO AMEMBASSY CANBERRA PRIORITY 
AMCONSUL MELBOURNE PRIORITY 
AMCONSUL PERTH PRIORITY

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