Analysis: After election victory, Australia's new PM faces sternest test

SYDNEY Sun Sep 8, 2013 12:43am EDT

Australia's conservative leader and Prime Minister-elect Tony Abbott leaves his house in Sydney September 8, 2013. REUTERS/Daniel Munoz

Australia's conservative leader and Prime Minister-elect Tony Abbott leaves his house in Sydney September 8, 2013.

Credit: Reuters/Daniel Munoz

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SYDNEY (Reuters) - Australia's prime minister-elect risks becoming a victim of his own success following an emphatic election win that threatens to reopen splits within his conservative coalition.

Tony Abbott and the Liberal-National Party coalition surged to victory on Saturday with a disciplined election campaign that painted a contrast to the country's three tumultuous years under the Labor Party, with its revolving-door leadership of Kevin Rudd and Julia Gillard.

With preliminary counting complete, election officials projected Abbott's coalition would win at least 88 seats in the 150-seat parliament. It could end up with a 30 seat majority.

But ironically, the decisive win could ensure a short honeymoon and uncover long-standing fissures within what until now has been an unusually unified bloc.

One of Abbott's centerpiece promises of a paid parental leave scheme is unpopular with business backers and within his party, and there are simmering tensions over Chinese farm buying, labor reform and overseas investment.

Economist and former central bank board member Bob Gregory says Abbott will face pressure from both restless backbenchers and fundamentalist reformers who believe that with a big win, Abbott has a mandate and a responsibility to reform.

"What it will do is strengthen the right, and the right will say, well the economy is not doing it, we've got the mandate, and if we don't do it, what are we here for?' It's all going to be harder for him to control having won."

PUBLIC FACE

Shellshocked by the protracted farce of Labor's leadership implosion and nervous of the economy's retreat from the peaks of a China-led boom, a majority of Australia's 15 million voters have put their faith in Abbott.

But it is unclear how convinced some on his own side of politics are, with rumblings over the fiscal rectitude of policies that paved Abbott's victory, including a $4.3 billion paid parental leave scheme underpinned by a levy on 3,000 big companies.

The differences were briefly bared early in the campaign when Liberal backbench MP Alex Hawke said business leaders - a key conservative support base - believed the scheme was unaffordable and incompatible with a center-right philosophy on small government and economic liberalism.

Hawke was rapidly silenced by Abbott's senior lieutenants.

"From time to time you are allowed to make a captain's call," Abbott said in explaining why he had pushed his plan. "But you can't do it very often, because quite soon your colleagues think that you're abusing your position."

The center-right is a sometimes fractious coalition of rural-based Nationals and city-based Liberals, with differing views on regional support in a vast continent of 23 million and where eight in 10 people live in just a handful of cities.

Divisions exist also between the liberal and conservative wings of Abbott's own Liberal Party, split over the extent of government intervention in the $1.5 trillion economy and welfare, as well as social platforms like detention of overseas asylum seekers.

One of the early tests Abbott will face is to decide whether to allow a proposed A$3 billion ($2.7 billion) takeover of bulk grain handler GrainCorp by U.S. Archer Daniels Midland. National party lawmakers are opposed to a foreign takeover of the country's sole remaining, locally owned major agribusiness.

The deal is awaiting a ruling from global regulators, including Australia's Foreign Investment Review Board (FIRB), which tests to ensure deals are not contrary to the national interest - a lower hurdle than in some countries.

The Nationals are also calling for greater scrutiny of overseas investment in farmland following a series of high-profile deals involving Chinese buyers. In response, Abbott has committed to lowering the A$248 million threshold that triggers FIRB scrutiny to around A$15 million, and will set up a register of foreign agricultural land purchases.

"What we are worried about in the National party is this: there has never been a purchase of agricultural land, or from what we can see an agricultural company, that has been rejected by the FIRB or rejected by the Treasurer on advice," Nationals member Barnaby Joyce said in the leadup to the election.

Any major concessions on investment by Abbott would risk stoking Chinese concern about sovereign risk in Australia, in contrast to his promise to be an "Asia first" leader and "open for business" approach.

RIVALRY

Australia's wealthiest MP, Malcolm Turnbull, is a reminder to Abbott of the simmering liberal-versus-conservative rivalry within his own party.

Turnbull, a former merchant banker and tech entrepreneur, was ousted as the opposition leader by Abbott after supporting pro-environment carbon taxes championed by the ruling Labor party.

Abbott prevailed, by one vote. But the margin of his victory left Australian political commentators wondering when the divide would reopen.

"They are all being good at the moment, with the more zealous ones biting their tongue on parental leave, or wanting to go hard immediately on labor market reform," says former Australian Democrats leader Cheryl Kernot.

"They've been quiet to get him there. But after that, ideology is so zealously held that quite a few of them will start speaking up," says Kernot, whose former party held balance of power in the upper house Senate for a time.

That could see Abbott come under pressure to revisit labor reforms known as WorkChoices, which led to the last conservative defeat in 2007 as Australian workers rejected laws challenging job entitlements and security.

Beyond his own party and coalition partners, Abbott is also likely to face challenges from an often obstructive upper house Senate where a splintered array of far right and left wing parties and independents will seek to exert influence on policies from auto industry support to agriculture and trade.

Former Liberal Opposition Leader John Hewson, for whom Abbott worked as press secretary, believes Abbott can deal with the myriad of tensions.

"He's had a long time in opposition. I think he's learned an enormous amount, and I think he's ready."

($1=1.0957 Australian dollars)

(Editing by Lincoln Feast and Neil Fullick)

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