* Labor tally dips more than 7 pct in two Australian states
* Conservatives enjoy revival ahead of national elections
* Minister predicts limited impact on national standing
By James Grubel
CANBERRA, March 21 Australian Prime Minster Kevin Rudd's ruling Labor Party suffered a large loss of support in weekend elections in Australia's two smallest states, in a result which could disrupt his plans for sweeping health reforms.
Voter support dropped more than 7 percent for longstanding Labor governments in South Australia and Tasmania, signalling a revival for the conservative Liberal Party ahead of national elections, due in late 2010.
If the shift away from Labor was replicated across the country at a national election, Rudd would be swept from power.
However, Finance Minister Lindsay Tanner said local issues dominated the two state elections, where voters turned against long serving governments. In contrast, Rudd's national government has been in office only two years and four months.
"I don't think there's much in the way of federal implications," Tanner told Australian television.
"Inevitably, governments that are long-term governments lose a bit of skin along the way. But we'll just see what the final details are and obviously we always learn lessons from every election."
Rudd remains firm favourite to win a second term in office at elections due later this year.
The Reuters Poll Trend shows he holds a 7.2 percent lead over the opposition on the crucial two-party vote, once minor party votes are distributed under Australia's complex preferential electoral system.[ID:nSGE62G01L]
Australians regularly vote for different parties at national elections and state elections, where local issues can dominate, making it difficult to interpret how state results might translate to the national arena.
OPPOSITION LIBERALS LIKELY TO GOVERN TASMANIA
Rudd's poll ratings and support for his climate policies have been falling since December after the Liberal Party elected a new leader, and his carbon trade plan was rejected a second time in a hostile parliamentary upper house.
In Tasmania, where Labor has governed for 12 years, the Liberals are likely to take office with support from Greens, who won five seats and a record 21 percent of the vote.
Rudd has unveiled a $45 billion plan to take control of struggling state-run public hospitals. But he needs agreement from all six states and two territories and a Liberal government in Tasmania could complicate efforts to implement the plan.
Rudd holds all five Tasmanian state seats in the national parliament, but four of those seats could be in jeopardy if the state swing away from Labor was replicated at a federal level.
In South Australia, where Labor has ruled for eight years, Premier Mike Rann will retain power despite the strong shift towards the Liberal Party.
Rann's campaign was disrupted by scandal after a former parliament house waitress claimed she had an affair with the premier. Rann denied the relationship, which happened before he was married, was anything more than a friendship.
South Australia is home to 11 seats in the 150-seat national parliament, and Rudd's Labor holds six. If the swing away from Labor was replicated at a national election, Rudd could lose three seats. For a full table of Poll Trend results, click on [ID:nSGE62G05N]. For a Q+A on whether Rudd could lose elections, click on [ID:nSGE62F05U]. For the latest political analysis of election timing, click on [ID:nSGE62F0HU]