* Australian PM Rudd raises threat of early election
* Upper house Senate may force budget changes
* Rudd says budget integrity must be upheld
By Rob Taylor
CANBERRA, May 13 (Reuters) - Australian Prime Minister Kevin Rudd raised the possibility of an early election when he warned an obstructive upper house of parliament on Wednesday not to unwind key measures in his national budget.
The leftist government faces an election in late 2010 and Rudd said he intended to serve his full three-year term, but said he was equally concerned about protecting the integrity of his government’s second budget, which was unveiled on Tuesday.
“We’ve got to ensure that the financial integrity of the budget that we’ve just put before the parliament, with the Treasurer’s statement last night, is upheld,” Rudd told Australian Broadcasting Corp. television.
Rudd, who continues to command strong public support in published polls, was asked four times to rule out an early election, and each time he linked the passage of budget measures directly to his intention to serve out a full term.
First elected in November 2007, Rudd could have an election trigger by the end of June if the upper house Senate rejects laws to increase taxes on sweet alcoholic drinks.
That would allow him to call an election at any time.
The Senate could also block the government’s plans to fight global warming by setting up carbon trading from mid-2011, which could give Rudd a second election trigger by the end of the year.
The Senate must reject or block laws twice, with a gap of at least three months between votes, to give any government a constitutional trigger for an early election for the full Senate and all 150 members of the lower house.
Analysts have said Rudd might want an early election to cash in on his high popularity, low levels of support for the conservative opposition, and to avoid a poll in late 2010 when the economy will be weaker and unemployment higher.
Rudd’s Treasurer Wayne Swan detailed a budget on Tuesday that set Australia on course for a decade of debt, while winding back health insurance subsidies for the rich and government support for middle-class families in a strategy to return to surplus.
Summary of budget measures [ID:nSYD17244]
Budget economic forecasts [ID:nSYD205404]
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Rudd needs the support of five Greens and two independents in the Senate to be sure of passing his budget measures, but one of those independents, Nick Xenophon, said on Wednesday he was worried about health care changes in the budget.
“It’s buy now, pay later,” Xenophon said. “There is no point in having some savings that on the surface look good for the budget bottom line but we end up having much longer hospital waiting lists,” Xenophon said.
He said it was too early to specify budget changes, but means testing for government private health insurance rebates could lead people to drop cover, further straining public hospitals or forcing health insurers like NIB (NHF.AX) to lift premiums.
The Australian Greens said the government needed a strategy of “conversation, not confrontation” to massage Senate support.
“Mr. Rudd may prefer an election to an improved budget outcome, but the people won’t,” Greens leader Bob Brown said, pointing out that the Australian electorate has a history of punishing governments who call early elections.
Brown said the budget should be “tweaked” in consultation with Senate finance committees, non-government organisations and business unions.
The other independent senator, Steve Fielding, said Rudd and Swan had delivered a “broken dreams” budget which made it harder for people to own a home and achieve a secure retirement because of cuts to tax breaks for private pension fund contributions.
Swan said the Senate needed to use common sense in deciding whether to pass the budget.
Additional reporting by James Grubel; Editing by Paul Tait