Australia's Gillard faces new leadership discontent

CANBERRA (Reuters) - Growing speculation that Australian Prime Minister Julia Gillard could be dumped by her party before the end of the year forced senior ministers to rally behind her Friday after a disastrous start to 2012.

Defence Minister Stephen Smith joined a string of cabinet ministers to offer support for Gillard despite media suggestions that she could face a leadership challenge this year from Foreign Minister Kevin Rudd, who she replaced in June 2010.

Some political analysts now believe Gillard is unlikely to lead the party to the next election, due in the second half of 2013, with a move against her most likely in the latter part of the year.

"MPs are starting to think the boat is going down, and they're starting to panic," Monash University political analyst Nick Economou told Reuters. "I don't think she'll lead the Labour Party to the next election."

The first major opinion polls for 2012 found government support stalled near record lows, while online bookmakers Sportsbet Friday said odds on Rudd returning as leader by the end of the year have shortened to just $1.20 for a $1.00 bet.

"I'm a strong supporter of the Prime Minister. I think she's doing a very good job in very tough circumstances," Smith told Australian television from Brussels.

He joined Climate Change Minister Greg Combet, Communications Minister Stephen Conroy, and Regional Affairs Minister Simon Crean, who have all called for an end to party dissent, with Crean saying Rudd was not a team player.

Rudd is seen as a lone operator by his Labour colleagues and was toppled as prime minister in a party room coup after his government struggled to pass reforms, but polls show he remains popular with voters.

Adding to the government's dilemma is the fact Gillard governs with support from two independents and the Greens, and any leadership change could force a change of government or an early election if a new leader can't negotiate similar support.

That means a leadership spill could trigger a change of government, with the conservative opposition promising to scrap a new 30 percent mining tax and a carbon tax, both due to start on July 1 this year.

Gillard dismissed the latest rumblings Friday, saying she was focused on delivering good policy.

"I don't worry about chatter in the media, I get on with the job," she said.

DISASTROUS NEW YEAR

Gillard finished 2011 strengthened after a disaffected opposition lawmaker became parliamentary speaker, effectively bolstering her majority from one vote to three.

But she has had a poor start to 2012.

She lost the support of one independent in January after she reneged on a promise to change gambling laws, and then lost a staffer who quit over his role in promoting a rowdy protest against Opposition Leader Tony Abbott that turned into a security scare.

That means the government is back to square one, commanding only a one seat majority in parliament and with one lawmaker under a cloud, due to an ongoing police investigation over the use of union money to pay for prostitutes.

At the same time, house prices are falling and manufacturers continue to cut jobs, although Gillard may get a reprieve if the central bank cuts interest rates next week as economists expect.

Australian Financial Review political editor Laura Tingle said the past week had seem a shift in support away from Gillard, although most Labour lawmakers were still deeply hostile about Rudd.

"The tide has turned with a sharp but silent menace against Julia Gillard," Tingle wrote Friday.

Economou said any move against Gillard would be unlikely before July, when the carbon tax and mining tax both start. That would allow Labour to deliver its budget in May, and to campaign for the March 24 Queensland state election, where polls suggest Labour will be thrown from office.

"The dangerous time is after the carbon tax comes in," Economou said. "If things don't improve by then, she'll have to go."

(Reporting by James Grubel)

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