Scenarios: Australia’s August 21 election

By Rob Taylor

CANBERRA (BestGrowthStock) – Australia is headed for a photo-finish election on August 21, with Prime Minister Julia Gillard struggling to hold onto power and lead the ruling Labor party to a second term.

An election eve Newspoll on Friday showed the country could be headed for a hung parliament with the ruling Labor party having lost its slim lead and now level with the conservative opposition, a worst-case scenario for investors.

A smaller Galaxy poll puts Labor ahead 52 to 48 percent and on track for a narrow win after allocation of Greens party preferences in Australia’s system of transferable voting.

Conservative opposition leader Tony Abbott, a former trainee Catholic priest who cycles and runs marathons, has brought his party within reach of a stunning victory, promising to campaign without rest or sleep for the final 36 hours.

Voting is compulsory for 14 million Australians over the age of 18. Here are some possible outcomes for the election.

GILLARD WINS A SECOND TERM FOR LABOR

Probability: Most likely.

While the polls are close, most analysts still believe Gillard has the best chance of victory on August 21. The economy is strong and Gillard is still well ahead in surveys as preferred prime minister. The five-week campaign has been short on big-picture policies and has failed to engage many voters. That should work in favor of an incumbent government. Gillard’s Labor has a reputation for running tactical election campaigns, where they target the seats they need to win or hold government, and Gillard has been scrambling to visit most of the key marginal seats in the crucial battleground states of Queensland, New South Wales and Western Australia. Gillard is using the last day of the campaign to attack Abbott, warning voters he is a risk to their future prosperity and productivity. History is on Gillard’s side. No Australian government has been voted out after one term since 1931 and the Great Depression.

ABBOTT WINS

Probability: Very possible.

Abbott took leadership of the opposition in December 2009, ending deep divisions within the conservative side of politics. He has proven a better campaigner than his opponents expected, and has been highly popular on the hustings. His campaign has focused on government debt and mismanagement. But polls after four weeks show disgruntled Labor voters are still wary of backing Abbott, with government votes leaking to minority Greens.

Abbott has promised a final blitz to win over undecided voters, campaigning all night with the explanation that “if you want a big job, you’ve got to make a big effort.”

The conservatives have made strong gains in northern Queensland state, where the mining tax and unease about the treatment of Rudd have hurt Labor’s campaign. Abbott is also on track for gains in western Sydney, and the key mining state of Western Australia. But Gillard could upset Abbott’s election by holding onto key marginal seats.

HUNG PARLIAMENT, INDEPENDENTS HOLD THE KEY

Probability: Possible.

The polls are pointing to a super-close election result, which raises a chance that three independent MPs could decide which party forms the next government. A fourth independent, and a Green, also has a chance of winning a seat, increasing the possibility of a minority government. Australia last elected a hung parliament in 1940.

Close election results, however, do not always lead to minority governments. In 1998, then prime minister John Howard won only 49 percent of the vote, yet still controlled a clear majority. In 1990, then Labor prime minister Bob Hawke won 49.9 percent, but still had an eight-seat majority.

The three current independents all have former links to the conservative National Party, but all have said they are open to work with either side of politics.

A hung parliament would create uncertainty for markets, likely knocking the Australian dollar and hitting mining, telecommunications and construction shares most affected by policy differences and political instability.

For Reuters online coverage of Australia 2010 Election http://www.reuters.com/places/australia

(Reporting by Rob Taylor, editing by Jonathan Thatcher)

Scenarios: Australia’s August 21 election