By Enda Curran
SYDNEY--Kevin Rudd began his campaign to be re-elected
Australia's prime minister by promising more aid to the nation's
ailing auto industry, a move that underscores how rising fears over
job security are becoming a flashpoint in battleground states as a
decadelong mining boom ends.
Mr. Rudd wants the Sept. 7 election to be fought largely on
economic issues, pitching his record of steering Australia through
the global financial crisis without a recession against the
center-right Liberal-National coalition's promises to balance the
budget through spending cuts.
However, this strategy carries big risks if voters decide that
Australia's current economic woes stem more from policies
introduced by his Labor Party than factors like a slowdown in
demand for commodities by top trading partner China. Just last
week, the government warned of higher unemployment, slower economic
growth and falling tax revenues in the fiscal year through June,
2014.
To win at the ballot box, Mr. Rudd needs to bolster support
among Australia's blue-collar workforce in sectors like
manufacturing and reconnect with voters who have turned their backs
on Labor due to unpopular policies such as new taxes on carbon and
mining.
On Monday, Mr. Rudd pledged 200 million Australian dollars
(US$177 million) to bolster the auto manufacturing sector, in a
direct pitch to voters from the party's traditional support base.
The package includes a promise that the government will only buy
locally made cars.
"With the China mining boom receding, we need a new way to drive
the economy forward," Mr Rudd said in a campaign advertisement that
aired Monday. "I want to see Australia make things that the world
needs."
Auto making in Australia has been hit hard in recent years by a
high exchange rate, rising labor costs, cheaper foreign imports and
changing consumer patterns as car buyers shift to smaller cars,
prompting the Labor government to pledge billions of dollars in
financial assistance.
In April, General Motors Co. (GM) Australian unit, Holden, said
it would cut 500 jobs--equivalent to 12% of its workforce--citing
pressure from the strong Australian dollar, which traded above
parity against the greenback for much of the past two years. Last
year, Toyota Motor Corp. (TM) also cut hundreds of jobs.
Although the dollar has declined in recent months, it came too
late for Ford Motor Co.'s (F) workforce. Ford unveiled plans in May
to end 90 years of car production in Australia in October 2016,
resulting in 1,200 job losses.
South Australia was once a major hub for auto manufacturing, and
Holden still designs and assembles vehicles in the state's capital
Adelaide. However, the city has lost hundreds of jobs in auto
making in recent years, as factories servicing the sector scaled
back output in response to weaker demand.
Mark De Wit, chief executive of Futuris Automotive, which makes
car components like seats and door trims, said the company's
workforce in Adelaide has halved to around 300 people over the past
seven years.
"There's no doubt that extra funding is needed to have the
industry survive," he said in an interview. "The competition is
fierce."
Voters in Adelaide are the type of bloc that Tony Abbott, who
leads the center right Liberal-National opposition, needs to win
over. In the last election to the nation's lower house in 2010,
South Australia returned six Labor candidates in its 11
constituencies.
On Monday, Mr. Abbott criticised the government for not
detailing how the new aid for the industry would be spent and
accused Mr. Rudd of offering "blank checks to industries, which
let's face it have been very good at using taxpayers money but
haven't always been that good at maintaining production and
jobs."
An opinion poll Monday showed Mr. Abbott's coalition holding on
to a slender lead. Popular support for the Labor party remains at
37%, according to Newspoll, while backing for the conservative
opposition stands at 44%. On a two-party preferred basis--which
factors in voters' second preferences as in real elections--Labor
trails the coalition by 48% to 52%.
Worryingly for Mr. Rudd, his status as preferred prime minister
slipped to 47% from 50%, while Mr. Abbott's rating fell one point
to 33%. Newspoll surveyed 1,147 voters by telephone between Aug. 2
and 4 and the poll has a margin of error of plus or minus 3
percentage points.
Mr. Rudd's decision to delay calling the election since seizing
the leadership from Julia Gillard in June may have undermined his
standing with voters. According to John Borghetti, chief executive
of airline Virgin Australia Holdings Ltd. (VAH.AU), the uncertainty
has damaged the economy.
"Do the walking-down-the-street test and talk to people and all
of them that I talk to, in business certainly, express a certain
degree of frustration with the uncertainty that's hanging over
Australia and has hung over Australia for months now," Mr.
Borghetti told reporters Monday.
Write to Enda Curran at enda.curran@wsj.com