Rudd resigns – is he playing for time?

Australia’s Foreign Minister – and former Prime Minister – Kevin Rudd just announced that he was resigning his commission as foreign minister, and heading to the back-bench. He says that this is because he no longer feels that he has the confidence of Prime Minister Gillard – though the reason she does not trust him is that he’s been campaigning for leadership of the ALP (and hence the Prime Ministership) ever since she took it off him in 2010.

The manner and timing – midnight while he’s on mission in New York – begs some questions.

The most obvious is why now?

I don’t have inside information, but my best guess is that he is trying to head off a spill.

He knows that he (probably) does not have the numbers to win a spill if it is called next week, and by resigning his commission as foreign minister, and saying that he will consider his future (which may mean retiring as an MP), he gives himself time to build a majority.

I think his best strategy now is to go to the bleachers, watch while the Government spirals down in the polls, and await a ‘draft’ from his desperate colleagues.

He is also playing for the moral high ground. He is trying to create a distinction between what he’s doing (open warfare) and what happened to him (a stealth attack on a sitting PM). By moving first and telling his one-sided story, he looks like the wronged man – cut down from office when he was PM, and now undermined by the ‘faceless men’ and factions of the ALP as Foreign Minister. He also looks a bit brave.

My impression is that the public is uncomfortable with the manner in which he was deposed in 2010, and that this ploy will work a little – notwithstanding that his campaign for re-election to the leadership is the other side of his (one sided) story.

An election in 2012 is now looking very likely. That ought to mean a change of Government. I doubt that means much for markets – fiscal discipline is fairly universal in Australia.

At the margin, i’d expect a new conservative Government will tighten fiscal policy somewhat in their first term, and that ought to boost the bond market a little. They are also likely to be a little more pro-business (no carbon tax, for example) which should boost the AUD and the equity market somewhat.

but all these things are very much at the margin.