Kevin Rudd returned as Australia’s prime minister, defeating Julia Gillardin a leadership vote that marks a stunning turnaround for a figure whom she toppled three years ago but has remained popular among voters

Updated June 26, 2013, 6:20 a.m. ET

Rudd Beats Gillard in Leadership Vote

ENDA CURRAN

SYDNEY— Kevin Rudd returned as Australia’s prime minister, defeating Julia Gillardin a leadership vote that marks a stunning turnaround for a figure whom she toppled three years ago but has remained popular among voters.

Mr. Rudd’s decisive victory in a leadership ballot among ruling Labor party members on Wednesday caps a bitter tussle for the premiership that has been likened to a classical drama ever since Ms. Gillard led the party revolt that ousted Mr. Rudd in 2010.Ms. Gillard, whose leadership had been growing increasingly fragile, called the ballot to end the long-running saga over whether she or Mr. Rudd is more capable of steering Labor into an election that opinion polls suggest will be a landslide defeat.

Both Ms. Gillard and Mr. Rudd pledged that if they lost, they would leave Parliament before the next election, scheduled for Sept. 14.

The ballot followed a petition calling for a leadership vote that was circulated among Labor party lawmakers earlier Wednesday. The results of the petition haven’t been made public.

In declaring his intention to take on Ms. Gillard for leadership, Mr. Rudd told reporters the party is set for a “catastrophic defeat” without a change of leader. He stressed the need for better management of the economy as the mining boom that has long powered the country nears its peak.

“The nation needs strong, proven, national economic leadership to deal with the formidable new challenge that Australia now faces with the end of the decadelong China resources boom and its impact on Australian jobs and living standards into the future,” Mr. Rudd said. “This is a massive new challenge.”

Mr. Rudd could face an immediate battle to keep the minority government in office. One nonparty lawmaker on whom the government depends has already said he wouldn’t automatically back a new prime minister.

Earlier Wednesday, the leader of the opposition, Tony Abbott, called on Ms. Gillard to bring the election date forward to Aug. 3 to prevent Labor party divisions from hurting the country.

“The poison inside the Australian Labor party is paralyzing government in this country,” said Mr. Abbott, who leads the Liberal National coalition.

According to recent opinion polls, the Labor party is set for one of its worst election defeats. The specter of a landslide victory for the Liberal Nationals intensified speculation that Mr. Rudd would present himself as the better alternative to Ms. Gillard.

A Nielsen poll this month put the opposition and a government led by Mr. Rudd tied on a two-party preferred basis which, as in real elections, factors in voters’ second preferences. By contrast, a Newspoll survey this week showed Labor trailing the center-right Liberal Nationals by 57% to 43%.

Ms. Gillard overcame two earlier attempts by Mr. Rudd and his allies to unseat her, the more recent in March. After failing then to arouse enough Labor party support to win the leadership, he pledged to stop vying for it.

The tension between the two politicians dates back to 2010, when Ms. Gillard, then deputy prime minister, abruptly ended Mr. Rudd’s premiership by leading a party-backed revolt that overthrew him. Her justification was Mr. Rudd’s dwindling popularity in the face of a fierce anti-government campaign run by Australia’s powerful mining industry opposing a “super profits” tax he’d proposed on resources companies.

Rudd Beats Gillard in Ballot for Australia Labor Leadership

By Jason Scott – Jun 26, 2013

Kevin Rudd beat Australian Prime Minister Julia Gillard in a ballot for the Labor leadership as the ruling party seeks to revive its fortunes ahead of an election that opinion polls show it will lose in a landslide.

Rudd won by 57 votes to 45 for Gillard in the Labor caucus, party official Chris Hayes said. In an interview with Sky News today in which she called the party-room ballot, Gillard pledged to leave parliament at the election if she lost.

Rudd, 55, ousted by Gillard in a backroom coup three years ago, faces the task of turning around a 14 percentage point advantage in opinion polls for Tony Abbott’s opposition. While popular among voters, Rudd has been criticized by colleagues including TreasurerWayne Swan for an autocratic style, raising questions over whether Labor can unite behind him ahead of a poll currently scheduled for Sept. 14.

“A win for Rudd means Labor has a chance to save some seats at the election and avoid a wipeout,” said John Warhurst, a political analyst at the Australian National University in Canberra. “While he’s more popular with voters, the deficit Labor faces in the polls means a win for the party still seems highly unlikely.”

Speculation about a challenge to Gillard, 51, Australia’s first female prime minister, intensified as Rudd this month made campaign appearances in marginal seats, with news footage showing enthusiastic voters greeting him. Gillard called the ballot after media reports earlier today that Rudd supporters circulated a petition calling for a special meeting of Labor lawmakers to oust her.

Party Powerbroker

Momentum swung to Rudd when party powerbroker Bill Shorten, who as recently as this morning said he supported the prime minister, called a press conference 30 minutes before the ballot to say he’d switched his allegiance.

The Australian dollar traded at 92.95 U.S. cents at 8 p.m. in Sydney, little changed from before the leadership announcement.

Rudd’s return would lift Labor by 11 percentage points in the primary vote to 40 percent, compared with the Liberal-National coalition’s 42 percent, according to a Nielsen survey published in Fairfax newspapers June 17. It showed support for Labor under Gillard slid 3 points to 29 percent, versus the opposition’s 47 percent.

Abbott’s Lead

Abbott widened his lead over Gillard as preferred prime minister to 12 percentage points, the largest margin between the two party leaders, according to a Newspoll published in The Australian newspaper on June 24. The coalition led Labor 57 percent to 43 percent on a two-party basis, designed to gauge which party is most likely to form a government under the preferential voting system.

While polls suggest Rudd would boost Labor’s popularity, “whether that would last very long is questionable,” said Peter Chen, who teaches politics and public policy at the University of Sydney. “The opposition has been brewing up a lot of very aggressive advertising to deploy if that occurs. The somewhat more positive view of Labor under Rudd that the public has expressed is set to be tested because it’s always been a hypothetical.”

With signs of a slowdown in the world’s 12th-largest economy, including worsening employment prospects and a waning of the mining boom, momentum is with Abbott’s conservative coalition, which hasn’t ruled since 2007.

Opposition Attacks

Rudd will have to rebut opposition attacks on Labor’s economic stewardship after the government failed to meet its pledge of a budget surplus in the current fiscal year.

The challenge by Rudd contradicts his March 22 comments that “there are no circumstances” in which he would return to the Labor leadership and a pledge of “100 percent support” for Gillard. A year earlier, she won a ballot against him by 71 votes to 31 in the caucus.

While Rudd has greater support than Gillard among the general public, he has faced antipathy from Labor’s senior ranks over his leadership style. Swan last year described him as a man of “great weakness” who had demeaned his party colleagues during his tenure as prime minister from 2007-2010.

The animosity between Swan and Rudd — former schoolmates and political allies before they fell out — raises the risk of a new treasurer being appointed with an election not far off. Swan backed Gillard when she toppled Rudd in 2010, and in return she kept him in the treasury portfolio where he had overseen Australia’s response to the global financial crisis.

Former Diplomat

Rudd, a Mandarin-speaking former diplomat, remained on the backbench since resigning as foreign minister last year when he challenged Gillard. He enjoyed record-high popularity ratings after defeating John Howard’s long-running coalition government in 2007, boosted in part by his apology to the indigenous Aboriginal population for systematic abuses by the state.

His ratings fell when major mining companies helped finance an advertising campaign against his plan for a 40-percent tax on resource profits.

Gillard enacted a 30-percent mining levy after ousting Rudd, and has since struggled to convince Australians that the resource tax will benefit them. The tax will reap A$1.8 billion less in revenue for the year to June 30 than previously forecast, budget documents showed May 14.

Even as the economy expanded in 2012 at its fastest pace in five years, unemployment has been rising in areas where Labor has been traditionally strong. While Chinese demand for iron ore and coal has driven a mining boom in the country’s north and west, manufacturing areas in the east have struggled, with the Aussie dollar in the past three years averaging 30 cents above the level of the prior two decades.

Manufacturing Downturn

While Gillard’s administration has warned about the impact of the exchange-rate’s appreciation, the government and the Reserve Bank of Australia have refrained from any Swiss or Japanese-style attempt to rein in the currency.

Much of the manufacturing downturn has hit electorates with a track record of voting Labor, further eroding the popularity of the government. One casualty was Ford Motor Co., which announced on May 23 it would end production in the country after nine decades, with the loss of 1,200 jobs.

Gillard’s record in pushing through groundbreaking legislation, including the world’s first compulsory plain packaging for cigarettes, has been overshadowed by scandals involving Labor lawmakers. In one case, Craig Thomson, a former national secretary of the Health Services Union, faces charges that he misused a union credit card to pay for prostitutes, air travel and cash advances between 2002 and 2007, before he entered parliament. Thomson, who resigned from Labor and sits in parliament as an independent, denies the allegations.

Labor’s fragile support base is also evident at the state level, where it only holds power in the two least populous of Australia’s six states.

Rudd may be better at selling Labor’s message to voters than Gillard, said Nick Economou, a political analyst at Monash University inMelbourne. “He is a double-edged sword. He ran a really poor government, he was a poor leader in government and a poor leader of his troops. Where he is very good is on the stump and in communicating,” Economou said.

To contact the reporter on this story: Jason Scott in Canberra at jscott14@bloomberg.net