Gillard musters her forces for early election

CANBERRA - Prime Minister Julia Gillard will address the National Press Club today amid speculation that she will soon call a late-August election.

Her speech will follow a Cabinet meeting believed to have locked in a new climate change policy and to have discussed a contest that polls now indicate will be close.

It also follows revised economic forecasts released by Treasurer Wayne Swan yesterday predicting strong growth and including projections rebutting claims that the Government had fudged its figures on the resources rent deal Gillard struck with major mining companies.

Gillard is sticking to her proposal to build a processing centre for asylum seekers in East Timor, with Foreign Minister Stephen Smith discussing the plan with Indonesian colleagues in Jakarta today.

Smith has played down the significance of the vote against the proposed centre by the East Timorese Parliament, and will further discuss the issue this week with the tiny nation's Foreign Minister, Zacarias da Costa.

He yesterday described discussions between Australian and East Timorese officials this week as productive, and dismissed an offer from Nauru to reopen the facilities built under former conservative Prime Minister John Howard's "Pacific solution".

As well as a series of minor policy announcements, the Government's new alignments on resources taxation, asylum seekers and climate change have locked in the elements Gillard set down as prerequisites for an election.

Although she has continued to refuse to discuss a date, Human Services Minister Chris Bowen said yesterday: "The election is due, it'll be called, and then we'll get on with it."

The Opposition has yet to finish selecting its candidates, but Gillard's former shadow, education spokesman Chris Pyne, told the ABC he was expecting an election soon: "We're certainly ready."

Swan's release of revised forecasts, only two months after the Budget, sets the strategy for the Government's defence of its economic credentials.

Despite its success in defending Australia from the worst of the global financial crisis, and recent rosy figures that have included strong employment growth, opinion polls report that most voters consider the coalition to be a better economic manager.

Although slightly below budget forecasts, the economy is still expected to expand by 3 per cent this financial year and 3.75 per cent in 2011-12.

The budget is predicted to return to a surplus of A$3 billion ($3.6 billion) in three years, three times larger than the May forecast.

"This represents the fastest fiscal consolidation in Australia since at least the 1960s and puts Australia at the forefront of global fiscal consolidation efforts," Swan said.

But Opposition leader Tony Abbott was sceptical, and said any surplus should be used to pay off debt that the Government was amassing at the rate of A$100 million a day.

Shadow finance minister Andrew Robb also attacked figures in the revised forecasts confirming that the new resources rent tax would raise A$10.5 billion in four years, despite private forecasts that the deal would cost up to A$35 billion in the next 10 years.

"Clearly, from what we can see it's a sham," he said.

The Government is still struggling with its new policy on asylum seekers and plans for an overseas processing centre, preferably in East Timor.

But there are indications that Dili is thinking hard about the prospect.

Development analysts have pointed to a significant inflow of foreign exchange for a country with a population roughly the same as Auckland, unemployment rising to 40 per cent among urban youth, and a per capita income of about US$46 ($63) a week.

Although probably too close to Howard's "Pacific solution" for Gillard, and condemned by the United Nations and other bodies, the now-defunct facilities on Nauru and Manus Island in Papua New Guinea indicate the scale of the potential cash flow.

A 2007 study by Oxfam and A Just Australia estimated that management and operation of the two centres cost at least A$253 million over five years, and Immigration Department figures provided to the Australian put the annual cost of the Nauru facility at about A$24 million.

Australian development assistance to Nauru also increased fivefold over the previous decade, amounting to A$123 million between 2001 and 2006, the Oxfam/A Just Australia study said.