In-house hiding clouds Rudd's Indonesia gains

CANBERRA - As Prime Minister Kevin Rudd was basking in the glow of successful diplomacy with Australia's biggest - and most sensitive - neighbour, Opposition Leader Tony Abbott yesterday continued to swing a wrecking ball at the Government.

Rudd's new initiatives on people-smuggling and other measures, agreed with Indonesian President Susilo Bambang Yudhoyono, were almost eclipsed by domestic politics.

The Opposition, Greens, Family First and independent Senators ganged up on the Government in the Upper House to block Rudd's bid to introduce a means test on the 30 per cent private health insurance rebate.

Finance Minister Lindsay Tanner said this would strip A$2 billion ($2.6 billion) from the May budget, a key marking post for the Government's campaign for re-election this year.

More significantly, rejection of the measure joined a growing list of Labor policies frustrated in the Senate, including the twice-rejected greenhouse emissions trading scheme and the promised defeat of legislation to break telecommunications giant Telstra into separate parts.

Now Rudd's planned parental leave scheme, with a proposed starting date in January next year, looks like joining what angry Government ministers say is the longest list of blocked bills in three decades.

Although not yet firmly committing the Opposition to such a move, Abbott has enlisted the support of the independent and minor-party Senators for the possible blocking of the scheme in the Upper House.

The Greens have supported Abbott's A$2.7 billion compulsory parental leave plan, to be paid for by a tax on big companies.

Primary carers would receive their full take-home pay for 26 weeks to a maximum salary of A$150,000, with the scheme to be up and running within the first two years of a Coalition Government. Rudd's scheme would provide the minimum wage of A$544 a week for 18 weeks.

Greens women's spokeswoman Sarah Hanson-Young described Rudd's scheme as unrealistic and said the Government would have to match Abbott's 26 weeks if it wanted the party's support.

Independent Senator Nick Xenophon described Rudd's proposal as a good starting point.

By gaining potential allies to either block Rudd's bill or force changes to it, Abbott has made up the ground he lost initially by announcing the scheme without consulting his own party, and through sweeping opposition from business and unions.

Rudd said Abbott would punish young families if he blocked the scheme to make a political point, and Tanner said the Opposition was using the Senate to sabotage economic policy.

If the Senate rejects Rudd's parental leave a second time, the bill will join a number of others - most prominently the ETS - in providing the Government with a trigger for the dissolution of both Houses of Parliament and an early election.

So far Rudd has refused to publicly consider going to the polls ahead of time but political opportunities and polls moving against the Government could prompt a change of heart.