State results threaten Gillard reform plans

John Brumby says he accepted that Labor did not have the numbers. Photo / Getty Images

Prime Minister Julia Gillard's plans for a year of reform yesterday became more difficult as Victorian Labor Premier John Brumby conceded defeat after the weekend's cliffhanger state election.

Victoria's 11-year-old state Labor Administration finally collapsed after counting in key remaining seats yesterday confirmed that Brumby had lost to Coalition Leader Ted Baillieu.

Although counting continues and the final result has yet to be determined, Baillieu is likely to form a government with 45 of the state Parliament's 88 seats.

Brumby said last night that he accepted Labor did not have the numbers to continue governing and that he had called Baillieu to congratulate him and to wish him every success.

"This is very disappointing for me personally and for the caucus and the Labor Party.

"We presented a very clear programme for the future and it is a matter of great regret that we won't be able to deliver on those plans for the future.

"The electorate has spoken and we have to respect their verdict," Brumby said. He did not mention any plans for his own future.

Baillieu's shadow Cabinet has already met to discuss the transfer of power.

"As I said on Saturday night, we are ready to govern," he said.

The collapse of a second Labor state government - West Australia fell to the Coalition in 2008 - is already casting a pall across Gillard's minority federal Government.

She ended the parliamentary year yesterday with her first significant victory, winning the separation of communication giant Telstra's wholesale and retail arms in a move vital to the new national broadband network.

The network was a key election promise, and Gillard's win, achieved with the help of Greens and independent MPs and Senators, ended her political year on a jubilant note.

But her media conference to welcome the victory yesterday was overshadowed by Brumby's defeat and questions about the ability of Labor to survive a potential domino effect.

Labor is expected to lose its next elections in New South Wales and Queensland.

Already, with two states now in the hands of the Coalition, Gillard will have trouble delivering key reforms she has identified as her priorities for the next 12 months.

Baillieu has indicated he will join WA in rejecting the health reforms that require state acceptance of a new funding deal from Canberra, and could oppose plans for national management of the Murray Darling Basin.

He could also hinder climate change measures.

Similar moves are likely to be followed in NSW and Queensland if their Labor Governments fall.

Gillard yesterday declined to comment on the potential impact of hostile administrations in the major states, but pointed to the problems former Liberal Prime Minister John Howard had overcome when faced by wall-to-wall Labor governments across the country.

"We saw John Howard successfully govern and be re-elected in circumstances where people were marching to ballot boxes, voting for Labor governments," she said.

"Australians separate [federal and state politics] in their minds."

Gillard said her future lay in governing well: "That's exactly what I will deliver - good government."