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Australian PM Surprises With September Election Call

Australian Prime Minister Julia Gillard
Mak Remissa | AFP | Getty Images
Australian Prime Minister Julia Gillard

Australian Prime Minister Julia Gillard stunned voters on Wednesday by setting a national election for September 14, eight months away, in her first major political speech for 2013.

Elections must be held in Australia by the end of the year, but Gillard said she wanted to end political uncertainty by setting the date now.

"It is not right for Australians to be forced into a guessing game, and it's not right for Australians to not face this year with certainty and stability," Gillard said.

(Read More: Will Lady Luck Return to Australia This Year?)

"So in the interests of certainty, in the interest of transparency, in the interest of good governance, I have made the date clear today."

Gillard's minority Labor government holds a one seat majority with support from a group of independents and the Greens, and polls suggest the Liberal opposition would easily win office if an election were held now.

The election will decide whether Australia keeps its controversial carbon tax, and a 30 percent tax on coal and iron ore mining profits, which the conservative opposition has promised to scrap it if wins power.

But apart from these two policy differences, the government and opposition differ little on domestic issues, and both firmly support greater involvement with China, the country's biggest trade partner.

(Read More: Australia Trade Deficit Widens; Iron Ore to the Rescue)

Gillard said the governor-general would dissolve the current parliament on August 12, giving the government two more sessions of parliament to pass laws and deliver its May budget.

Gillard used the speech to the National Press Club to lay the groundwork for an election year battle focused on the economy, arguing that a strong economy is necessary to ensure fairness in education and disability services -- two key election policies aimed at Labor heartland voters.

Australia's resource economy is expected to slow this year as a stubbornly high currency crimps export earnings and a boom in mining investment plateaus. Australia's A$1.5 trillion ($1.53 trillion) economy has grown for the past 22 years and has overtaken Spain as the world's 12th largest economy.

"We just don't have the sense that the economy will go into hibernation just because an election is coming in eight months time," said Michael Turner, a strategist at RBC Capital Markets.

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There was no discernible reaction in financial markets on Wednesday. The Australian dollar remained firm, hitting its highest level against the Japanese yen in over four years. The share market reached a fresh 21-month high and government bonds were steady.

Though the government has dropped its pledge to reach a budget surplus for 2012/13, any deficit is still likely to be a fraction of the economy's A$1.5 trillion in annual economic output and no worry to investors.

Under Australian laws, governments serve for three-year terms and the prime minister has the right to decide the election date. By calling a September election, Gillard's government will have served a full term.

(Read More: Australia Inflation Surprisingly Tame Last Quarter)

Gillard said she did not want her announcement to mark the start of an eight-month election campaign.

"I do so not to start the nation's longest election campaign - quite the opposite," she told the National Press Club.

"It should be clear to all which are the days of governing and which are the days of campaigning. Announcing the election date now enables individuals and business, investors and consumers to plan their year."

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