Labor sharpens knives, possibly for its own destruction, as Rudd targets Gillard ... again.

More talk of leadership squabbles in the political sauna of Canberra. Massive new plans to build dams to unlock Australia's potential to become the foodbowl of Asia. An election is definitely in the wind.

As Parliament nears the end of its first session of the year, both major parties are sharpening knives and refining their strategies for the September 14 election, which polls indicate Opposition Leader Tony Abbott will win by a country mile.

With its proven ability to shred its own intestines, Labor is again honing the blades for its own destruction, apparently intent on another challenge by ousted leader Kevin Rudd against Prime Minister Julia Gillard.

The Opposition relishing the speculation, adding its own barbs while its potential campaign policy is tested through leaks. New dams and the development of the remote north are its present focus.


There is no doubt Gillard remains deep in a hole of the Government's own making. The long election call should have given her time to marshal her forces and use incumbency to take back the agenda from Abbott.

Instead, she has been hit by ministerial resignations, fraud charges against former Labor and now independent MP Craig Thomson, and now, public exposure of the failure of the mining tax from which much of her major programmes was to have been funded.

The controversial tax was watered down and reshaped by Gillard after it led to the 2010 coup against Rudd. In its new form it was supposed to have raised A$3 billion ($3.7 billion) this financial year, a target later pruned by A$1 billion. Instead, in its first six months it realised only A$126 million, leaving gaping holes in forecast revenue. Treasurer Wayne Swan continues to promise its commitments to key projects, such as the new national disability insurance scheme education reforms, but declines to say how.

Yesterday, he initially refused to rule out income tax increases but, in the ensuing hullabaloo stomped on the suggestion, pointing to the series of cuts Labor has made since winning power in 2007. But it gave the Opposition yet another chance to exploit the tax bogeyman and hammer the Government over its "chaotic" economic management.

"They've got a mining tax that is hardly raising the revenue that they budgeted for, but they spent it," Shadow Treasurer Joe Hockey said. The Greens, whose support is pivotal to Labor, have kicked in, joining Opposition claims that the big mining companies rolled Gillard into compromises that emasculated the tax and allowed loopholes costing billions of dollars.

The party wants the tax rewritten.

Offstage, Rudd is gaining from the row. He infuriated Gillard and her supporters by publicly placing the blame on Gillard and Swan, exploiting growing concern within the party that a series of blunders and errors are driving the Government toward decimation in September.

News Ltd yesterday quoted sources saying Rudd could challenge Gillard within weeks.

Abbott, meanwhile, has been working to shift his "Dr No" tactics to a positive tack, promising fully costed policies across a wide range of sectors. Leaks of draft documents have pointed to some directions.

First was a proposal to lure Australians to the north, using relocation incentives, favourable tax rates, immigration policies and large-scale movement of federal public servants.

Yesterday, another draft paper floated the prospect of as many as 100 new dams, costing A$30 billion, for irrigation, flood mitigation and hydroelectric power.

Most would be built in the north to help boost agricultural production and feed 120 million people across the Asia Pacific region.