Keating sets agenda after shock win

IN THE wake of his astonishing weekend election victory, Paul Keating, the Australian Prime Minister, will start work today on implementing his agenda for the Nineties, which includes plans for a referendum on turning the country into a republic.

Against all opinion poll predictions, Mr Keating and the ruling Labor Party seem likely to return to power with an increased majority in the House of Representatives. The election on Saturday produced a swing of 1.6 per cent to Labor, which could see its majority of five rise to between seven and eleven seats.

At the close of weekend counting Labor claimed to have won 74 seats, the opposition Liberal-National coalition 63 and independent candidates two, leaving eight seats still to be decided on the distribution of preference votes under the system of single-transferable votes.

There was great surprise in Labor ranks that the party performed so strongly against the odds. After 10 years of Labor government, a crippling recession and the highest unemployment in 60 years, Mr Keating had been given little chance of victory against an opposition whose political fortunes had revived under John Hewson, its leader for three.

Opposition MPs were in a state of shock and disarray yesterday. Liberal Party officials had flown in VIP supporters from around Australia for an expected victory party with Mr Hewson at a Sydney hotel, which turned into a wake as the full extent of the devastation unfolded on Saturday night.

Mr Keating can take much of the credit for the Labor win through his campaign strategy of turning the election into a referendum on the centrepiece of Mr Hewson's plans for radical economic reform, a proposed VAT- type goods and services tax (GST).

As much as the result was an endorsement of Labor for an unprecedented fifth term, it was also a rejection of the proposed new tax, which Mr Hewson never succeeded in explaining to the public, and which Mr Keating managed to bury by convincing voters it would turn into 'a monster'.

Mr Keating spent yesterday savouring his victory with his wife, children and well-wishers at the Prime Minister's official residence in Sydney. Uppermost in his mind must have been the fact that his win was a vindication of his successful challenge 15 months ago to Bob Hawke, then the Labor leader and prime minister.

Mr Hawke, who had led Labor to four successive election victories since 1983, fought bitterly to stop Mr Keating, who had served him as Treasurer (or finance minister) and was the chief architect of the Labor government's economic reforms of the Eighties. After Mr Keating ousted him, Mr Hawke quit parliament, declaring he was the only person capable of leading Labor to a fifth victory.

In Sydney yesterday, Mr Hawke showed no bitterness against his old rival. 'The past isn't important,' he said. 'I prayed the Australian electorate wouldn't get it wrong this time. They didn't. Under Paul's leadership the Labor Party has won. No one is happier about that than I am. It must have a beneficial effect on Paul.'

Mr Keating displayed as much when he described his win to cheering supporters on Saturday night as 'the sweetest victory of all'. With victory in his own right, he has established himself, at 49, as the dominant figure in Australia for the Nineties.

If the Australian economy continues its steady recovery, and with the opposition likely to stay shell-shocked for some time, Mr Keating could possibly look forward to a second three-year term, which would take him to 1999, the deadline of his pledge for a referendum to allow Australians to choose whether to replace the Queen with a president.

Although the election win must be seen as an endorsement of Mr Keating's republican views, the issue itself was swamped in the campaign by the economic questions that will confront him as he returns to work this week.

He is faced with the daunting task of tackling Australia's record foreign debt, bringing unemployment down from more than 1 million and fulfilling his campaign promises to cut business taxes, help families and elderly people, stimulate new industries and expand job training. All these promises will cost 3.6bn Australian dollars ( pounds 1.7bn) over four years.

The budget deficit is already about Adollars 16bn, and the governor of the Reserve Bank (the central bank) has warned that the incoming government will have to curb spending drastically. Mr Keating is almost certain to be forced to scrap some of his promises.

Demoralised after losing the election that should have been unlosable, its fifth loss since 1980, the Liberal Party, once the voice of conservative Australia, will be preoccupied with internal bloodletting. Mr Hewson said yesterday he would recontest the party leadership at its meeting this week. He is the Liberals' third leader in 10 years and there is already speculation that he will not survive for long after such a humiliating public rejection.

A fading monarchy, page 21

(Photograph omitted)