A blow to Labor's heartland

ANOTHER election, another tight contest.

Premier-in-waiting Ted Baillieu at the Liberal Party's election room in Melbourne. Picture: David Caird

ANOTHER election, another tight contest.

Early counting suggested the Victorian state election might result in a hung parliament with each side winning 44 seats. But counting yesterday in the key seat of Bentleigh went the Liberals' way, making it likely the Coalition will win a narrow victory.

"A government a decade or more old has a huge political burden of proof to convince the electorate it can do in the next term what it didn't do in the previous three," says Liberal powerbroker Michael Kroger.

"For most governments in Australia, it is a burden they fail to carry off."

Moreover, the Greens have suffered a big setback, having failed to win any lower house seats. The Victorian Liberal decision to preference Labor ahead of the Greens has been vindicated. It shows the Greens can be contained.

Premier John Brumby looks likely to become a two-time loser as Labor leader, having lost during the Kennett years and now as Premier after taking over from Steve Bracks who won in 1999, 2002 and 2006 with Brumby as his treasurer.

If there is a hung parliament, that will mean voters will probably go to the polls again early in the new year. The conventional wisdom is that a damaged government forced back to the polls is likely to be put out of its misery rather than win a reprieve.

Labor's vote in the east metropolitan areas of Melbourne collapsed, and even though the Liberals didn't pick up the seats in regional areas Kennett lost in 1999 - seats in Bendigo and Ballarat - the gains in suburban Melbourne should be enough to give Ted Baillieu a narrow victory.

Labor's rot set in around seats that changed hands: Prahran, Mount Waverley, Mitcham and Gembrook all suffered swings against the Labor Party of more than 7 per cent on the primary vote.

But there were big surprises too.

"The real thing that happened here is Labor lost seats in Melbourne they never expected to, seats like Carrum," former Labor powerbroker Graham Richardson says. "The big story here is how can a swing that big happen in the last few days? I think it is a cost of living issue. That is affecting all incumbent governments and will continue to do so more than they realise. For anyone talking up an ETS that's something to think about."

Federal Labor will also want to take note of sizeable swings to the Liberal Party in state seats that sit within the federal boundaries of marginal electorates Julia Gillard held on to in August. Bayswater and Kilsyth are both state seats that take in large parts of the federal seat of Deakin for example, yet in both electorates Labor had double-digit swings against it.

From the West Australian election in late 2008 to the Tasmanian election earlier this year to the recent federal result, voters appear unwilling to deliver either party a strong mandate to govern in its own right. Even in South Australia the Mike Rann-led Labor government was returned by only the barest of majorities, with less than 50 per cent of the two-party vote.

Victorian Liberals are ecstatic with their performance at this election, but that says as much about where they have come from as it does about the number of seats they are likely to win.

"The Victorian division has been split for years, and the parliamentary party has been seen internally as not having adequately renewed its ranks ahead of this election," one senior Victorian Liberal notes.

There is no denying the size of the shift in voter sentiment, but that shift has only led to a similar outcome in terms of seats for both main parties. This result is more repudiation of Labor than endorsement of the alternative: the message Kennett received in 1999 in reverse.

"The result is deeply worrying [for Labor]," Richardson laments. "One gets the impression that the brand is damaged. That I think is a real worry with obvious wider implications."

But Brumby is not a popular figure. The final Newspoll put his satisfaction rating only in the high 30s. Labor has been in power for 11 years and was seeking a record fourth term. Yet the Brumby government wasn't regarded as a bad government, certainly nothing like Labor in NSW, which managed to win re-election in 2007 after 12 years in power.

Brumby's re-election was endorsed on Friday by this newspaper's editorial, that of the Herald Sun and the Melbourne Age, an unusual union. The same thing happened when all three papers editorialised for Kennett in 1999.

Victoria has been a policy heartland for the Labor Party for years.

Gillard is a former chief of staff to Brumby when he was opposition leader. Members of Gillard's policy team have a public service background in Victoria. Kevin Rudd's health reforms were modelled on the Victorian system.

On the back of a strong Labor showing in Victoria at the federal election (strong enough to save the government from losses in other parts of the country) losing power at state level will hurt. It will also make negotiating agreements with the state premiers at COAG that much harder for Gillard, making achieving reforms more difficult.

Assuming Baillieu becomes Victoria's next premier, come March he and Western Australia's Colin Barnett will surely be joined by Barry O'Farrell as premier in NSW, leaving three states under the authority of an increasingly confident conservative movement.

While there is something to be said for the political advantage Gillard gets in arguing for balance federally if state governments turn to the Coalition, any such advantage would only be years away at election time. In the meantime the Labor Party must deal with the disappointment of defeat, and the strong swing that has been registered against it.

Perhaps the most significant outcome from Saturday's election is that the Greens as a political force have been dealt a body blow, failing to pick up a single seat in the Legislative Assembly despite high hopes of winning three or four.

And their success at winning seats in the Legislative Council is in some doubt, with analysts such as the ABC's Antony Green believing they will lose one of their three positions, an extraordinary decline given expectations.

Despite high hopes, the Greens only secured a swing of 0.63 per cent at close of counting on Saturday night.

"It was a pretty lacklustre result for the Greens," Richardson says. "Obviously they weren't going to win the lower house seats because of the Liberals denying them preferences. But they still under-delivered."

Courtesy of Baillieu's courage in preferencing the Greens last, the minor party did not pick up any of the inner-city seats they were targeting, including electorates such as Melbourne and Brunswick.

"The party leadership's decision on Greens preferences was undoubtedly the right one," Kroger says. "It stopped the Green momentum, pacified Liberal supporters, showed we stood for something, made clear there was a line we would not cross to form government and showed Ted Baillieu as the decisive leader than John Brumby was not."

Kroger also points out the importance of a range of senior Liberals urging Baillieu to act as important in convincing him to do so.

In the state seat of Melbourne, which sits entirely within the federal seat Adam Bandt won for the Greens with Liberal preferences in August, the minor party's primary vote went backwards when booth results are compared, from more than 35 per cent to just 30 per cent.

This is not the sort of building blocks to the rise of the Greens Bob Brown was looking for. It could cause the Greens to reconsider whether they need to take a more constructive approach to dealing with the Liberals. And it will mean more debate inside the Labor Party on whether pandering to Greens issues is in Labor's best interests as it tries to hold on to outer metropolitan seats where voters are more concerned with cost of living issues than climate change or gay marriage.

Questions must be asked on whether the Greens have reached their high watermark as a party. Talk of their rise may have been grossly exaggerated. But that will only be true if the Liberals continue to deny them preferences.

Will Tony Abbott do what his Victorian colleagues did and commit to putting the Greens last, something his Senate leader Eric Abetz is suggesting?

At the Liberal campaign launch, Abbott suggested it wasn't something he was keen on, telling those in attendance that it is not the Liberals' job to save Labor from its Left flank. As John Maynard Keynes once said: "When the facts change, I change my mind, what do you do?"

More immediately, what will O'Farrell do in NSW? The electoral system in the nation's largest state is different to Victoria's in that it has optional preferencing, but you can bet calls for Liberal how-to-vote cards putting the Greens last as a way of sending an ideological message will now grow.

The problem for Labor is that if it panders to its Left, it gets outflanked by the conservatives in outer metropolitan areas. But if it doesn't its chances of winning inner-city seats that are under threat from the Greens will be in the hands of the Liberals as they decide where to send preferences.

The Liberals will decide what to do with their preferences as late as possible, to force Labor to use up resources on inner-city seats as well as to make it harder for them to ignore issues the Greens want to talk about.

Liberals holding off on preference decisions also mean the Greens have to decide how to target limited resources.

Gillard will want to manage this situation federally rather delicately. But the Victorian result makes this more difficult.

Openly gay senior frontbencher Penny Wong used the South Australian conference of the ALP on the weekend to urge Labor to support gay marriage, something she has previously shied away from doing.

But the Victorian result suggests Wong has done so at a time when Labor strategists are getting nervous about such an approach.

And the optics aren't good for Labor in battlers' territory (read marginal seats). As the Liberals are standing up to the Greens by denying them preferences, the Labor Party is increasingly wanting to adopt parts of their agenda.

That at least is the impression voters worried about cost of living pressures in outer metropolitan seats are getting.