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Undercurrents Down Under

He has spent the past week taking the sun in Fiji, enjoying a Pacific holiday while his Liberal Party goes through agony trying to frame a credible climate change policy.

Former conservative prime minister, John Howard, who was defeated in the general election late last year, has emerged periodically to give speeches. However, Costello has maintained a self-imposed silence.

Immediately after the election defeat, when Kevin Rudd from the centre left Labor party became Prime Minister, Costello vowed that he would no longer be part of the Liberals' leadership team. Furthermore, he indicated he would pursue a career in the corporate world where his financial expertise and inside knowledge gained from 11 years as Treasurer should garner a handsome salary.

This week, however, he turned down a A$2 million a year job in London with the World Gold Council, preferring not to uproot his family from Melbourne.

But it seems that every day he remains mute as he works on his memoirs, his popularity rises and his supporters become more impatient for him to declare his hand.

The source of their frustration is the standing of current Liberal leader, Brendan Nelson. As Opposition Leader, Nelson should be putting Rudd's policies under intense scrutiny. Instead, he is stumbling over his own policies.

For weeks, Nelson has been publicly musing about the need to take a more conservative policy on climate change. He put the view that Australia should not begin an emissions trading scheme until the major emitters - the United States, China and India - committed to reductions in their greenhouse gas emissions.

He argued that Australia could only make a tiny reduction in the world's emissions but any action would disproportionately affect the nation's resources sector.

Australia relies on coal-fired power stations and exports huge amounts of coal to China and Japan. Nelson argued that early action against Australia's resource dependent industries would make them less competitive globally, without helping the world's environment.

His pitch resonated with climate change sceptics in the Liberal Party but the more powerful moderates group said Nelson was trying to unwind the party's policy. Howard was a climate change sceptic but before the last election he finally changed his policy in favour of introducing an emissions trading scheme by 2012, regardless of action by other countries.

When Nelson called a meeting of his frontbench team, his proposal for a more conservative policy was blocked. He took responsibility for the shambles but that means his already shaky leadership has been further damaged.

The curious element in the current speculation swirling around Nelson's future as leader is that the longer Costello stays silent, the more popular he becomes in the public opinion polls. "Public opinion is a fickle thing," a leading commentator says. "For some reason, Peter Costello is now hot with the public after many years of languishing cold and all but despised in the shadow of John Howard."

There are mixed views about Costello's strength of character. There is an excellent debater in Parliament and was one of the key figures in the Coalition government led by Howard. But Costello was widely criticised for not challenging Howard to a leadership vote when it was revealed that Howard reneged on a deal to hand over the Prime Ministership before the last election. The refrain being heard around Parliament House this week is, "Has he got the guts to mount a leadership challenge this time?"

That point will be moot if Nelson decides to leave. He is known as a fighter who relishes a battle but many in his team believe his position is becoming untenable. They suggest Nelson is an interim leader, charged with the unenviable job of holding the Liberal Party together in the year after its defeat.

But if Costello takes over, will he present generational change to counter Rudd's soaring popularity, or will it be seen as just more of the same, a Howard-era figure who supported the Iraq war?

Ross Peake is a Canberra-based political analyst