Australian PM faces new leadership challenge from conservative rival

CANBERRA (Reuters) - A second challenge to Australian Prime Minister Malcolm Turnbull’s leadership loomed on Wednesday, a day after Turnbull rejected the resignations of seven Cabinet members who had backed a rival who is openly preparing a new bid.

Former home affairs minister Peter Dutton said he was again canvassing colleagues in the Liberal Party, the senior partner in the government coalition, just a day after Turnbull survived his initial challenge for the leadership in a party-room vote.

The narrow margin of his victory - Turnbull defeated Dutton 48 votes to 35 - only heightened speculation that his leadership days were numbered in a country that has earned a reputation for having a revolving door of political leaders.

Australian newspapers echoed the frustration many voters feel over the constant leadership changes.

“The rest of Australia is looking on at the antics of the coalition caucus in disbelief,” The Sydney Morning Herald wrote.

“It would be kinder to voters and more in the national interest if Mr Turnbull ... called an election a year early,” it said in an editorial.

Turnbull won a narrow election victory in 2016 and the next poll is due by May.

Expectations that Turnbull would soon face another challenge, possibly within days, were stoked when eight Cabinet ministers backed Dutton in Tuesday’s challenge.

Dutton soon confirmed those expectations and declared on Wednesday he was working to secure the seven party votes he needs to become Australia’s sixth prime minister since 2009.

“I’m speaking to colleagues,” Dutton told 3AW Radio.

“If I believe the majority of colleagues support me then I will consider my position,” he said.

Desperate to unite the fractured Liberal Party, Turnbull asked most of the Cabinet rebels, including two senior ministers, to remain in their posts after Dutton’s initial challenge, Turnbull’s party deputy and Foreign Affairs Minister Julie Bishop said.

Only the resignations of Dutton and Concetta Fierravanti-Wells, the former minister for international development and the Pacific, were accepted.

Further political instability is now all but guaranteed in the final two days of parliament’s sitting before it breaks until September, upsetting Australia’s financial markets.

Australia’s stock market was down more than 0.5 percent on Wednesday, with the index hitting a nine-day low.

Market sentiment was further soured when the upper house Senate rejected the government’s planned corporate tax cuts on Wednesday, one of Turnbull’s most important policy planks that echoed a similar move by U.S. President Donald Trump.

Turnbull’s leadership came to a head with the weakening of the government’s centerpiece energy policy, which had included the imposition of a target of a 26 percent reduction in greenhouse emissions from Australia’s energy generators, an issue that has repeatedly divided the government.

Turnbull came to power in a party-room coup in September 2015 over former premier Tony Abbott, who also survived an internal leadership contest before his eventual defeat.

A social liberal and multi-millionaire former merchant banker, Turnbull rode an early wave of popular support but he has struggled to appeal to conservative voters.

Progressive supporters have also been disappointed as they watched government policies shift to the right as Turnbull tried to appease a powerful right-leaning backbench.

Dutton, a hardline conservative who has carved out his reputation by overseeing Australia’s harsh immigration policy, is unpopular with moderate voters, raising the possibility that a third, centrist candidate might emerge.

($1 = 1.3669 Australian dollars)

(This version of the story refiles to remove typographical error in paragraphs 1 and 15.)

Reporting by Colin Packham; Editing Paul Tait

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