Australian PM's rival cleared to remain in parliament ahead of expected leadership vote

CANBERRA (Reuters) - The Australian lawmaker vying to oust Prime Minister Malcolm Turnbull was on Friday declared eligible to remain in parliament by the country’s senior legal adviser, removing one obstacle to him contesting an expected leadership ballot later in the day.

Former home affairs minister Peter Dutton narrowly lost a leadership vote against Turnbull on Tuesday sparking an internecine battle in the ruling Liberal party ahead of an election due by May 2019.

Under intense pressure to call a second vote, Turnbull has offered to call a midday (0200 GMT) meeting of the Liberal party if he receives a letter signed by the majority of party members.

If the meeting is called and a vote to vacant the leadership is passed, Turnbull said he will not contest the ballot, leaving Dutton a confirmed candidate, with the country’s treasurer and foreign minister also likely to nominate.

Turnbull had sought legal advise on whether Dutton could remain in parliament over reports he financially benefited from government funding, which is not allowed under the constitution.

“In my opinion the better view is that Mr Dutton is not incapable of sitting as a member of the House of Representatives,” Australia’s Solicitor-General Stephen Donaghue wrote in his judgment seen by Reuters.

But he also qualified: “I consider there to be some risk.”

If Australia changes prime minister on Friday it will be the sixth leader in less than a decade and none have served a full term.

The political uncertainty has clouded the outlook for investors who have punished the Australian dollar AUD=D4, which was down 0.1 percent on Friday, after falling 1.4 percent on Thursday, the worst performing major currency on the day.

Australian shares are down more than 1.5 percent since the first leadership challenge this week.

Just hours ahead of a potential vote, Turnbull’s letter threshold had still not been met, though key Dutton supporters said they were confident the meeting will happen.

“I’m very confident we will have a party room meeting today,” Mathias Cormann, formerly a key Turnbull backer who changed his support to Dutton and resigned as finance minister told Sky News on Friday.

Australian media have reported that Treasurer Scott Morrison and Foreign Minister Julie Bishop would contest a leadership vote, with Morrison the stronger contender.

Turnbull came to power in a party-room coup in September 2015. A social liberal and multi-millionaire former merchant banker, he has struggled to appeal to conservative voters and only narrowly won a general election in 2016.

The ruling Liberal-National coalition government has consistently trailed the opposition Labor party in opinion polls, but Turnbull has remained the voters’ preferred prime minister over Labor leader Bill Shorten.

Reporting by Colin Packham; Editing by Michael Perry

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