Budget may be behind Gippsland pain: PM

(AAP) - Prime Minister Kevin Rudd concedes the May budget may have been responsible for a seven per cent swing against his Labor government in the Gippsland by-election.

Despite two prime ministerial visits to the Victorian seat and a high profile campaign, voters deserted Labor, erasing the 2.46 per cent swing it attracted last November.

Labor's overall vote dropped by almost 9.5 per cent on the back of record petrol
prices, higher interest rate rises and soaring grocery costs.
Nationals candidate Darren Chester won 63 per cent of the two party preferred vote
to Labor candidate Darren McCubbin's 37 per cent.

Federal Opposition Leader Brendan Nelson said voters felt let down just seven months
after electing Mr Rudd in a landslide.

But Labor's federal president Mike Rann said Labor had never expected to win the
seat, which has been held by the Nationals for 88 years.
"No government has won a seat in a by-election off an opposition since 1920 in Kalgoorlie.

"So no one was predicting a Labor victory, certainly we weren't," Mr Rann told Sky
News.
Mr Rudd and Treasurer Wayne Swan conceded that the May budget was a factor in the
defeat.

"The people of Gippsland have said loud and clear their concerns about impacts on
household budgets," Mr Rudd told reporters in Sydney.
"When you take tough decisions for Australia's long-term future and the future of
working Australians, it means that there will be political setbacks. That's simply
the truth of it."

The government was committed to long-term decision making rather than politically
convenient short-term policies, he said.
"If it means that on the way through that there will be political setbacks, I
understand that."

Mr Swan said inflation was high, interest rates had risen eight times since the 2004
election and petrol had risen by 30 cents a litre this year alone.
"On top of that, we have had to bring down a tough budget which has taken hard
decisions for the long-term," Mr Swan told the Nine Network.

"And when you put all those things together, it does have an impact out there, and
maybe that is reflected in the by-election result."
Dr Nelson, whose leadership would have come under serious scrutiny had Labor won the
seat, said voters had told Mr Rudd that they did not want to be taken for granted.

"I think it's an extraordinary result that you have a seven per cent swing against
Mr Rudd only seven months after he has won the election, which would be one of the
largest swings against a newly elected government, I think, since federation," Dr
Nelson told the Ten Network.

Former agriculture minister Peter McGauran forced the by-election when he quit
parliament following the coalition's November 24 election loss.
Mr Truss said he never felt the by-election was a test of Dr Nelson's leadership.

"The Liberal Party have never held this seat and so if it was a test of anybody's
leadership it was mine and Kevin Rudd's," he said.
"If you think it was a test of Brendan Nelson's leadership he obviously passed with flying colours."

But Mr Rann said Dr Nelson had failed.
"If Brendan Nelson thinks it's an endorsement of his leadership ... he spent a
fortune on this campaign, five times more than Labor on this campaign, and he came
third," he said.

"They wouldn't even put Brendan Nelson's picture on the how to vote cards."