A leaked American diplomatic assessment of the Rudd government's emissions trading scheme predicted that 2009 would be a ''defining year'' for ''heir apparent'' Julia Gillard.
Among the cache of US cables released by whistleblower site WikiLeaks on Monday was a frank assessment of the failed scheme.
It showed the US embassy believed in January 2009 that with rising unemployment, the ETS was becoming increasingly untenable for business groups, placing former prime minister Kevin Rudd's leadership in doubt.
Charg d'affaires of the US embassy in Canberra, Daniel Clune, told his colleagues in Washington DC that looming job losses were threatening the ETS legislation.
''The weakening economy will also put pressure on the Senate to carefully consider the timing and details of two of Prime Minister Kevin Rudd's key policy initiatives for 2009: climate change and industrial relations.
''The political risk for Rudd is that unemployment keeps rising despite his interventions.''
In 2007, promising action on climate change and rolling back WorkChoices were ''political winners for Kevin Rudd and the ALP''.
''Now, however, the predominant issue for both an emissions trading scheme (ETS) and the new industrial relations law is certain to be their effect on unemployment levels.''
Mr Clune wrote, ''The Minerals Council of Australia claims the proposed ETS is much tougher than those operating in Europe and will cost jobs [and] the Coalition is warning of jobs being exported.''
The other side of the coin, he said, was the Fair Work Australia legislation, then before the Senate.
''Business groups have long warned that the Government's proposed changes will cause job losses and act as a disincentive to hiring but this is becoming a more powerful argument given the weakening economy.''
Mr Clune wrote a prescient assessment of Mr Rudd's political challenges, under a section labelled ''History Repeats Itself?''
''Some observers argue the economic security under former Prime Minister Howard created a 'prosperity paradox' which gave voters the confidence to focus on issues other than jobs and the economy, and turn to a fresh leader,'' he observed.
''Notwithstanding Rudd's economic stimulus measures, Australia's economy is largely at the mercy of global forces. The political risk for Rudd is that unemployment keeps rising ...''
He said 2009 would be ''a defining year for Rudd's heir apparent, [Julia] Gillard''.
''Despite her immense political skills, she has few policy achievements to her credit. As Minister for Employment and Workplace Relations, she will take a lot of the heat if unemployment keeps rising.''
