'It was always on the cards': Labor prepared for early election after Dutton challenge
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'It was always on the cards': Labor prepared for early election after Dutton challenge

The Labor opposition has quietly prepared for an early election as soon as September, booking bank loans and war-gaming the campaign's opening salvos amid the Coalition's leadership disarray.

While Prime Minister Malcolm Turnbull's office played down talk of a snap poll following his 48-35 defeat of former home affairs minister Peter Dutton at a leadership ballot on Tuesday, both sides are mindful of paths to an early election.

Mr Dutton did not rule out a second challenge, but indicated he would use his backbench freedom to prosecute an alternative policy agenda. If successful in a second spill, he could call an immediate poll - or be forced to go early in the face of uncertain numbers in the lower house.

Labor leader Bill Shorten in Question Time on Tuesday.

Labor leader Bill Shorten in Question Time on Tuesday.Credit:Dominic Lorrimer

Crossbenchers were split on giving confidence and supply to a potential Dutton government. While  Bob Katter endorsed Mr Dutton wholeheartedly, Greens MP Adam Bandt and Centre Alliance MP Rebekha Sharkie were less certain, saying they would make a decision on supply if the issue arose.

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Mr Turnbull could also use his prime ministerial prerogative to go to the polls early to head off a second leadership challenge. On Tuesday, the bookies began tipping an October election.

Labor has an almost singular focus on Queensland, where it needs to win a swag of marginal seats to form government. Mr Dutton, a Queenslander, would likely make Labor's task more difficult in that state - though his appeal in NSW and Victoria has been called into question by his own colleagues.

"I wouldn’t rule out additional seats in those states, particularly if Dutton becomes leader," Labor's national president Wayne Swan told Fairfax Media on Tuesday.

But a senior Labor source in NSW conceded there was "not much room to grow" in that state. The party is targeting the Liberal-held seats of Gilmore, Banks and Robertson, but it could easily lose Emma Husar's seat of Lindsay.

"Everyone knows if we win the election, we win it in Queensland," the party source said.

The July byelection in Longman, north of Brisbane, delivered Labor a 3.7 per cent swing, while the Liberals' primary vote plunged by 9.4 per cent.

Mr Swan said the byelections did Labor a "big favour" because they let it road test messages against trickle-down economics, particularly on tax cuts for big businesses and the wealthy - "all the things that add up to them not being very friendly to ordinary people and led by a Prime Minister who is chronically out of touch".

Mr Swan said a switch to Mr Dutton would be a case of "same horse, different jockey". But it would force Labor to jettison the campaign it honed against Mr Turnbull and pit them against a relatively unknown entity in Mr Dutton.

An early election "was always on the cards", Mr Swan said - and the party has been preparing for months. Shortly after the byelections, Labor ran a "trial" of the first 24 hours of a general election campaign, pulling together key teams and personnel to simulate various campaign scenarios.

Mr Swan would not comment on Labor's finances. Both major parties face expensive state elections in Victoria (November) and NSW (March). A senior Labor source acknowledged "money is always a problem", but said loans were already booked and "it won’t be a problem to get an influx of cash".

Earlier this month, Labor pocketed an estimated $1 million from a major business summit - the "biggest ever" according to party sources. Labor's candidate selections are also "almost universally done", Mr Swan said - compared to the Liberal Party, whose preselections in key NSW seats remain incomplete.

"We've done f--- all, to be honest," said one senior Liberal source in NSW. "If they go to an early election we're stuffed."

Liberal Party federal president Nick Greiner cited Mr Turnbull's repeated promise the election would be held "in the first half of next year" and told the ABC the Liberals were "well prepared" for that eventuality.

"Should we have more money? Yes of course we should," he said. "I think the election will be held roughly when it’s due and I think the rest is really just all bizarre speculation."

Michael Koziol is a political correspondent for The Sydney Morning Herald and The Age.

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