The Rudd Government is planning a major Peter Costello scare campaign focusing on his "industrial relations baggage", amid growing speculation the former treasurer will lead the Coalition to the next election.
As Mr Costello returned from a family holiday in the Pacific, Labor strategists yesterday were finalising an industrial relations dossier with which to attack him if he replaces Brendan Nelson as Opposition Leader.
Labor fears that Mr Costello, who delivered 12 budgets under the Howard government, would pose a greater threat as Opposition Leader than Dr Nelson, who has been dogged by leadership questions following a series of bad poll results and his clumsy handling of the emissions-trading debate.
A senior Labor source said the approach would be to remind people at every opportunity that "Peter Costello has devoted his life to arguing for extreme industrial relations laws".
"Peter Costello is a bloke who said WorkChoices didn't go far enough," the source said.
"This is a great opportunity for us to return to WorkChoices - we made huge gains in the last year before the election on this issue and by focusing on Peter Costello, so we would relish the opportunity to go head to head with him. The Liberal Party obviously has a very short memory."
The comments came as a beleaguered Dr Nelson claimed he had the full support of his party and said he had no plans to discuss leadership with Mr Costello over the weekend.
"Peter Costello has earned the right to make the decision about his future with his own family, in the best interests of both them and the people of Higgins," Dr Nelson told a NSW Liberal Party State Council meeting at Homebush yesterday.
"I would be very happy for Peter Costello to stay on in the Parliament, and if he chooses to do so, he will be immediately on the frontbench. But that's his choice, his decision, and he'll make it in good time."
Labor is worried Mr Costello would be more competitive than Dr Nelson as Opposition Leader, but has identified his past hard-line stance on industrial relations as a weakness to exploit following the previous government's failed WorkChoices package.
Labor has compiled a dossier of "highlights from Mr Costello's extreme industrial relations crusade" that stretches back to 1986, the year he formed the HR Nicholls Society, a right-wing think tank set up to argue the case for workplace reform and lower minimum wages.
Sportingbet is pricing the likelihood that Mr Costello will be Liberal leader at the next election at $1.80, compared with $2.20 for Malcolm Turnbull and $3.50 for Dr Nelson. Julie Bishop is paying $9, Joe Hockey $26 and Tony Abbott $34.
Former prime minister John Howard spoke publicly in Sydney yesterday for only the second time since his electoral defeat last year and backed Dr Nelson strongly as Liberal leader.
Speaking at the NSW Liberal Party meeting, Mr Howard condemned the Rudd Government for taking credit for the Coalition's economic achievements.
But the former prime minister neglected to give credit for the strong economy to Mr Costello and his 12 years as treasurer.
Mr Howard said the Coalition should focus on attacking Labor's economic record, adding that the strong economic fundamentals referred to by Prime Minister Kevin Rudd had been delivered by his government.
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