Reuters International

Australian Prime Minister Malcolm Turnbull speaks during a media conference in Sydney, Australia, Marh 23, 2016. REUTERS/David Gray

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By Byron Kaye and Ian Chua

SYDNEY (Reuters) - Australian Prime Minister Malcolm Turnbull on Tuesday gambled his political fate on a budget that he hopes will shore up his dwindling appeal with voters without blowing out the country's budget deficit.

With an early election in July a near certainty, Turnbull also hopes to silence increasingly loud accusations of dithering after his government suggested several new revenue-raising measures only to rule them out later.

Hikes on tobacco tax, closing tax loopholes for wealthy pensioners and limiting corporate tax havens are among the cash-raising measures the conservative leader has left open to possibility, according to local media reports.

Under Australian electoral rules, Turnbull was free to call a vote anytime until January 2017, but he has been anxious to revamp a Senate dominated by unaligned minor parties and the centre-left opposition Labor party.

After the Senate voted down a controversial labour reform bill on Monday, he used a rare constitutional mechanism, only allowed in Australia after the upper house rejects a bill twice, to dissolve both houses of parliament and put them to a vote.

In the meantime, he will try to deliver a budget that can make good on promises to guide the country through a once-in-a-generation commodities downturn and into a new phase of tech-savvy entrepreneurship.

He expects to deliver all that without growing a national deficit already expected to hit A$37.4 billion (£20.36 billion) in fiscal 2016 and last another five years.

"This is his chance to say 'I do have policies and we do have a plan'," said Annette Beacher, Chief Asia-Pacific Macro Strategist at TD Securities.

"He's been losing ground in the polls because everyone thinks he doesn't have a plan, so this is big for Turnbull."

SIX LEADERS IN SIX YEARS?

A campaign effectively lasting 74 days is double Australia's conventional five-week window and adds to a sense of instability that has been battering the country's Federal government for half a decade.

Before Australia's last general election in 2013, another former prime minister, Julia Gillard, announced a September poll date in January of that year, 228 days in advance and lasting a quarter of her three-year term.

If Turnbull loses on July 2, Labor opposition leader Bill Shorten will be the country's sixth leader since 2010 - and the sixth to be introduced to U.S. President Barack Obama and British Prime Minister David Cameron.

Nevertheless, business groups said the gambit may stabilise sentiment.

"The idea of minor parties holding government to ransom does not create the best climate in which business can operate," Australian Chamber of Commerce and Industry spokeswoman Patricia Forsythe said, referring to the Senate deadlock.

Council of Small Business Australia CEO Peter Strong said that, while his members face a longer election campaign, "we've got a budget. The community gets to see what they're doing... and then we see the opposition's response".

Paul Bloxham, HSBC's chief economist of Australia & New Zealand, said Turnbull has made clear the government won't be delivering a lot of sweeteners.

"It is going to be a budget that focuses on consolidating the budget position," he said.

(Reporting by Byron Kaye and Ian Chua; Editing by Ryan Woo)

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