The Rudd Government has bowed to pressure from the Greens and Independent Senator Nick Xenophon and slashed the proposed income thresholds for the Medicare surcharge to $75,000 for singles, although Health Minister Nicola Roxon wants to leave the proposed new threshold for couples unchanged at $150,000.

The Liberal leadership saga has overshadowed growing unrest within the Government over industrial relations, which the Prime Minister will again avoid this week. Some backbenchers fear Julia Gillard’s proposed industrial relations legislation is too similar to Work Choices. Last Tuesday, while Brendan Nelson was being dumped, New South Wales senator Steve Hutchins was telling a restive Labor caucus that the legislation was “Work Choices lite”.

The Prime Minister today defended the trip as in the national interest, and received some unlikely support today from Independent Senator Nick Xenophon, who said now was the time to talk to world leaders in the wake of the global financial crisis. But Liberal frontbencher Eric Abetz said this morning: “Kevin747 seems to be a very good little tagline for him. It’s, unfortunately, indicative of what he’s been doing in recent times.”

Amid the train wreck that the Senate became last week there was one consistency - everybody concerned claimed they had a mandate. The highlight was when the Coalition and Family First’s Steve Fielding knocked off the increase to the luxury car tax, worth $555 million over four years.

This week saw big problems emerge for the Labor Party in New South Wales and Western Australia, while federally the Nationals shrank even further with the loss of Lyne. In the Senate, Steve Fielding voted down the luxury car tax increase, while in the United States, Sarah Palin has garnered an immediate and positive reaction.

This week was a week of number twos on a variety of fronts. In the US, Joe Biden became Barack Obama’s new sidekick, while in Australia, the minor parties in the Senate geared up to take on their new roles as second fiddles. Meanwhile, in the entertainment world, ‘Stargate Atlantis’ was cancelled and replaced by ‘Stargate Universe’.

f there was a large swing against Labor in Western Australia, let alone a loss, it would send a jolt right across a continent papered with wall-to-wall Labor governments. Inevitably, federal Labor would feel a touch nervous. This would affect the mood for the busy spring parliamentary session and Labor’s work on its extensive agenda.

The Coalition will vote against a number of budget measures when they go before the Senate later this year. The Government will then need the votes of five Greens senators, Independent Senator Nick Xenophon and Family First Senator Steve Fielding to pass its legislation.

The big news of the week, rather surprisingly, wasn’t the Olympic Games. However, the media still found time to complain about the Chinese government. On the local front, Labor managed to hang on in the Northern Territory, Federal Labor actually made a decision, and Peter Costello waited some more for his book launch.

The Government is in a dilemma. Having invested much political capital in FuelWatch, does it move heaven and earth to get it through? Or does simply blame the Opposition for not supporting the policy, and privately breathe a sigh of relief when the Senate shoots what has been widely attacked as a dog of an idea?