The government still sometimes ''won'' the daily news cycle, which many internal critics say was a misguided preoccupation, especially in the prime minister's own office, but it was losing the more important longer-term battle to present a clear, strategic message against the battering-ram political approach of the new Coalition leader, Tony Abbott. Kevin Rudd's supporters at the time denied any decision-making ''chaos'', saying the government's priorities were set at open-agenda twice-yearly cabinet planning days, where issues were designated either as ''signature reforms'' (SRs) - big, government-defining promises, such as health or climate change or the G20 or the response to the financial crisis, which were the responsibility of the prime minister himself - ''major reforms'' (MRs), which were handled by the full cabinet or its committees, and ''ministerial priorities'' (MPs), which were run by individual ministers. They counselled the critics to hold their nerve, they had it under control, the job would get done. But a confluence of forces was growing that would prove lethal for the prime minister and his carefully laid plans - ministers who still admired his policy vision were losing faith in his ability to manage the government day to day. Meanwhile, Young Turks who he had kept on the outer were growing nervous and impatient and he was falling out with powerbrokers from the NSW Right, who were unsuccessfully urging him to take a more politically expedient route, particularly on climate change and boat people. Worst of all, his soaring personal approval ratings were quickly falling away.

When Kevin Rudd's opponents finally moved in favour of Julia Gillard, they succeeded so shockingly and so quickly because they exposed a rot that had been eating away behind the government's facade for a very long time. Labor has assigned the former Victorian premier Steve Bracks, the veteran senator John Faulkner and the former NSW premier Bob Carr to conduct a formal review into what went wrong with a government that had kept the Australian economy growing while the rest of the world crumbled and had done its best to keep the rest of its election promises as well. Interviews done by the Herald since the election with many central players in the Rudd and Gillard governments reveal a prime minister reluctant to adjust his ambition or ditch any promises despite having spent almost 18 months of a fleeting three-year term fighting the global financial crisis and despite an increasingly desperate ministry that was slow to actually voice its concerns. The problems had been building. The political disasters of the home insulation scheme and the green loans program were unfolding and, according to key players, had become far worse because it took the strategic priorities and budget committee so long to agree on how to deal with them. Because the government was so centralised Rudd seemed to get blamed for it all - as much as the responsible minister and much more than the minister actually charged with ''government service delivery'', the NSW Right powerbroker Mark Arbib. The drawn-out asylum-seeker standoff on the Oceanic Viking late last year pushed the politically toxic issue of asylum onto the 6 o'clock news, and a bitter disagreement over how to respond began the breakdown in the relations between the prime minister, Arbib and his NSW Right cadre and the Labor Party's federal secretary, Karl Bitar.

With the defeat of the emissions trading scheme and the failure of the international climate talks in Copenhagen, the government's problems escalated towards crisis. Just before Christmas 2009, exhausted after the round-the-clock Copenhagen negotiations, Rudd met Wayne Swan, Gillard, Arbib and senior staff in his Phillip Street offices in Sydney to discuss an early 2010 double dissolution election on the ETS. No decision was made. Rudd never pulled the trigger, and those urging him to were few - among them Faulkner and the Victorian Left minister Kim Carr. Arbib and Bitar - armed with ''internal polling'' - were soon urging the government to ''kill'' the ETS altogether. The Herald can reveal Labor was also forced to shelve a multimillion-dollar ETS advertising campaign after receiving informal advice that it would not pass the approval processes set up to meet another of Rudd's 2007 election promises, to end rampant political advertising that had, he said, become ''a cancer on our democracy''. ''No one has introduced major taxation reform without advertising - the ban meant we had one hand tied behind out backs,'' one Labor strategist said.

The ad campaign was never formally submitted to the auditor-general for review but government sources said they had received clear ''informal' advice that it would not have been approved because the ETS legislation had not been passed by Parliament and the material was too ''persuasive'' - and this caused the government enormous frustration. About this time the former public servant Allan Hawke was brought in to ''review'' the process, which resulted in the auditor-general losing the power to approve ad spending. Tony Abbott was already touring the country repeating his line that an ETS was a ''great big new tax on everything''. Labor was losing the debate while the SPBC decided what to do - but the government's inner circle was intractably divided. Gillard and Swan were in favour of killing it altogether, Lindsay Tanner and the then climate change minister, Penny Wong, backed Rudd's view that the government had to press ahead. The issue was discussed a dozen or more times. Eventually, with the budget less than three weeks away, the government hit decision-making crisis point. The strategic priorities and budget committee simply had to decide whether the multimillion-dollar ETS compensation payments were to be included in the budget calculations - especially since those payments made it much more difficult to meet the government's crucial stimulus package ''exit'' strategy to keep the growth in its spending below 2 per cent.

The prime minister settled on a compromise - the ETS would be removed from the budget's four-year forward estimates but the revenue would be ''parked'' in the contingency reserve, leaving the government's options open to develop an alternative strategy in the three weeks remaining before the delay became public knowledge through the release of the budget. The debate about what the alternative should be was to start in cabinet the following Thursday. But the decision to defer was leaked to the Herald in a report that appeared on the Tuesday. The government had no alternative ready and no prepared script to justify the delay in its policy to address ''the great moral challenge of our generation''. In retrospect it was the point where voters' faith in Rudd seemed to snap. The prime minister responded by devoting his every waking moment to ''winning'' on his health and hospitals reform - doing little else for most of March and April as he toured the nation's hospitals in what frustrated senior colleagues termed his ''General Hospital routine''. (The soap opera is America's longest-running.) But the weeks on the road made it even harder for the strategic priorities and budget committee to follow him and make efficient decisions - most particularly about taxation reform, which was by now also approaching a deadline crisis. The options for SPBC decision had been ready ''since about February'', already extremely late in the parliamentary term to begin making the case for a big change in the taxation system. It was now April. The review, and the government's response to it, had to be announced before the budget in May. The SPBC was advised the big miners and the governments of the resource states of Western Australia and Queensland would reluctantly agree to the new super profits tax that was being proposed. The assurance overcame Gillard and Rudd's political concerns.

The mining industry believed it had an agreement that the government would announce the structure of the tax, but not ''the numbers'' - that the final decision on the revenue to be raised would be determined though negotiation. Some ministers think the fact that some very big revenue numbers were in fact included in the package meant the politics of the situation was always destined to explode. Others say the big mining companies reneged on the understanding they had had with the government because they could see Labor was in a tight corner. ''In the end they saw we were in such a politically weakened position, they decided to try to take us out …'' one said. ''They concluded, correctly, that after the reaction to the ETS the prime minister didn't have another backflip in him.'' Still others say the decision itself would have been different if the cabinet, or even just some of the longer-serving ministers, had had a say. The resources minister, Martin Ferguson, for example, discovered the full details of the resource super profits tax only a few days before it was made public. Cabinet was read only a short prepared statement about the tax changes by then junior treasury minister Chris Bowen, explaining the tax policy in the broadest of terms and reassuring ministers it was ''in tune with Labor values''. Many of them would have preferred to be able to make that judgment for themselves. As the full force of the mining industry's multimillion-dollar advertising campaign hit, the government did force through an ad campaign of its own, under an emergency clause in the new procedures that sidelined the auditor-general.

But in the end the advertisements were so constrained they were ''next to useless'', according to senior Labor figures. The government had become so used to Rudd's centralised way of working - set up after the damaging early leaks now attributed to Godwin Grech and continued through the financial crisis - that it took a long time for ministers and party elders to try to change what they thought was an increasingly dysfunctional process. The strategic priorities and budget committee and cabinet did have ''very frank'' discussions about the gridlock in the two months before the leadership change. ''But the more we talked about the problem the more it stayed the same,'' one said. Some things did change. Gillard, at her request, was put in charge of a special committee to prepare policy for the rapidly approaching election. Her office was also given charge of co-ordinating ministerial visits to electorates so that two government luminaries would not turn up on the same day. The soon-to-retire Hawker Britton lobbyist Bruce Hawker, a friend of the Rudd, moved into the prime minister's office to ''help with the government's broader messaging''. He was there for less than a month before Rudd was deposed.

The head of Prime Minister and Cabinet, Terry Moran, seconded Barry Sterland, a senior and respected official from the Department of Prime Minister and Cabinet (which with the delay of the ETS now had precious little to do) to conduct a ''full review of government process''. But when The Australian Financial Review reported the review was under way, Rudd's spokesman dismissed it as being about mere ''documentation matters'', not decision-making. Government sources say that was definitely not the case. All the while, the prime minister's personal office had become more and more influential as a source of advice, and that was adding to the anger and fear in the ministry and caucus. The prime minister's staff were capable but, according to the critics, they were politically inexperienced and often given jobs far above their station. Particularly influential was Rudd's economics adviser, Andrew Charlton, who became so close to his boss some insiders called him ''the muse''. Before the Copenhagen meeting he was doing some of the travelling and negotiating with other governments that would normally have been the preserve of the bureaucrat Howard Bamsey - the ''special envoy'' for climate talks - or the minister. Eyebrows were also raised when Rudd made the young adviser his official ''sherpa'' for G20 meetings - a job other governments gave to ministers or very senior officials - although even the eyebrow-raisers admit he did a good job.

Mostly Laborites resented the fact that the young advisers ''who had never faced a vote in their lives'' seemed to be providing the prime minister with political advice as he continued to work feverishly towards a deal on the mining tax, a credible interim policy on climate change and ultimately what he had pencilled in as an October election. With the cabinet feeling sidelined, the political problems mounting, and tactical decisions increasingly made in the prime minister's own office, the factional players who had lost faith in Rudd talked up the growing crisis and the shrinking available time before the poll, even though Labor's two-party-preferred polling still stood at 53 per cent. Then they struck. When the Herald's Peter Hartcher reported on June 23 that Rudd's chief of staff, Alister Jordan, had been checking support in the Labor caucus, Gillard's supporters say she was furious that her loyalty was being questioned. In a final irony, the plotters used the 24-hour news cycle that Rudd had been so criticised for pandering to. Gillard's supporters say she had not made up her mind to mount a leadership challenge before the fateful 2½-hour meeting that night. But news of the meeting was carefully ''leaked'' during the discussion, as well as ''decisions'' to support her by various factional blocs. She, and the party, emerged feeling they had little choice. The decision to depose a first-term prime minister shocked most of those who found themselves suddenly forced to make it as much as it shocked the nation.

As they contemplate it now, their political near-death experience just behind them, the word they most often use is ''tragedy''. A leader they still describe as having great talent and ambition was brought undone partly by ill fortune, partly by his own policy ambition, partly by his rival's political ambition but - in the assessment of his colleagues - also by his own flaws.