(Updates with background, analyst) By James Grubel CANBERRA, Jan 23 (Reuters) - Australian Prime Minister John Howard reshuffled his ministers ahead of a tough 2007 election on Tuesday, with Iraq, environment and nationalist values looming as key issues as he bids for a fifth term in office. The changes came as a new poll found the centre-left Labor opposition maintained a 10-point lead over the conservative government, with its new leader Kevin Rudd gaining ground on Howard as preferred prime minister. Treasurer Peter Costello, Finance Minister Nick Minchin, Foreign Minister Alexander Downer and Defence Minister Brendan Nelson retained their jobs in the reshuffle. With an election due in the second half of 2007, Howard dumped Immigration Minister Amanda Vanstone and revamped the portfolio to focus more on citizenship, rather than ethnic diversity under the policy of multiculturalism. "It is a step towards a particular position on national values and nationalism," John Warhurst, professor of politics at the Australian National University, told Reuters. "It's tougher language. It's arguing that multiculturalism emphasises diversity too much and it is out of favour." Debate on values and citizenship has been prominent since clashes between Australian-Lebanese and white Australian youths on Sydney's beaches in late 2005, and with ongoing tensions with parts of the small Muslim community. Howard has long criticised Australia's policy of multiculturalism and ethnic diversity, preferring immigrants let go of allegiances to former homelands and commit to vague values of fairness and "mateship". ENVIRONMENT Howard used the reshuffle to promote high-profile politician Malcolm Turnbull to the environment portfolio, giving him responsibility for climate change and water as much of the country suffers amid the worst drought in a century. Turnbull, a wealthy former merchant banker, lawyer and former head of the republican movement, will take on Labor's charismatic rock star and environment spokesman Peter Garrett. Vanstone was replaced as Immigration Minister by Workplace Relations Minister Kevin Andrews, while Environment Minister Ian Campbell will be moved to the Human Services ministry. "I think it is an effective concentration of the firepower of the prominent people within the government," Howard told reporters. Howard said climate change and water issues would be crucial in the lead up to the next election, with Labor maintaining a strong lead in polls on the back of promises to sign the Kyoto protocol on climate change. Rudd, who took over as Labor leader in December, has also boosted his party's support with a promise to bring troops home from Iraq if he wins power. A Newspoll, published in the Australian newspaper on Tuesday, found Rudd's Labor leads the government with 55 percent support to 45 percent for Howard's conservatives. The poll also found Rudd, 49, closing the gap as preferred prime minister to just two points, well down from the 30-point lead Howard enjoyed over former opponent Kim Beazley last November. Howard, who will be 68 in July, has been in power since 1996 and is the country's second longest serving prime minister. ((Editing by Jeremy Laurence, james.grubel@reuters.com; Reuters Messaging: james.grubel.reuters.com@reuters.net, +612 6273 2730))
