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John Howard, Australia’s prime minister, on Tuesday sent a strong signal that the government’s plans to privatise Telstra and relax the country’s media ownership laws remained on track, following a smaller-than-expected cabinet reshuffle.

Mr Howard said that Brendan Nelson, education minister, would replace Robert Hill, who resigned as defence minister last week. The prime minister made a number of other changes but left the key ministries unchanged.

Nick Minchin, finance minister, had been widely tipped to replace Mr Hill. Mr Minchin is in charge of the sale of the government’s remaining 51.8 per cent stake in Telstra, the country’s dominant telecommunications company, and is due to recommend to cabinet in March when to proceed with the A$26bn ($19.5bn, €15.9bn, £10.9bn) sell-off.

However, Mr Minchin, who is supportive of Telstra’s battle with competition regulators, stated publicly at the weekend that he wished to remain at the finance ministry.

He did accept Mr Howard’s offer to replace Mr Hill as leader of the government in the Senate, or upper house, where the ruling Liberal-National coalition, which has held power for nearly 10 years, has a one-seat majority.

A wider reshuffle was also expected to have resulted in Helen Coonan, the communications minister, being moved to another cabinet position. Ms Coonan is expected to announce changes soon to the country’s restrictive media laws and foreign investors are likely to be reassured that she will remain in her post.

In a surprise move, the sensitive issue of relations with Australia’s aboriginal communities is to be stripped from Amanda Vanstone’s immigration ministry and handed to Mal Brough, who joins the cabinet as minister for families and community services.

There was also promotion for Malcolm Turnbull, a newly elected member of the lower house and former Goldman Sachs banker. The backbencher, who has been a strong advocate for lower taxes and tax reform, will join the government as parliamentary secretary to the prime minister, with responsibility for water policy.

Mr Howard said of Mr Turnbull: “He is able and intelligent and deserves a run in the paddock.”

Analysts said Mr Turnbull’s elevation would make it difficult for him to continue his controversial campaign for radical tax changes, which would come as a welcome relief to Peter Costello, the treasurer, who has opposed his plans.

As education minister, Mr Nelson has been credited with introducing a series of radical changes including voluntary student unionism.

Mr Nelson will now oversee Australia’s troop commitments in Iraq, Afghanistan and the Pacific islands.

Mr Howard said: “Brendan is a details man. Defence is a huge job and we want somebody in it who will burn the midnight oil.”

Mr Hill is expected to be appointed Australia’s next ambassador to the United Nations.

Australia’s next federal election must take place by November next year.

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