Koala chaos ends as Australian state leaders reach truce over habitat law

SYDNEY (Reuters) - A political crisis in Australia's most populous state ended on Friday as one of the parties in the governing coalition abandoned a threat to leave the alliance over policies designed to protect koalas.

The clash erupted a day earlier when the Nationals party of New South Wales (NSW) state objected to a ban on land-clearing in habitat deemed essential for the marsupials. The law was introduced in December amid ferocious bushfires that reportedly killed thousands of the native animals.

The rural-focused Nationals, who hold power with the larger conservative Liberals in an alliance dating from 1927, planned to overturn the law saying it deprived farmers of the right to manage their own land.

The Liberals, the larger coalition partner, held firm on the law, prompting the Nationals to say they might quit the ministry en masse, a move that would have left the state of 7.5 million people in turmoil as the country grapples with the coronavirus pandemic.

However, on Friday Nationals leader and Deputy State Premier John Barilaro said his party would stay in their roles after Premier Gladys Berejiklian assured him the law would be on the agenda at a future cabinet meeting.

"We've made a compromise about when, she's made a compromise about it becoming an agenda item," Barilaro told reporters. "We've conceded in some part but so have the Liberals."

Berejiklian said in a joint statement with Barilaro that "the NSW Liberal and Nationals Coalition remains in place", including "a commitment to supporting cabinet conventions and processes".

The Nationals hold 13 seats in the NSW lower house while the Liberals hold 35, giving the coalition a majority in the 93-member house.

(Reporting by Byron Kaye; Editing by Sam Holmes)