THE federal cabinet is divided over the integrity of the Prime Minister, with senior ministers disputing her claim she did not know until the last minute about a deal to allow Gina Rinehart to import 1700 workers to help build a massive iron ore project in Western Australia.

With the issue placing fresh pressure on Julia Gillard’s leadership, the ministers Martin Ferguson and Chris Bowen have told colleagues they had been hung out to dry by the Prime Minister as she distanced herself from the policy to placate a backlash from the unions who support her.

The ministers’ backers were saying yesterday that Mr Bowen had informed Ms Gillard’s office the week before last that Ms Rinehart would be the first to be granted an enterprise migration agreement. This would enable her company, Hancock Prospecting, to import 1715 workers to help build the $9.5 billion Roy Hill iron ore project in the Pilbara.

”It was inconceivable her office wasn’t up to their neck in this,” said one minister. ”Of course she knew,” said another.

Ms Gillard, who told union bosses she had first heard of the agreement last Wednesday after arriving back from overseas, refused to elaborate yesterday. But she was backed by other ministers. ”She did not know – no question,” said one familiar with events.

”You really think Julia Gillard pursued an alliance with Gina Rinehart and said, ‘Please, Chris, announce it at the National Press Club’?”

The issue of imported labour is set to remain prominent today when the engineering company Hastie Group, which has collapsed under debts estimated at $500 million, sheds more than half its 4000 employees this morning. Most of the job losses will come in the economically troubled states of NSW and Victoria.

The national secretary of the Australian Workers Union, Paul Howes, said thousands more jobs would be shed from manufacturing in the next month.

The unions oppose the enterprise migration agreements, claiming they are putting foreign jobs before those of locals, and they fear more agreements will be granted in coming days.

But the miners, big business and some Labor ministers such as Gary Gray, as well as Mr Bowen and Mr Ferguson, say the giant minerals projects cannot obtain enough Australian labour as not everyone who loses their job in the eastern states is prepared to move west.

Ms Rinehart’s project will still employ 6000 Australians.

The government approved the enterprise migration policy more than a year ago but the specific projects to which they would apply were left up to ministerial discretion.

On Friday, union bosses, including Mr Howes and the secretary of the ACTU, Dave Oliver, who had been tipped off on Thursday night by the Workplace Relations Minister, Bill Shorten, about Mr Bowen’s impending announcement, remonstrated with Ms Gillard.

She told them she was unhappy but had been informed only on Wednesday, by which time the deal was a fait accompli.

It was reported that she made Mr Bowen include caveats in his speech to ensure Australian workers were given first priority.

Mr Ferguson and Mr Bowen both support Kevin Rudd.

The Chief Government Whip, Joel Fitzgibbon, used Twitter yesterday to deny reports that he had started counting the numbers for Mr Rudd. But Mr Fitzgibbon, who has abandoned Ms Gillard after backing her in the February leadership ballot, did confirm continuing unrest in Labor by blaming colleagues for spreading untruths about him.

”I thank my colleagues for the publicity but no one does more to support the PM and the government than me!” he tweeted.

Although there is unrest, there are no concrete moves afoot to depose Ms Gillard.

”She’s toast,” said one MP. ”[But] I don’t know how or when … We’re not doing anything.”

Despite the enterprise migration policy having the support of business, industry groups and the mining sector, the Opposition Leader, Tony Abbott, reportedly refused to support it on Saturday, saying Australian jobs should be protected.

with Mark Hawthorne