Newhouse was endorsed in May 2007 as the Labor candidate for the federal electorate of Wentworth, held by the Liberal member, Malcolm Turnbull; at the time the Minister for Environment in the Howard Government. In order to contest the election, Newhouse resigned as Mayor of Waverley. Although Wentworth had never been won by Labor, there was speculation that after a redistribution it might be winnable. Newhouse backed Labor's support of the construction of the Bell Bay Pulp Mill in the Tamar Valley, Tasmania. Newhouse's decision led to criticism from the Australian Greens and other environmentalists. Two candidates, former Sydney Deputy Mayor Dixie Coulton and Danielle Ecuyer, nominated against Newhouse as anti-pulp mill candidates.