Gillard-led Australian Govt may water down mining tax

Thursday 24th June 2010

Julia Gillard, Australia’s new prime minister, will seek to engage with the mining industry over the 40% Resource Super Profits Tax (RSPT) and may negotiate a ‘watered down’ version after the coup that ousted Kevin Rudd.

Shares of resources companies gained on the ASX today. BHP Billiton, the world’s biggest mining company, climbed 2% to A$39.91 and Rio Tinto, the third-largest, gained 2.4% to A$72.20, outpacing the S&P/ASX 200 Index’s advance.

Rudd’s determination to ram through the super tax and willingness to back down on the emissions trading scheme were seen as political blunders that damaged Labor’s support heading into the next elections. Under Gillard, Australia’s ruling party will seek to repair the damage before heading to the polls, investors say.

“No doubt it means amendments to the RSPT structure,” said Angus Gluskie, who manages US$300 million at White Funds Management in Sydney, including resources stocks. “It is likely to be some kind of watered down version. The miners will have to buy into the process.”

Gluskie said the government will still push on with a resources tax in some form. Gillard is “very left-wing orientated” and there are “strong elements of the left” that want a tax.

Gillard wasted no time in signalling a new approach by announcing she would cancel the government’s advertising campaign pushing the resources tax. BHP subsequently said it would suspend its only lobbying efforts via an advertising campaign, according to the Sydney Morning Herald.

“Listening to her press conference and response to questions it does appear that the door is open to some renegotiation of the mining tax and then taking a proposed package to the polls,” said Andrew Bascand of Harbour Asset Management in Wellington. “We doubt a big backing down as she has said that she thinks it is only fair that every Australian gets a bigger share of the mining boom.”

Rudd quit rather than let his leadership be put to a test in a caucus vote, when it became clear he didn’t have the numbers to survive. In a tearful final media conference as prime minister, he told reporters that he had given the job his all.

A Newspoll published by the Australian newspaper this week showed a Rudd-led government would lose key seats in a federal election, while a separate poll by the Herald this month showed opposition leader Tony Abbott led Rudd by 53% to 47%.

The Canberra coup came just after key New Zealand ministers had returned from high level meetings with the Australian counterparts about the trans-Tasman relationship. Prime Minister John Key said he telephoned Gillard this afternoon “and offered my congratulations, and indicated that I looked forward to meeting her soon.”

“Our relationship with Australia is a critical one and our most important with any country, and I look forward to working with Julia Gillard to advance that relationship,” he said.

Businesswire.co.nz

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