Australia PM Avoids Mine Tax Talk In Key Marginal Electorate
August 17 2010 - 4:34AM
Dow Jones News
Australia's Prime Minister Julia Gillard gave a campaign stump
speech to miners in resource-rich Queensland state Tuesday without
once mentioning her center-left Labor party's controversial
mining-profits tax proposal.
The tax is a pivotal issue that could help decide the outcome of
Saturday's general election, particularly in line ball electorates
like this one, the central Queensland seat of Flynn, held by Labor
MP Chris Trevor with a margin of a little over 2.0%. Coal mining is
the life blood of the electorate's large inland town of Emerald,
around 650 kilometers north of the state capital Brisbane.
Voter polls indicate Saturday's election could be a photo
finish, especially in the key swing states of Queensland and New
South Wales. Gillard blitzed marginal seats in northern Queensland
Tuesday, including Herbert, Dawson and Flynn.
The initial proposal for a 40% tax on mining profits contributed
to the June ouster of former Prime Minister Kevin Rudd in a Labor
party coup, amid fears he was damaging the party's electoral
chances.
The revised proposal--softening the headline rate of the tax to
30% from 40% and excluding all minerals except iron ore and
coal--was notably absent in a speech by his successor, Gillard, to
around 40 dusty coal miners who downed tools at the Gregory-Crinum
mine near Emerald, for a lunch time barbecue of chicken, coleslaw
and steak sandwiches Tuesday.
The mine is a 50:50 joint venture between BHP Billiton Ltd.
(BHP.AU) and Mitsubishi Development Pty Ltd, a wholly-owned unit of
Mitsubishi Corporation (8058.TO).
The audience seemed a little nonplussed by Gillard's
arrival--and it was an awkward backdrop for the well-dressed prime
minister--though the miners were polite listeners and there were no
interruptions during her speech.
While avoiding a mention of the proposed tax, Gillard did
acknowledge the sector's contribution to Australia's A$1.3 trillion
economy. Australia was one of few developed nations to avoid a
recession last year due partly to ongoing demand from developing
countries like China for the country's vast natural resources.
"Core to everything in this campaign is keeping the economy
strong," Gillard told the gathering.
"You obviously work in a great industry in a prosperous part of
the country. We want to make sure our economy stays strong and
keeps giving the benefits of work to people right around the
nation," she added.
The prime minister later brushed off suggestions from reporters
she was embarrassed by the tax proposal--of which Rudd and
Treasurer Wayne Swan were the chief initial architects.
Gillard noted she had visited the mine in May to discuss the
mining tax. "Of course my economic plan includes the minerals
resource rent tax," she added.
Gillard thrashed out the compromise deal on the tax with the
country's three biggest miners, BHP Billiton, Rio Tinto Ltd.
(RIO.AU) and Xstrata PLC (XTA.LN) a week after Rudd was
deposed.
But many smaller miners are unhappy with the deal, arguing the
amended plan favors the big three. They argue it has damaged
Australia's reputation as an investment destination and is
hampering their ability to raise capital. Led by the Association of
Mining and Exploration Companies, they are mounting a three-week
campaign against it in the midst of the election campaign.
New Hope Corp. Ltd. (NHC.AU), Australia's fifth-biggest
independent coal miner by production, earlier Tuesday urged its
Australia shareholders to consider the impact of the proposed tax
in the Aug. 21 ballot.
The main opposition Liberal-National coalition of center-right
parties has vowed to scrap the tax, warning it will "choke the
golden goose" that spared Australia from recession. The coalition
has also said it will provide A$418 million of exploration rebates
for smaller miners if it wins power.
In a letter to shareholders, New Hope Corp. warned long-term
shareholder returns will be reduced by more than 10% as a result of
the new tax.
"I ask that you consider the potential impact of the current
government's proposed mineral resource rent tax when casting your
vote in the forthcoming election," Chairman Robert Millner
wrote.
New Hope operates mainly thermal coal mines in the southeast of
Queensland.
In a separate letter to shareholders released late Monday in his
capacity as chairman of investment company Washington H. Soul
Pattinson & Co. Ltd. (SOL.AU), Millner also said the tax could
impact future earnings of that company.
Washington H. Soul Pattinson owns 60% of New Hope.
-By Rachel Pannett, Dow Jones Newswires; +61-2-6208-0901;
rachel.pannett@dowjones.com
(David Fickling in Sydney contributed to this article)
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