Australia Election Battle Begins With Company Profits at Stake

Australians will vote in a national election on Aug. 21 that will decide whether mining companies share more of their wealth, who pays to clean up the environment and if the first female prime minister can keep her job.

The latest poll shows Prime Minister Julia Gillard’s Labor party with an election-winning lead over Tony Abbott’s Liberal- National coalition. Gillard, who ousted former Prime Minister Kevin Rudd last month, set the date for the election on July 17, vowing to maintain the economic growth that helped skirt the global recession while improving education and health care.

The election will determine whether resources companies led by BHP Billiton Ltd. and Rio Tinto Group pay higher taxes, a policy championed by Rudd and since diluted by Gillard, 48, to win support. Abbott, bidding to make Labor the first one-term government in 80 years, pledged not to adopt the tax, describing it as a punishment for the nation’s most profitable industry.

“There are fairly big differences in terms of health, the mining tax, which the coalition would ax, and in industrial relations and regulation generally,” Shane Oliver, head of investment strategy at AMP Capital Investors, which manages about $95 billion, said by telephone from Sydney.

Gillard has widened her lead over Abbott’s coalition, according to a Newspoll survey published in the Australian newspaper today. Labor is ahead by 10 percentage points with 55 percent of voters preferring the incumbent party, up from a 53 percent to 47 percent split three weeks ago, the poll of 1,140 voters on July 16 to 18 showed. The survey has a margin of error of 3 percentage points.

Opportunity to Vote

“I know I haven’t been elected,” Gillard told Australian Broadcasting Corp. radio today. “I want to make sure that Australians get the opportunity to exercise their vote, their birthright, to pick their prime minister, their government.”

Polls had pointed to defeat before Gillard took over from Rudd on June 24 after a standoff with mining companies over his planned resource “super profits” tax in an economy where mineral wealth makes up 10 percent of gross domestic product. The slide in Rudd’s support began when he shelved carbon-trading plans in April -- a mainstay of his election victory in 2007.

“Until we know what an emissions-trading scheme in Australia is going to look like, and when it’s set to start, it creates a lot of uncertainty for us as investors,” Amanda McCluskey, head of sustainability and responsible investment at Colonial First State Global Asset Management, which oversees about $135 billion, told Bloomberg Television today from Sydney.

Carbon-Trading Preparations

While AGL Energy Ltd., Australia’s largest energy retailer, and Origin Energy Ltd. are well-positioned for carbon-trading, the lack of a carbon price means most businesses can’t prepare, McCluskey said.

Besides climate change, the election will be fought over the management of Australia’s A$1.2 trillion ($1 trillion) economy. Gillard said last week the economy is the foundation of her re-election campaign. She also reaffirmed the central bank’s annual inflation target of 2 percent to 3 percent.

The Australian dollar is the third-best performer among the world’s 16-most traded currencies during the past decade, gaining about 50 percent against the dollar.

Aided by China’s hunger for commodities such as iron ore and coal, Australia’s economy expanded for a fifth straight quarter in the three months ended March 31. The Reserve Bank of Australia has increased the benchmark rate six times to 4.5 percent since early October from a half-century low of 3 percent.

Economic Management Debate

“The real risk in this coming election is that we will give a bad government a second chance it doesn’t deserve and that Australia certainly can’t afford,” Abbott told business leaders in Melbourne today. “The only way for Australia to move forward economically is for Labor to move out.”

Australia’s unemployment rate of 5.1 percent is almost half the U.S. and Europe, driven by the need for workers in Western Australia where more than a third of the nation’s exports originate.

“This election will be about the economy, climate change, border protection and the minerals tax,” said Joshua Williamson, senior economist at Citigroup Inc. in Sydney. “That’s where the key policy differences are and that’s what will be on voters’ minds as they head to the ballot box.”

Both leaders put economic credibility at the center of their pitch to voters and pledge to return the budget to surplus in three years and maintain an independent central bank.

Questions of Growth

The coalition says A$42 billion in stimulus handed out by the government in 2009 pushed the central bank to a world- beating round of interest rate rises. The government says it staved off recession and helped Australia emerge from the global recession with stronger growth, lower debt and lower deficits than any of the world’s major advanced economies.

“Our region is growing strongly,” Treasurer Wayne Swan told an Adelaide radio today. “That’s good for Australia, but also what’s good for Australia is that we’ve come out of this global recession in better shape than any other economy.”

Gillard has pledged to “put a price on carbon,” without issuing a detailed strategy to combat climate change. Abbott, 52, has promised to kill the proposed mining levy and opposes any form of carbon tax. A climate policy, including a commitment to revisit carbon-trading plans at the end of 2012, will be issued during the campaign, Gillard told ABC radio today.

“This election is going to be about leadership -- which leader do you trust, Julia Gillard or Tony Abbott?” said Nick Economou, a political scientist at Monash University in Melbourne. “There will be no new policies.”

To contact the reporter on this story: Marion Rae in Canberra at mrae3@bloomberg.net; Gemma Daley in Canberra at gdaley@bloomberg.net

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