Australia May Ax Mining Tax After Labor Fails to Win Majority in Election
Australia’s proposed mining tax may be scrapped after the incumbent Labor Party failed to win a clear majority in yesterday’s federal election.
“If the Liberals were to form a government, there’s no mining tax,” Peter Chilton, a fund manager at Constellation Capital Management Ltd. who holds both shares in BHP Billiton Ltd. and Rio Tinto Group, said by phone from Sydney. “That’s potentially positive for the mining sector. If Labor forms an arrangement with the Greens, there’s more uncertainty.”
Australian Prime Minister Julia Gillard, 48, and opposition leader Tony Abbott, 52, will need to broker deals with other lawmakers to pass legislation after neither party secured enough votes to form a government in the House of Representatives.
Abbott has vowed to scrap Labor’s proposed mining tax which would levy a 30 percent tax on iron ore and coal producers such as BHP and Rio. Greens party leader Bob Brown said he wants to renegotiate the mining tax to raise an extra A$2 billion while Gillard told reporters today that she’ll “honor” the deal she brokered with the mining industry.
Seventy-six seats in the 150-seat lower house are needed to form a government. At last count, both parties had 71 seats apiece. The two main parties must now negotiate with the three independent members of parliament and the one Greens member. Four seats remain undecided.
Independents
While independents Bob Katter, Robert Oakeshott and Tony Windsor are ex-members of the junior coalition partner the Nationals, they haven’t indicated which party they’ll back.
“There are three independents that are ex-Nationals, they represent the bush, and they won’t want that tax,” said Cameron Peacock, a market analyst at IG Markets in Melbourne. “If you look at the breakdown of the votes, of those independent candidates, Labor is the least favorite party.”
A perception of political risk in Australia is deterring foreigners from investing in the nation’s stock market, according to Gary Head, who co-manages UBS AG’s equities business in Australia and New Zealand. Investor nervousness increased after the proposed tax deepened concerns over government intervention in other industries, he said last week.
BHP, Rio and rival producers will pay A$10.5 billion ($9.4 billion) more in tax in the first two years of the levy. Fortescue Metals Group Ltd., Australia’s third-largest iron ore company, said the tax threatened A$17 billion of its planned expansions.
Morgan Stanley estimated the initial plan for a 40 percent tax proposed by Kevin Rudd, the former Labor prime minister ousted by Gillard when the party’s popularity fell, would have cost the mining industry A$85 billion in its first 10 years.
To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net To contact the reporter on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net
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