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Rudd Makes Australian Mining Tax Mainstay of Election Platform

May 3 (Bloomberg) -- Australian Prime Minister Kevin Rudd will base his election campaign this year on his plan to provide for a growing and ageing population by tapping profits from resources companies after abandoning action on climate change.

Rudd’s Labor government will do “whatever it takes” to be re-elected at a ballot likely to be held by October, after failing to get its proposal for cutting carbon emissions approved by the upper house Senate, Malcolm MacKerras, visiting fellow in political science at the University of New South Wales, said in a phone interview.

“There is no reason to think that the tax on wealthy miners will be unpopular,” Mackerras said. “Rudd is proving to be a disappointing prime minister, essentially because he so lacks courage, but that doesn’t stop him being re-elected.”

Treasurer Wayne Swan yesterday unveiled what he called the broadest overhaul of the nation’s tax system since World War II with a proposed 40 percent tax on resource profits from 2012 as its centerpiece. The legislation won’t be debated in Parliament until late next year, meaning it will become part of Labor’s platform for an election that Rudd has to call within a year.

“Some will undoubtedly be paying some more tax,” Swan told Bloomberg Television today. “What Australia needs as we go forward is an efficient tax. We need one which gives to the Australian people the fair value they deserve for their resources.”

Population Growth

The resources industry accounts for a 10th of Australia’s A$1.2 trillion ($1.1 trillion) economy and the tax on profits will raise A$12 billion in its first two years, Treasury documents showed. Australia will need funds for hospitals, roads, rail links and ports as its population is forecast to increase to 36 million from 22 million by 2050 with one quarter aged over 65.

The proposed duties threaten Australia’s competitiveness and “jeopardize future investments,” Marius Kloppers, chief executive officer of BHP Billiton Ltd., the world’s biggest resources company, said yesterday. The company has 51 percent of its assets in Australia.

Rio Tinto Group, the world’s third-biggest mining company, said the plan will “curtail investment and limit jobs growth.”

BHP’s shares slumped 4.1 percent as of 10:55 a.m. in Sydney today and Rio Tinto, whose Australian iron-ore unit is its biggest earner, plunged 5.5 percent.

Highest Taxes

The total tax paid by minerals companies and workers in 2008-2009 was about A$25 billion and Australia will have the “highest taxed mining industry in the world” as a result of the changes, Minerals Council of Australia Chief Executive Officer Mitch Hooke said yesterday.

Mining taxes “paid for schools, hospitals and roads across Australia,” Hooke said in an e-mailed statement. “Mining companies contributed about 18 percent of the corporate income tax revenue during 2008-2009. We are already punching above our weight.”

Rudd’s carbon trading plan, aimed at cutting emissions by 5 percent, was the mainstay of his 2007 election campaign when he pitched climate change as “the greatest moral challenge” of our time. The prime minister said last week the proposal will be shelved as a result of opposition in Parliament and the government will assess actions taken by other nations at the end of 2012, the end date for the Kyoto climate accord.

Support for Rudd declined 2 percentage points to 54 percent, according to an April 20 poll published by the Australian newspaper. Tony Abbott, leader of the opposition Liberal-National coalition, saw his support increase a similar amount to 46 percent, according to the survey.

The tax package proposes “long-term reforms, they will take some time to do,” Swan told reporters in Canberra yesterday. “They will go through for the next term, and if we have to do a complete and fundamental realignment of the system, it won’t happen until the term after that, if we’re in government.”

To contact the reporter on this story: Marion Rae in Canberra at

To contact the editors responsible for this story: Iain Wilson at; Bill Austin at

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