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Gillard Flexibility on Mining Tax Revives Labor

Australian Prime Minister Julia Gillard speaks during a news conference in Canberra.  Photographer: Scott Barbour/Getty Images
Australian Prime Minister Julia Gillard speaks during a news conference in Canberra. Photographer: Scott Barbour/Getty Images

June 28 (Bloomberg) -- Australian Prime Minister Julia Gillard’s willingness to compromise on a mining tax proposed by her predecessor may prevent opposition leader Tony Abbott from reaping gains in elections likely to be held later this year.

“The landscape has changed,” Stephen Miller, who manages A$7 billion ($6 billion) worth of Australian bonds as managing director in Sydney at BlackRock Inc., said in a phone interview from London. “Investors see there are grounds for optimism” in a government of Gillard’s Labor Party.

As soon as Gillard ousted Kevin Rudd as prime minister on June 24, she vowed to resolve a standoff over his proposed 40 percent mining tax plan on what he called “super” profits. Melbourne-based BHP Billiton Ltd., the world’s biggest mining company, said in a statement it was “encouraged” by Gillard’s naming and would suspend its anti-tax advertising.

Gillard said she would call elections for this year. The earliest possible date for a joint House of Representatives and Senate election is Aug. 7 under Australian election laws.

“Gillard will win,” Malcolm Mackerras, visiting fellow in political science at the University of New South Wales, said in a phone interview from Canberra. “The situation has pretty much reverted” to December, when polls showed Labor in a winning position, he said.

Rudd Excluded

Gillard, 48, excluded Rudd from her Cabinet today and moved her most experience minister, ex-labor union leader Simon Crean, 61, into her former roles in employment, workplace relations and education. Foreign Affairs Minister Stephen Smith takes the additional job of trade minister, held by Crean.

“For the immediate future, my family and I have decided to take a break,” Rudd said in an e-mailed statement today.

Wayne Swan retains his role as Treasurer as well as becoming deputy prime minister, while Finance Minister Lindsay Tanner, who plans to retire from politics at the next election keeps his post. No further changes will be made until Labor is re-elected, Gillard said.

Labor will win an election held now, a Newspoll published in the Australian newspaper today showed.

Labor leads the opposition by 53 percent to 47 percent, according to a telephone survey of 1,142 people between June 25 and 27. Some 53 percent preferred Gillard as prime minister, compared with 29 percent for Abbott, the poll, with a 3 percentage point margin of error, showed.

Preferred Leader

The first Nielsen opinion poll after Gillard overturned Rudd gave her a 10 percentage point lead over Abbott’s Liberal-National coalition, at 55 percent to 45 percent, and a 21 point lead over Abbott as preferred leader, according to the telephone survey of 1,000 voters in the Sydney Morning Herald June 26.

The previous poll, on June 3 to 5, put the coalition in the lead, at 53 percent to 47 percent, for the first time in four years.

Abbott, 52, had been gaining on Rudd, 52, whose approval rating fell below 50 percent from above 70 percent last year. Rudd clashed with mining and energy companies over the profit tax, which the proposal set at returns above the long-term Australian government bond rate of about 6 percent.

Gillard’s claims of “throwing open the door” for “genuine” talks with mining companies can’t be believed, Abbott told the Liberal Party Federal Convention in Canberra June 26.

“This week’s protestations of goodwill are as believable as last week’s protestations of loyalty to Kevin Rudd,” Abbott said. “She can execute a prime minister but she can’t execute a government program.”

Middle Ground

Uncertainty over the tax still exists, said Tim Schroeders, who helps manage A$1.1 billion at Pengana Capital Ltd. in Melbourne.

“The intentions are good in terms of wanting to find a middle ground with mining companies,” he said by phone. “The proof of the pudding will be in the eating.”

Gillard’s appointment wasn’t greeted with enthusiasm from all investors. The S&P/ASX 200 Index fell 0.7 percent today, adding to last week’s 4.3 percent fall as investors pared buying on speculation Gillard may not abandon the tax and Asian stocks fell on U.S. earnings forecasts.

Even if the tax issue is resolved, the candidates will confront other difficult economic issues. The winner will have to tackle rising health care and pension costs caused by a rapidly aging population and fix the nation’s crumbling ports, roads and rail networks, said Graham Bradley, president of the Melbourne-based Business Council of Australia, which represents 100 chief executives from the nation’s biggest companies.

Growing Population

“Decades of underinvestment in social, economic and public infrastructure have undermined Australia’s once rock-solid support for a growing population,” Bradley said in a June 24 speech to the National Press Club in Canberra.

Transport is key to Australia’s economy because the nation is the world’s biggest shipper of iron ore and coal. Natural resources, which are sent to China and elsewhere by rail, ship and truck, make up 10 percent of gross domestic product.

Australia’s infrastructure backlog is at least A$128 billion, or nearly 11 percent of gross domestic product, the Sydney office of the Royal Bank of Scotland Group Plc said in a June 23 research report.

In addition, all political leaders must show “courage and honesty” in tackling health care, which absorbs 10 percent of gross domestic product in the A$1.2 trillion economy, Bradley said.

Population Growth

Between now and 2050, the number of people aged 65 to 84 years will more than double and the number of people aged 85 and over will more than quadruple, according to the Treasury’s Intergenerational Report, released on Jan. 31. Australia’s population has more than tripled since 1945, to 22 million, in part through immigration.

Gillard moved away from Rudd’s “big Australia” views yesterday, saying immigration policies must “focus on employers sponsoring people who are the skilled labor that they need.”

“I’m indicating a different approach,” Gillard in an interview broadcast by the Nine television network. Population policy is “a really major issue for this country.”

Gillard may revive a proposal for a carbon-trading system, a goal Rudd shelved because of opposition in the Senate and lack of action by other countries. Abbott’s coalition opposes carbon trading and has proposed a A$1 billion emissions reduction fund that would give farmers and industry incentives to cut emissions.

“Gillard will have to be blasted out with a credible alternative platform,” Wayne Errington, a political leadership and communication specialist at Canberra-based Australian National University said in a phone interview. “The opposition will struggle.”

To contact the reporters on this story: Marion Rae in Canberra at; Gemma Daley in Canberra at

To contact the editor responsible for this story: Iain Wilson at

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