Australian mines to become electoral battleground

Australia’s mines are likely to be the key battleground for this year’s federal election.

Announced yesterday, Prime Minister Julia Gillard has set the election date of September 14, a record eight months out.

Putting Australian’s right in the firing line of the longest electoral campaign in the nation’s history.

But this election will test voter support for the Labor government’s controversial taxes on resource profits and carbon emissions, the Wall Street Journal reported.

Past bouts with the mining lobby and politicians opposed to the MRRT and carbon tax has seen Gillard come out bruised and battered.

The resources sector "will likely be the one that displays the most reaction to campaign developments in the lead up to Sept. 14," Tim Waterer, a senior trader at CMC Markets said.

"Traders will have a very close eye on the mining tax and any potential changes to that if there were to be a change of government."

The industry that accounts for the majority of Australia’s exports is also one of the government’s loudest critics.

Especially when it comes to Gillard’s claims that the MRRT and carbon tax legislation have been a success.

Critics argue that the policies were watered down under pressure and have been largely ineffectual; instead saying they have made the industry less competitive with high costs eating into profits.

Following yesterday’s election announcement, the leader of the opposition Tony Abbott was quick to promise to abolish both taxes should he win the elections.

Abbott’s pledge has received support from the Minerals Council of Australia who said its primary election issue is establishing "internationally competitive tax and royalty arrangements".

The council’s other aims include investing in university education and technical training to address the industry’s skills shortages, and cut red tape that is slowing down mining projects across the country.

"The need for change in Australia's minerals sector must be recognised," said council spokesman Ben Mitchell.

"We need to set about regaining world leading competitiveness."

The mineral council, whose members produce more than 85 per cent of Australia's annual mineral output, vocally protested Labor’s mining tax reforms which came as commodity prices were rising.

At the time the lobby group ran an advertising campaign which has been credited with forcing Labor to water down the legislation to now only apply to excessive profits on iron ore and coal.

Mining accounts for almost 10 per cent of Australia’s gross domestic product, but only directly employs a small proportion of the country’s workforce, this combination makes the industry an easy target for any government looking to fill a gap in the national budget, the WSJ reported.

Earlier this month Australian Mining reported that miners have escaped the mining tax for a second time.

Despite a recent surge in the iron ore price, mining giants BHP Billiton, Rio Tinto, Xstrata, and Fortescue Metals Group will not be liable for mining tax payments.

This means the minerals resource rent tax will have raised no money since taking effect on July 1 last year.
"A lot of Labor Party initiatives, such as the mining tax, haven't been to the detriment of the mining companies as many had feared," Chris Weston, chief strategist at IG Markets said.

Weston added that it's unlikely any new taxes on mining will be promoted during the campaign.

According to The Australian company tax payments from miners have also dropped due to falling commodity prices, with the iron ore slump last year almost halving Rio Tinto's WA tax bill.

The shortfall from Rio alone is expected to have cost Canberra $500 million, with the company thought to be paying around $1 billion a quarter in tax before iron ore prices fell.

This disappointing outcome for the Federal Government saw Treasurer Wayne Swan scrap a government pledge to return the budget to surplus this year; instead it is expected to fall several billion dollars short of expectations.

The Liberal government currently dominates the mining heavy weight state of Western Australia, where Labor has struggled to win votes in the past.

A Gillard led government is also said to be unpopular in the coal rich Queensland, especially after the unceremonious ousting of former prime minister, and Queenslander Kevin Rudd.

**UPDATE**

In reply to Prime Minister Julia Gillard’s election announcement this week, opposition leader Tony Abbott said there would be no carbon or mining tax under a Coalition government, SMH reported.

Instead, the Coalition will offer “positive plans for a cleaner environment with incentives to do the right things, not penalties, and a 15,000-strong green army marching to the help of our land-care groups'', Abbott said.

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