Will Australia's Tax Backlash Undo Gillard Vote?

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"Some voters will favor the opposition's plan to scrap the tax"

Australian Prime Minister Julia Gillard will face her biggest election fight in mining states to win Saturday's too-close-to-call ballot. These communities oppose her planned tax on coal and iron ore companies.

"The mining tax will be an important issue in important seats, particularly ones in the resource states of Western Australia and Queensland where there are tight contests," said John Warhurst, a political analyst at the Australian National University in Canberra. Some voters will favor the opposition's plan to scrap the tax, he said.

Opposition leader Tony Abbott may win the 17 extra seats he needs to form a government after gaining support in mining communities, as well as in Sydney (where voters are concerned about rising borrowing costs, according to this week's Galaxy poll). The tax will cut A$10.5 billion ($9.5 billion) in profits in the first two years from companies including BHP Billiton Ltd., the world's biggest mining company and Rio Tinto Group.

"Australia's issues about the mining tax aren't gone," Evy Hambro, manager of BlackRock Investment Management Ltd.'s flagship $14.3 billion World Mining Fund said this month in an interview. "Gillard is facing some pressure in the polls."

Opinion surveys are deadlocked ahead of tomorrow's election as voters weigh which side can best manage the A$1.2 trillion economy. Gillard's Labor Party led in a news poll opinion survey published in an Australian Aug. 16 with 52% support compared with 48% for Abbott's Liberal-National Coalition. She may win enough seats in Victoria to allow Labor to govern in its own right by the "narrowest of margins," the newspaper said.

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