Signs of Panic and Despair in Australia's Labor Government

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"So what does this mean for the mining industry? There are suggestions that one of the few ways Julia Gillard can win back voters is to revoke the carbon tax, which she introduced to appease the Green Party."

There are serious signs of panic and despair in the Labor Party minority Government that is hoping to get some remedy from this Tuesday's Federal Budget.

The latest Newspoll placed the Julia Gillard-led Government at its lowest point with 27% popularity and, based on a two-party electoral result, would see the coalition of the Liberal and National parties winning clear government with 59% of the vote.

In the past week Australian newspapers and the electronic media have been talking to concerned Government politicians who see the progressive deterioration as now alarming, to the point that some factions are privately calling for the sacking of Gillard and the exhumation of Kevin Rudd, whom she toppled during the super mining tax row.

The real scare for Labor came with the Queensland State election two months ago that saw a Labor Government obliterated and ending up with virtual minority party status. The suggestion of giving back the Prime Ministership to Rudd is not seen as saving the party but stopping a Federal election rout in Queensland to match the State election bloodbath.

What has added to the problem is that the Liberal maverick Peter Slipper whom Labor anointed as Lower House speaker stepped down voluntarily because of queries about his expense claims and allegations of sexual misconduct, which he denies, despite some spicy reports.

Belatedly, Gillard decided Slipper should remain standing down despite Slipper claiming he had provided evidence to end the expense claims. Labor's paper-thin majority was also damaged by the decision of New South Wales MP Craig Thomson to leave the party and become an independent after being enmeshed in allegations about the Health Services Union he used to run now being under a police investigation.

There are few political observers that believe Labor will win the next election in about 12 months time, if it lasts that long, because there are also rumblings among the independents who have supported Gillard's tenure.

So what does this mean for the mining industry? There are suggestions that one of the few ways Julia Gillard can win back voters is to revoke the carbon tax, which she introduced to appease the Green Party which currently provides a controlling vote in the Senate.

The carbon tax will severely impact on mining, particularly coal mining, particularly as it is at a far higher rate than carbon taxing in Europe.

But the real issue worrying the mining sector is the increased tax on iron ore, magnetite and coal, and changing that course will not be easy because Treasurer Wayne Swan needs the added income that will start to flow into Canberra coffers in his quest to balance the Budget, which now has a hole that may be as much as A$50 billion.

Labor has been able to swing some voters on the push for increased taxes on mining on the basis of a "them and us" approach, citing miners as being filthy rich and their employees being on colossal wages, in what is a two-speed economy—the mining sector and virtually everybody else who are not linked to mining or the petroleum sector.

Wayne Swan's Tuesday budget may hit the high-wage income bracket and the level of profit in other sectors, and mining lobby Association of Mining & Exploration Companies (AMEC) warned today that if he revokes or minimises the current diesel fuel rebate for miners and farmers, then it would have serious implications on the profitability of remote mines.

On the other side of the political spectrum, Liberal Opposition Leader Tony Abbott cannot believe his luck with the continuing disintegration of what has become a dysfunctional government.

But the issue for mining is whether he will keep his promises, something Gillard did not do on winning office when she said there would be no carbon tax. Abbott will undoubtedly seek to kill the carbon tax, but revoking the mining profit tax may be harder given the size of Government debt.

Should Wayne Swan try to add other commodities to the higher bracket of taxing—such as gold—then the Labor factions now talking of dumping Julia Gillard may move quickly on that front because surviving lower house Laborites in Queensland and Western Australia will be lonely figures.

Ross Louthean
Mineweb

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