3rd UPDATE: Australia PM Says Mining Tax Deal A Top Priority

25th Jun 2010 07:05

(Adds comments by Rio Tinto Iron Ore CEO, Western Australian Premier) By Alex Wilson and Rachel Pannett Of DOW JONES NEWSWIRES MELBOURNE (Dow Jones)--Australia's new Prime Minister Julia Gillard on Friday singled out reaching a deal with industry over a controversial mining profits tax as a top priority for her government. As the market tries to gauge how far Gillard will bend in compromising on the proposed tax and how quickly she will move, the government has signalled all aspects of the proposal are up for discussion but that it is committed to imposing some form of profits based tax on the industry. "My view is that this task needs to be undertaken as quickly as possible," Gillard told reporters after meeting with Treasurer Wayne Swan and Resources Minister Martin Ferguson to discuss strategy. "My priority is to ensure that we deal with the question of the mining tax. It has caused uncertainty, I think that uncertainty has caused anxiety for Australians." Swan said the government is genuine in its call for negotiations with the resources industry but remains committed to applying a profits-based tax to the sector "We are committed to a profits-based tax. The mining industry say they are committed to a profits-based tax as well...we are genuine in our desire to negotiate with the industry," Swan told Australian Broadcasting Corp. radio. Julia Gillard was sworn in as Prime Minister Thursday after Kevin Rudd quit the role in the face of a leadership challenge and in her first press conference as Prime Minister called for a truce in the increasingly bitter battle between the mining industry and the government over Rudd's planned Resource Super Profits Tax. Under Rudd the government had steadfastly insisted it would not budge on the 40% rate of the tax and that it was determined it would be applied to existing mining projects. However, Swan shied away from restating this position Friday and indicated that all details of the tax would now be up for discussion. "The 40% is used with the PRRT (petroleum resource rent tax), for example but I am not going to go into a discussion about all of the details," he said. "We're going to go into these negotiations again about all of the details with good faith." The mining industry will be heartened by the suggestion that all aspects of the tax may now be open to negotiation, having complained that the their key concerns about the tax were excluded from previous consultations. Rio Tinto Ltd. (RTP) Iron Ore Chief Executive Sam Walsh said he doesn't believe the tax will now go forward in its original form and he hopes a new proposal could be hammered out sooner rather than later. "I think the tax as it was originally ascribed is dead," Walsh told reporters in Perth. "I think that what we will see is something that will enable projects to go ahead." The announcement of the tax proposal in May prompted Rio Tinto to launch a review of all of its growth projects in Australia under a worst case tax scenario. In response to a call for a truce from Gillard, the mining industry has agreed to suspend its advertising campaign against the tax, which it had argued would put investment in the Australian mining sector at risk and cost jobs. The government has also suspended its publicly-funded advertising of the tax plan. UBS mining analyst Glyn Lawcock said in a client note he now believes the door has opened for a watering down of the tax but that a resolution could be some way off. "It seems almost assured that a diluted version of the initial version of the RSPT will eventuate," he said in a client note. "However, given the proposed new negotiation, the resolution of details may now be further in the future opening up a longer period of uncertainty for the miners." Western Australian Premier Colin Barnett, a trenchant opponent of the tax, said it would take time for the federal government to engage in meaningful consultation with the industry. "If the federal government is going to persist with this, I think they need to take probably at least six months to gain some understanding of the industry," he told reporters in Perth. RBS analysts said the change in attitude from the new Prime Minister suggested meaningful change to the policy was now possible. "Clearly, the worst-case RSPT scenario that the market had been factoring in will not now play out," they said in a client note. Gillard has reaffirmed the government's previous pledge to bring the budget into surplus in 2013, and RBS said meeting this would mean matching any revenue lost in mining tax concessions with matching policy adjustments. The mining industry was shocked in May when the RSPT proposal wasn't only announced without consultation, but was factored into the government forward budget estimates. Macarthur Coal Ltd. (MCC.AU) Chairman Keith De Lacy said he welcomed the offer of genuine negotiation on the tax, but urged Gillard to remove the future revenue from the tax from budget estimates as an act of good faith while talks were underway. "It is not possible to negotiate in good faith with a big hairy monster like that looking over your shoulder," he said. "Forward estimates should be the outcome of successful negotiations, not the starting point." Swan said the RSPT wasn't essential to bring the budget into surplus in 2013, and that the revenue from the tax had been tagged for specific initiatives which would be at risk of the tax didn't go ahead. "The budget is going to return to surplus in three years time...and it is not dependent on revenue from the mining tax," he said. "We will spend the revenue from the mining tax on improving superannuation (pensions), on cutting the company (tax) rate and boosting infrastructure and I made the point on day one that if that revenue was not available, it would be hard to deliver all those initiatives." -By Alex Wilson, Dow Jones Newswires: 613-9292-2094; [email protected] (Lyndal McFarland in Melbourne, Geoffrey Rogow in Sydney and Stephen Bell in Perth contributed to this article) (END) Dow Jones Newswires June 25, 2010 02:05 ET (06:05 GMT)