HEARD ON THE STREET: Rudd's Downfall Hasn't Locked Victory For Miners

24th Jun 2010 08:13

By Andrew Peaple A DOW JONES COLUMN As anyone who's played sport against Australia knows, it's a country that likes a winner. Kevin Rudd, Australia's outgoing prime minister rescued his Labor party from 12 years of opposition and steered Australia through the global financial crisis without a recession. But it looked ever more likely that Labor would lose the next general election under his leadership, and so he's been unceremoniously dumped. The fate of one proximate cause of his downfall, the government's proposal to levy a 40% tax on mining profits, now hangs in the balance. Governments in several countries around the world are currently picking fights with powerful corporations -- the U.S. with BP, and several with big banks. With the resources tax Rudd, too, took on an industry with heavy lobbying artillery. The difference is that public opinion hasn't been unequivocally against the miners. In a series of advertisements, the industry has argued the tax would hit Australians hard by increasing unemployment and harming their pension funds, many of which are invested in the likes of Rio Tinto and BHP Billiton. Still, it would be a mistake for investors to presume that Rudd's replacement, Julia Gillard, will kill the tax. For one thing, she and new deputy prime minister Wayne Swan have both been prominent proponents of forcing mining companies to share the fruits of the sector's boom with the government purse. Canberra sees the tax as an important ingredient in its plans to bring the fiscal budget into surplus by 2013. On Thursday, the new prime minister struck a conciliatory tone, by calling for negotiations with the mining industry over the tax. But Gillard still argued that "Australians are entitled to a fairer share of our inheritance, the mineral wealth that lies in our grounds." Entering into negotiations on the resource tax may be a way for the new Australian leadership to take the heat out of the issue for a while, perhaps until after elections are out of the way. But the only way that tax is going to be killed for sure is if the next election, which Gillard said will be held in the "coming months", leads to Labor -- and not just Rudd -- leaving office. For mining investors, it's too soon to call the winner of this particular contest. (Andrew Peaple, a Columnist on Dow Jones' Heard on the Street team, has been a financial journalist since 2003. Currently based in Beijing he has also covered the U.K. economy and financial services, and is a U.K.-qualified chartered accountant. He can be reached on +86-10-8400-7705, or by email on [email protected]) TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at [email protected]. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments. (END) Dow Jones Newswires June 24, 2010 03:13 ET (07:13 GMT)