Julia Gillard, Australia’s new prime minister, on Friday said her first priority would be to resolve an impasse with the mining industry over a controversial proposed resources profits tax.

Mining heavyweights BHP Billiton, Rio Tinto and Xstrata had on Thursday welcomed Ms Gillard’s move to suspend a A$38m government advertising campaign to promote the tax and instead seek negotiations with the miners. On Friday, the companies renewed calls for the government to put existing projects beyond reach of the levy.

The public dispute over the tax dealt a final blow to Kevin Rudd, the Labor prime minister who had steered Australia away from recession during the global downturn. Anxious Labor parliamentarians suddenly abandoned Mr Rudd this week amid worries about the party’s standing ahead of new polls that must be called in the coming months

Sam Walsh, Rio’s chief executive, said the original tax plan was now “dead” with the change of prime minister.

“What we will see is something that will enable projects to go ahead,” he said. “And I am very hopeful that will be sooner rather than later.”

Keith De Lacy, chairman of Macarthur Coal, went further, urging the government to remove projected tax revenues from its budget forecasts.

”It is not possible to negotiate in good faith with a big hairy monster like [the budget projection] looking over your shoulder,” said Mr De Lacy. “In return, the mining industry would be fair dinkum (honest) in its desire to negotiate a fair return for the use of the non-renewable resources that belonged to all Australians.”

Tony Abbott, leader of the opposition coalition, backed Mr De Lacy’s call, saying Ms Gillard needed to remove the A$12bn from projected budget revenues to prove that she was serious about negotiations.

“There can’t be any real negotiation, there can’t be any real compromise because that revenue is what will destroy the future of the mining industry,” said Mr Abbott.

Ms Gillard on Friday met Wayne Swan, the Treasurer and her new deputy prime minister, to cobble together a strategy to end the fight with the enormously profitable and powerful mining industry.

Mr Swan said Australia could return to having a budgetary surplus in 2013 without the proposed tax but would find it difficult to fund a planned corporate tax cut, infrastructure projects and retirement pensions.

“I made the point on day one that if that revenue was not available, it would be hard to deliver all of those initiatives,” said Mr Swan.

Ms Gillard said toughening up border controls and combating climate change would be government priorities.

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