Will leadership change mean changes to proposed mining tax?
That’s the question everyone in the industry will be asking after Julia Gillard was announced as Australia’s new Prime Minister on June 24th, with Kevin Rudd standing down in the face of defeat at a special caucus meeting.
Australia's new Prime Minister, Julia Gillard
Rudd became the shortest-serving Australian prime minister since 1972, with his leadership falling apart after a string of poor opinion polls showed him losing ground over recent decisions to shelve a carbon reduction scheme and impose a new mining tax.
The Australian dollar briefly jumped after the leadership change, while shares in BHP Billiton and Rio Tinto rose around 2 percent, on hopes of a mining tax compromise.
"The market is going to assume that the (mining) tax is going to be amended, and hence the worst case outcome they were staring at is not going to eventuate," Richard Schellbach, an equity strategist at Citi, told Reuters.
The news service also reported a senior analyst at Morningstar, Mark Taylor: "I think you'll find that they might do something fairly radical. They might either say they're going to put it on the backburner and look at the whole thing all over again from a fresh start, or they'll make a fairly large concession on the uplift rate or the headline rate."
In a media conference on June 24th, Gillard threw open the “doors of Government” and welcomed the mining industry to “open its mind”.
She said there was an emerging consensus that Australians sought a greater share of wealth from natural resources, and that mining companies can pay more.
Gillard said she would take steps to remove Government advertising regarding the RSPT and issued a challenge to the mining industry to do the same.
“I’m making an offer of goodwill today,” she said, “…the Deputy Prime Minister will lead a team with Martin Ferguson…the only entry point for these negotiations is that people need to understand that Australians get a fairer share of the mineral wealth in the ground.”
She refused to make any comment on the “parameters” of negotiations.
Within minutes of the ASX opening on June 24th, BHP Billiton had jumped about 2 per cent to $39.90, and Fortescue Metals surged as much as 4 per cent, and was 16 cents higher at $4.59 by 10:05am.
Rio Tinto was up 2.2 per cent just after 10am.
After a three-hour crisis meeting in his office on June 23rd with Julia Gillard and John Faulkner, Rudd held a media conference and said he would fight.
“Right now obviously we're in the midst of a debate on the future of the taxation system…Tax reform is never easy…
“We don't resile from that challenge. However, this obviously has created some challenges and tensions within our party, and I mentioned before, having lost the support of certain factional leaders.”
Rudd said he was not elected by the factional leaders of the Australian Labor Party, but the Australian people.
"I was elected to do a job and I intend doing that job."
Gillard, however, was believed to have had the numbers before going into this morning's ballot, which was not held. She also had the backing of the powerful Australian Workers Union.
Before the leadership challenge was made public, it was reported that the Government may have been close to making an announcement about changes to the proposed RSPT. These included boosting the level at which the tax cuts in and modifying its original plan to carry the industry's losses.
Kevin Rudd reportedly said that not all industry players would like the government's adjustments.
''If we reach this balanced and sensible outcome, I can fully predict that a number of the major mining companies will still not be happy with it,'' Rudd reportedly said.