Mining tax headache returns

AUSTRALIAN Prime Minister Julia Gillard secured a wafer thin parliamentary majority yesterday, ending a political impasse but hardly cheering investors worried about the fragility of her government and its plans to tax mining profits.

Gillard’s Labor Party, which was punished by voters in 21 August inconclusive elections despite a robust economy, secured enough support from three independents and one Green lawmaker to form a one-seat majority in the lower house of parliament.

Her narrow victory means Labor can implement its proposed 30 per cent mining tax, a prospect that dented resources stocks and the dollar, as well as pursue a $38bn telecoms project, which supported shares in phone company Telstra.

Shares in mining heavyweights BHP Billiton and Rio Tinto extended losses yesteray after the independents backed Labor, dashing hopes that the conservatives -– who were opposed to the tax -- would take power.

BHP Billiton closed at 1895p after falling by 1.3 per cent, while rival Xstrata was down 1.56 per cent to 1072p.Similarly, Rio Tinto dropped 1.78 per cent to 3447.50p and Vedanta was down 1.1 per cent to close at 1980p. A group of miners had earlier threatened to exit Australia when former Prime Minister Kevin Rudd had proposed a 40 per cent mining tax.

FAST FACTS | AUSTRALIAN ELECTION
● The new goverment has been formed after 17 days of political deadlock.

● Welsh-born Gillard now controls 76 seats, and can finally call herself Australia's first elected female Prime Minister.