🎁 💸 Warren Buffett's Top Picks Are Up +49.1%. Copy Them to Your Watchlist – For FreeCopy Portfolio

FACTBOX-Policy challenges for Australian Prime Minister Gillard

Published 05/05/2011, 04:02 AM
Updated 05/05/2011, 04:16 PM
XTA
-
RIO
-
BHPB
-
SCOP
-
BIG
-
FTNMX551030
-

May 5 (Reuters) - Australian Prime Minister Julia Gillard has declared 2011 the year of policy delivery and decision after her ruling Labor Party limped back into power with support of one Green and three independents after last August's dead-heat elections.

Treasurer Wayne Swan will deliver the government's first budget on May 10, with tax revenues to be hit by a summer of natural disasters and an Australian dollar which has hit record highs against the US Dollar.

Gillard holds a one-seat majority in parliament, and needs support from three independents and one Green to hold on to power.

Following are the key policy challenges for Gillard in 2011.

BUDGET/ECONOMIC MANAGEMENT:

Gillard and Swan are determined to deliver a small budget surplus in the fiscal year to June 30, 2013, after running up big deficits due to stimulus spending to help Australia avoid recession during the global financial crisis.

Labor, under former prime minister Kevin Rudd from late 2007 and under Gillard since June 2010, has yet to deliver a budget surplus, leaving the government vulnerable to opposition attack on economic management. The summer floods, cyclones and fires, and falling demand from Japan after a massive earthquake and tsunami have put new pressures on finances.

At the same time, the central bank is starting to worry about rising inflation and economists expect interest rates could start to rise again in the second half of the year. [ID:nL3E7G3041]

MINE TAX:

Gillard has made her new mine tax a priority for 2011, and she should succeed in getting the plan endorsed by parliament with broad support from Greens and independents.

The government wants to impose a 30 percent tax on coal and iron ore mining profits from July 2012, to raise A$7.4 billion in its first two years and to help the budget return a small surplus by June 30, 2013. The opposition and mid-sized mining companies oppose the tax and want it scrapped.

Legislation is due to be released later in May, after the government offered more concessions by agreeing to refund any future state-based royalty increases. [ID:nL3E7EO04L]

Global miners BHP Billiton

The Greens, who will hold the balance of power from July this year, support the tax but want miners to pay more. That may make mining companies nervous if the parliamentary debate drags on beyond July, when the Greens will have the power to pass or reject laws in the upper house Senate.

CARBON PRICE:

Gillard has promised to introduce a carbon tax from July 2012, ahead of a full emissions trade scheme three to five years later. A committee of government, Greens and independents is due to finalise the policy by July. [ID:nL3E7G406W]

Agreement on the scheme is far from certain. The government, Greens and independents continue to argue about the scope and size of the tax, what compensation will be available to big business and what emissions targets Australia should adopt.

The government target is to cut emissions by at least 5 percent of 2000 levels by 2020. The Greens want cuts of 25 percent to 40 percent over the same period.

GAMBLING:

In order to win support from a key independent, Gillard has promised to crack down on problem gambling by imposing new restrictions on gaming machines. The Greens support the plans, but the government is still short of the numbers needed to pass the scheme through parliament. Gillard also faces a tough fight with state governments, which rely upon gambling taxes for around 10 percent of state revenues.

Gillard needs to deliver on the promise in order to ensure she can rely on independent Andrew Wilkie to support her minority government.

WATER REFORM:

The government faces a difficult challenge to reform water policy in the foodbowl Murray-Darling Basin. It must find a way to balance the needs of farmers, while also ensuring the river basin in sustainable. The basin has suffered more than a century of over allocating water to farmers.

A report in October last year proposed cutting more than a third of irrigation water from farmers. That interim report prompted anger in farm towns and forced the resignation of the independent Murray Darling Basin Authority boss. Gillard's government hopes to make a new decision by the end of 2011 on how much water it will buy back from farmers. Any decision will either anger environmentalists and Greens, or farmers and people in towns who rely upon irrigation water.

(Reporting by James Grubel; Editing by Nick Macfie)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.