Australia's embattled Prime Minister Julia Gillard today vowed to retain a controversial tax on mining profits if she succeeds in forming a government following deadlocked national polls.
Gillard said she had brokered an agreement with the mining sector ahead of Saturday's elections, which ended with neither her centre-left Labor Party or the main opposition Liberal/National coalition holding enough seats to govern.
'I entered a breakthrough agreement with the Australian miners, our biggest miners, about the Minerals Resource Rent Tax and I will be honouring that agreement,' Gillard said.
She struck a crucial deal with mining giants BHP Billiton, Rio Tinto and Xstrata that will place a 30% tax on iron ore and coal profits, within days of deposing Kevin Rudd as prime minister in a party coup.
The deal effectively watered down Rudd's original plan to tax all resources companies at a rate of 40% on profits - a move which provoked a furious backlash from the country's most important export sector.
Liberal leader Tony Abbott has vowed to scrap the levy if he becomes prime minister and major mining shares lifted today on the prospect of him forming a government, with BHP shares up 0.5% and Rio Tinto rising 0.8%.
Votes are still being counted in Australia's national polls, but at least three independents are set to hold the balance of power in parliament and are being wooed by Gillard and Abbott to support their parties.
Voter concern about the mining tax, particularly that it could drive jobs and investment overseas, is believed to have contributed to Labor's loss of a swathe of seats in the key mining states of Queensland and Western Australia.
With both leaders claiming to have the mandate to lead a minority government, experts warned the nation's future could hang in the balance for weeks or months, leaving stock and currency markets in Australia flat but cautious.
