Australia: Rudd Under Pressure On Resource Taxes
Australian PM Rudd is coming under stronger domestic pressure as the opposition to the resource tax gains momentum. There have been press reports of a leadership challenge and a local report claims that a key bloc in the Rudd’s Labor Party is supporting Rudd’s deputy Julia Gillard. Rudd has now called a press conference and SKY TV is now reporting he is prepared to step down. A national election does not have to be called until next April.
The Australian dollar softened initially, but the risk appears to be on the upside after the political shock wears off. This will add to the likelihood that the tax is diluted. The tax was a negative on an otherwise generally constructive macro economic picture. The rate hike cycle is mature, but an additional rate hike before the end of the year cannot be ruled out. The relatively strong banking system, commodity exposure, proximity to China round out a generally bullish case. Look for $0.880 near term and the $0.8850.
This tax is in the budget, the money is allocated.
Julia will most likely win the next election in a couple of months.
I’ve been thinking for months that it would occur by the end of Aug, i.e. before real economic impact from GFC v2.0 starts to emerge, and US and EU contraction and trade impacts show up.
This tax is very unlikely to go away or change much, and if you research it you realize its a rather small impost that occurs only when companies are making fantastic profits on big volumes (and lucky for them they are invested in a place where that regularly occurs and is unlikely to stop).
These companies are just getting far too greedy and they don’t like having their hand repeatedly slapped away from public pockets.
And don’t make the mistake of thinking that Rudd is gone because of tax policy. That is not why he’s gone. He made a string of very big and economically and socially very significant promises and policy implementations that he did not deliver on, rescinded, and/or made a fantastic mess of, in several instances.
He really blew it and the public had had enough.
This mine profits tax hype coincided with all that thus giving an impression that his slide in popularity was driven by it and the mining companies did everything they could to suggest that.
A few months ago Rudd would have easily won an election easily, but since then it became very rapidly clear, in case after damning case, that he could not win any longer, and the election cycle would not wait any longer. In hindsight it was also obvious that his deputy has a very good chance of turning it all around – so bye-bye Kevin Rudd.
It all literally occurred within about 16 hours.
Never seen anything like it before, and I sure didn’t see any of it coming, and nor did anyone else, but the instant I heard it, it all made perfect sense as a strategy that was likely to work.
Frankly, it’s a welcome relief that Rudd was replaced so quickly and efficiently, as a genuine right-wing opposition leader was about to take over Govt. – so bad was Rudd’s record of monumental stuff-ups.
That tax will stay, and so will the mining companies, ignore their pouting, it’s all quite disingenuous.