Gillard’s (picture) success sent a shudder through mining shares and the Australian dollar, with her government vowing to press ahead with a new mining tax and work toward a scheme that would force major polluters to pay for their carbon emissions.
With four of the five cross-bench MPs in the new parliament now backing Gillard, she has a majority of just one seat and a tenuous grip on power.
“I will reserve the right to represent my constituency on any vote in the parliament and also reserve the right to move a no-confidence motion in the government as I see fit,” said rural independent Tony Windsor in announcing he would back Labor.
The four have all made clear they will support a stable Labor government and back its budgets, but they pointedly do not guarantee their support for Labor policies, reserving the right to vote independently on each one.
“This parliament is going to be different and no one party has dominance over the executive or the parliament,” independent lawmaker Rob Oakeshott told reporters at parliament house after announcing the decision alongside colleague Windsor.
“That is just the reality of the way we are going to do business over the next three years.”
But with Labor in minority in the lower house and the Greens to control the balance of power in the upper house Senate from July 2011, Gillard will need all her negotiating skills to not just pass policy, but ensure Labor survives its three-year term.
“It’s really anyone’s guess how long the government will last and how effective it will be and I don’t think you can really pre-judge the outcome,” said Brian Redican, senior economist at Macuarie Bank.
Gillard and conservative leader Tony Abbott had been desperately wooing three undecided independents since dead-heat August 21 elections and Tuesday agreed to reforms demanded by the trio, including brakes on executive power over parliament.
Major policies up for review
Major policies will now be up for review, including Labor’s mining tax and a US$38 billion (RM118 billion) national broadband project proposed by Labor. Climate change policy will also be reviewed.
Global heavyweights BHP Billiton, Rio Tinto and Xstrata have already signed-up to the 30 per cent tax due by 2012. Shares in BHP Billiton and Rio Tinto extended losses Tuesday after the independents backed Labor.
BHP was down 0.5 per cent at 1334 (Malaysian time) compared with flat before the independents backed Labor, while Rio was down 1.1 per cent compared with down 0.4 per cent earlier. Fortescue was down 0.6 per cent.
But the final shape of Labor’s resource tax and its headline rate may rise due to pressure from the Greens party which supports the tax but has argued for a higher rate.
Such a move could see Labor’s deal with the miners broken and reignite a bitter battle in which miners earlier warned that around A$20 billion (RM57 billion) in resource investment could be at risk. Australia avoided recession during the financial crisis due in large part to its booming minerals exports to China.
The other major Labor policies seem to be on more solid ground, with Windsor saying Labor’s fiber-optic broadband network was the critical factor in his decision.
“There’s an enormous opportunity for regional Australians to engage with the infrastructure of this century and ... I thought (that) was too good an opportunity to miss,” said Windsor.
“You do it once, you do it right and you do it with fiber.”
Windsor also said Labor’s pledge to move toward a carbon price, postponed by previous Labor prime minister Kevin Rudd, was another reason for his support.
“It’s obvious to me that regional Australia would be a major beneficiary of a lot of the renewable energy sources. I see enormous opportunities where others fear the whole climate change debate,” he said.
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