Saturday, June 12, 2010
Macarthur Coal Chairman Calls For Australia PM Rudd To Be Dumped

By Lyndal McFarland
Dow Jones Newswires

MELBOURNE -(Dow Jones)- A prominent Australian businessman and former Labor politician has urged Australia's governing Labor party to dump Prime Minister Kevin Rudd or risk being out of power for a generation as the heated debate over the government's planned Resources Super Profits Tax continues to escalate.

"I regret to say Kevin Rudd has to go," Keith De Lacy, chairman of mining company Macarthur Coal Ltd. (MCC.AU) and former Labor treasurer of Queensland state, said in an opinion piece published in the Australian newspaper Saturday. "He is doing terminal damage to brand Australia."

"The tax will have dreadful consequences not only for the resources sector but for the general economy and Australia's reputation as an attractive investment destination," De Lacy said.

Rudd's center-left Labor government first outlined the planned tax, aimed at securing a greater share of profits from the nation's vast mineral resources, in early May. Under the planned tax, which would effectively replace state-based mining royalties, profits over the long term bond rate would be taxed at a rate of 40%.

But mining companies have railed against the planned tax in an increasingly vocal, and bitter, public campaign, with some mining companies putting projects and investments on hold and executives of some other companies threatening to focus investment in lower taxing countries and describing the levy as a potential sovereign risk.

"Rudd is fast becoming an object of ridicule," De Lacy wrote.

"We have a Prime Minister who is so wounded from his many policy backdowns that he can't afford to compromise. Or he feels a macho fight with the miners would overcome a perception of weakness. Heaven help Australia," De Lacy said.

Rudd and his government, who came to power in 2007, are struggling in opinion polls after a long honeymoon period, with a series of perceived policy backdowns and poor policy execution, including the postponement of a planned carbon emissions trading scheme and a disastrous end to a home insulation scheme, hurting the Labor party's popularity. The government is expected to call a national election in the second half of this year.

De Lacy's comments came as the Minerals Council of Australia stepped up its public campaign against the tax by taking out full newspaper page ads of a scathing open letter sent to Rudd, signed by the heads of many of the country's biggest miners including BHP Billiton (BHP.AU) chief executive Marius Kloppers, Rio Tinto (RIO.AU) CEO Tom Albanese and Xstrata PLC (XTA.LN) head Mick Davis. The letter slammed the government's consultation process and called for an urgent round of new talks with the sector. The mining industry has said it wasn't widely consulted before the new tax, which will not come into effect until 2012, was announced.

"We are profoundly disappointed in both the current consultation process and the manner in which it is being portrayed by the government," the letter from the Minerals Council--a lobby group--said.

The government has said it is talking to miners about the tax and has promised generous transition arrangements, but has said a number of aspects of the tax, including the 40% tax rate, are not negotiable. Rudd met with several high profile mining company executives in recent days, including BHP's Kloppers and Fortescue Metals Ltd.'s (FMG.AU) billionaire founder and chief executive Andrew Forrest, to discuss the tax.

"A political solution where a small change to the tax proposals is presented as a major compromise will not end this uncertainty or deliver the right result for Australia," the letter said.

The letter said the proposed tax rate will mean that Australia will have the highest mining tax rate in the world. It also said, among other things, the planned tax should not be applied retrospectively to existing projects, that it should not be applied to infrastructure and secondary processing and the tax should be differentiated by commodity.

"Unless all these elements are addressed in a comprehensive way the minerals resources super profits tax will remain fundamentally flawed...the consequences will be simple. Mining projects will be either cancelled or deferred with a consequent loss of thousands of jobs in mining and related industries, the weakening of remote and regional communities and significantly reduced economic benefits to all Australians," the letter said.

The government has accused the miners of a scare campaign and remains confident that the planned tax will not deter investment in the sector.

http://www.foxbusiness.com/story/market ... st+News%29