New Gillard-led Aus govt expected

2010-09-06 13:23

Canberra – Australian Prime Minister Julia Gillard is expected to form a new minority government on Tuesday with the backing of three kingmaker independents, ending two weeks of uncertainty.

Independent Tony Windsor said the impasse should end on Tuesday morning, but there was still a risk the independent MPs could split, delivering a deadlock of 75 votes apiece in the 150-seat lower house and the prospect of another election.

"People may be leaning one way, but they may have to come back the other way to get some stability into the system," Windsor told national radio on Monday before last-minute talks with rival leaders at Canberra's parliament house.

Labour's Gillard and conservative opposition leader Tony Abbott have been desperately wooing the independents for their support for a minority government since August 21 elections delivered the country's first hung parliament since World War 2.

Several newspapers on Monday said unnamed conservatives were expecting Gillard to win over at least two independents to form a minority government holding 76 seats. Bookmakers are also tipping a Gillard Labour government.

Gillard currently has 74 seats to Abbott's 73 after a fourth independent last week sided with Labour, but Abbott could still form a government if the three uncommitted independents back him.

Controversial mining profit tax

Labour has promised a controversial mining profits tax and a $38bn broadband project if it wins, as well a carbon price to curb one of the world's highest per-capita levels of emissions. The conservatives oppose all three policies.

"They are pretty significant issues with significant amounts of money wrapped up in all three of those policies, so I think a lot more certainty on the government side and those policy fronts will be welcomed by business leaders," said Stephen Halmarick, Head of Investment Markets Research with Colonial First State.

An Essential Media poll on Monday showed 52% of Australians now wanted another election, regardless of which party the independents decided to back, underscoring expectations that any new government will struggle with such a thin majority.

Seventy percent of respondents believed there would be fresh elections within a year, the survey found.

Australia's economy recorded strong growth in the last quarter and financial markets have largely been unruffled by the political gridlock. Standard & Poor's on Monday reaffirmed its AAA/A-1+ foreign and local currency sovereign credit ratings for Australia, with a stable outlook.

"The ratings on Australia reflect the country's ample fiscal and monetary policy flexibility, economic resilience, public policy stability and its sound financial sector," Standard & Poor's credit analyst Kyran Curry said.

Fiscal position stronger

Despite providing a large stimulus of almost 5% of GDP over 2009 and 2010, the government's fiscal position was stronger than most other AAA countries, with the deficit likely to peak at a modest 3.2% of GDP in 2010.

Independent Rob Oakeshott said he could change his mind about which of the two major parties to back in a minority government if the outcome was tied at 75 seats apiece. He also said he was disappointed at conservative opposition to some parliamentary reforms sought by the kingmakers.

"There is a national interest issue in question about how we have a stable government over the next three years," he said.

Betting agencies were tipping one of the three, stetson-wearing outback MP Bob Katter, to side with Abbott.

Katter last week gave Gillard and Abbott a "wish list" of 20 priorities that could cement his support, ruling out emissions trade and the 30% tax on coal and iron ore miners.

But Katter also hinted that the mining tax, brokered by Gillard with Rio Tinto, BHP Billiton and Xstrata, was not a deal breaker.