Chief Correspondent, Sydney
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Jun 29, 2010

Australian Greens propose A$23/ton carbon tax

SYDNEY (Reuters) – Australia’s influential Greens party has written to new Prime Minister Julia Gillard calling for a A$23 a ton carbon tax after upcoming elections, allowing her time to gain support for a carbon trading scheme.

If Gillard’s Labor government is re-elected at polls expected within months, the Greens said they would help her pass a carbon tax through a hostile Senate within three months of polling day.

Jun 24, 2010
via Global News Journal



By Michael Perry

Chief Correspondent, Australia

Former Australian Prime Minister Kevin Rudd promised so much but in the end failed to deliver the generational change voters had hoped for when they swept him to power 2007.

But it was for not want of trying.

In the end, the cut-throat nature of politics, where re-election is all that matters, saw Rudd’s government turn on him on Thursday in favour of his deputy Julia Gillard.

Jun 23, 2010

Strong economy may save PM Rudd at Australia polls

SYDNEY/CANBERRA (Reuters) – It should be Prime Minister Kevin Rudd’s recipe for re-election: economic growth for 16 years, unemployment about half that of Europe and the United States, a strong housing market and manageable mortgage rates.

Yet Australian voters who felt little pain from the global financial crisis seem intent on inflicting electoral pain on Rudd this year, and may even turf him from office after just one term.

Jun 18, 2010

Oceans choking on CO2, face deadly changes: study

SYDNEY (Reuters) – The world’s oceans are virtually choking on rising greenhouse gases, destroying marine ecosystems and breaking down the food chain — irreversible changes that have not occurred for several million years, a new study says.

The changes could have dire consequences for hundreds of millions of people around the globe who rely on oceans for their livelihoods.

Jun 16, 2010

Australia PM signals tax compromise

SYDNEY (Reuters) – Australian Prime Minister Kevin Rudd signalled on Wednesday he may compromise parts of his controversial mining tax to gain at least partial resource sector backing and ease concerns over his leadership ahead of elections.

Rudd seems to be adopting a divide-and-conquer strategy against the resource sector as he seeks to solve the heated tax debate ahead of an expected October poll, with his government at risk of losing office due to a string of earlier policy failures.

Jun 10, 2010
via Global News Journal



Can Australian PM Kevin Rudd salvage his prime ministership?

By Michael Perry
Chief Correspondent, Australia

Australians love to gamble, in fact they say Aussies would bet on two flies crawling up a wall.

But even the most hardened Aussie gambler would be shocked at the recent blowout in odds for Australian Prime Minister Kevin Rudd.

Jun 9, 2010

Australia dangles tax carrot; China evaluates mine

SYDNEY (Reuters) – Prime Minister Kevin Rudd faced down mining tax protesters on Wednesday and promised immediate spending in Australia’s largest resource state in an effort to placate opposition to a controversial mining tax.

Over $20 billion in new resource investment in Australia has been put on hold by global miners due to the tax, with Chalco, the listed unit of Aluminum Corp of China, saying on Wednesday it was evaluating a planned $2.5 billion bauxite project in Queensland.

Jun 9, 2010

Australia dangles tax carrot

SYDNEY (Reuters) – Prime Minister Kevin Rudd faced down mining tax protesters on Wednesday and promised immediate spending in Australia’s largest resource state in an effort to placate opposition to a controversial mining tax.

Over $20 billion (13.8 billion pounds) in new resource investment in Australia has been put on hold by global miners due to the tax, with Chalco (2600.HK: Quote, Profile, Research) (601600.SS: Quote, Profile, Research), the listed unit of Aluminium Corp of China, saying on Wednesday it was evaluating a planned $2.5 billion bauxite project in Queensland.

Jun 7, 2010

Australian PM Rudd a mystery to voters, may lose poll

SYDNEY (Reuters) – At the start of 2010, Australian Prime Minister Kevin Rudd was unchallenged in opinion polls, set to easily win a second term at elections this year. Just six months later, he is at risk of being turfed from office. Why?

According to voters the problem is not the government nor its policies, but Rudd himself. Voters no longer know what Rudd stands for, or worse, believe he only stands for himself.

Apr 20, 2010
via Global News Journal

Policy inertia raises Australia’s investment risk

SYDNEY, April 20 (Reuters) – Australia is the last place most investors would expect to find rising political risk.

But with major policies that may fundamentally change the rules of the game for key business sectors either yet to be unveiled or facing deadlock in parliament, a growing number of companies are complaining about policy risk — or policy inertia.

Many are voting with their feet, deciding that given the level of domestic uncertainty it makes more sense to invest in Asian and African countries commonly seen as far more risky.

"You are starting to see a number of CEOs comparing the sovereign risk in Australia with that of Laos," said Mitchell Hooke, chief executive of the Minerals Council of Australia.

It is a starkly different picture from the usual view of Australia as somewhere far from conflict zones and partly insulated from the pain of global economic shocks, and where a change of government rarely heralds a sea-change in policy.

Dun & Bradstreet’s latest Economic & Risk Outlook, released this week, is typical of the consensus. Australia, Canada, Norway and Switzerland are named the world’s safest for investment.

But many firms in the energy and mining sectors, backbone of Australia’s economy, would argue with that assessment.

Rudd’s failure to get carbon trading laws passed means nobody is certain what kind of scheme will eventually be adopted, and this is stifling investment. Mining firms are braced for looming taxation reform, which may see a 40 percent resource rent tax.

And investors have also been spooked by shifting Rudd government plans for a national broadband network and political wrangling over the proposals, wiping out 25 percent of the value of top telco Telstra Corp <TLS.AX> since Rudd’s election.

With individual states also having legislative powers, regional political risks can compound the national uncertainty.

Since Rudd came to power in 2007, policy risk rose in every state except one, the 2009/10 Fraser Institute global survey of risk in mining sector said (

Portfolio investors attracted by Australia and its apparently low levels of risk need to take policy uncertainty into account.

"It won’t affect our sovereign credit rating. It is not like a macro risk to the economy, but it is adding to the uncertainty and cost of doing business," said Shane Oliver, head of investment strategy at AMP Capital Investors.

Rudd will seek a second term in elections due late in 2010, and is leading in opinion polls despite a perception among voters that his government has not fully delivered.

"We have had policy pronouncements but not a lot of outcome," Hooke said. "We are now seeing a whole stack of policy proposals and ideas that are being floated which are adding to this uncertainty or lack of confidence about investing in Australia."

Click here for Australia political risk FACTBOX [ID:nRISKAU]


In the past three years Australian miners have invested more than A$3 billion overseas, with small and mid-tier companies in particular pushing into African nations with a far higher sovereign risk than Australia’s AAA rating.

Australia’s second-largest listed gold miner, Lihir Gold <LGL.AX>, closed one of its Australian mines in 2009 and directed more spending to the Ivory Coast. The third largest, Resolute Mining <RSG.AX>, is also digging deeper into Africa with a $186 million Mali project, citing scarcer fewer opportunities at home.

Some miners says regulatory and environmental hurdles in Australia mean it could take 10 years to get a new project off the ground, compared with five years in Africa.

The mining sector is most concerned about the lack of a national energy policy and the prospect of a new tax regime.

A rumoured 40 percent resource rent tax on miners including Rio Tinto <RIO.AX><RIO.L> and BHP Billiton <BHP.AX><BLT.L>, would potentially place them among the world’s most heavily taxed.

Click here for latest on tax reform [ID:nSGE63E0LU]

"My great concern is the sense that the Australian government is under the misapprehension that all sectors of the Australian mining industry are going well," Mark Cutifani, chief of AngloGold, the world’s third biggest gold miner, told Reuters.

"In South Africa the government deferred for a year the imposition of a royalty for fear it may damage the industry. In Australia we seem to be debating how many taxes can we lump on."

Oil firm Santos <STO.AX> said a tax hike may deter foreign partners like Malaysia’s Petronas [PETR.UL]. "The last thing we want is a change or any uncertainty in the fiscal environment. It could well threaten our investments," said chief David Knox.

Canada’s Fraser Institute survey of 670 executives found more policy risk investing in Australia’s two main resource states, Queensland and Western Australia, than Alaska, Utah and Chile. Only South Australia ranked in the top 10 for mining investment.


The lack of a carbon price poses a problem for power firms, which have A$19 billion in debt refinancing due in two years.

"It is fair to say, without a doubt, that investment in the sector would be higher if there was clarification on what the future carbon policy is going to be," said Steve Durose, head of Fitch’s Asia-Pacific energy and utilities team.

The lack of a carbon policy will also discount bids in the A$6 billion power privatisation planned by the New South Wales (NSW) government in 2010, said Durose. "Frankly it’s a terrible time to be trying to be selling coal fired assets," he said.

Top operator of renewable energy assets AGL Energy Ltd. <AGK.AX> has shelved up to A$1 billion worth of investment in wind energy, citing uncertainty over climate change policies.

"Providers of capital and companies are saying…with carbon price uncertainty they are not committing to substantial future expansion in electricity generation," said Fitch’s Durose.

Rudd’s failure to get a hostile Senate to pass his carbon emissions trading laws, which would see a A$10 a tonne price on carbon in 2011, also threatens debt refinancing.

Heavily-geared power firms needing to upgrade infrastructure can’t calculate future profits without a carbon price. The most at risk are four brown-coal-fired plants in Victoria state.

According to Fitch, TRUenergy, owned by Hong Kong-based CLP Holdings <0002.HK>, operates the Yallourn power plant, and has A$950 million in corporate debt due by August 2011.

The Loy Yang A plant has A$455 million due November 2011, Loy Yang B has A$1.1 billion due June 2012 — both are owned by a consortium of AGL <AGK.AX>, Tokyo Electric Power Co <9501.T> and private investors. British-based International Power’s <IPR.L> Hazelwood power station has A$742 million due June 2012.

"These plants are very highly geared. Absent of carbon they produce quite a lot of cash because they are low cost. But when carbon gets priced in they … become uneconomic," Durose said..

The carbon legislation is due to again be voted on in May. Click here for details of biggest carbon emitters [ID:nSGE62007S]


The recent collapse of three infrastructure projects, one a A$5 billion Sydney Metro transport plan, is also fuelling concerns over political risk, particularly in the nation’s biggest state economy NSW, worth A$370 billion annually.

Infrastructure Partnerships Australia (IPA) said the decision "shreds the credibility of the (NSW) government in delivering projects and will likely make it much harder to attract investment and skills to deliver new infrastructure".

Bidders including top Australian contracting group Leighton Holdings <LEI.AX> are seeking A$200 million in compensation.

Adding to concerns about political risk at a state level are two state elections, in NSW and Victoria, due within the year, and a deteriorating budget in the resource rich Queensland state, which is offloading some A$15 billion in assets.

So far, Australia’s shares have not been hit with a significant risk discount because of legislative risk. But analysts say that if Australia starts to get a name for policy paralysis, more portfolio investors will get nervous.

On the other hand, as with most risks in Australia, there are plenty of places where things are even worse. "America has been living with gridlock between the major parties…for decades," said AMP’s Oliver. "Investors have learned to live with it." (Reporting by Michael Perry; Editing by Andrew Marshall)