CANBERRA, (Reuters) – Julia Gillard became Australia’s first female prime minister today (last night local time) when Kevin Rudd stepped down, as the Labor government sought to avoid election defeat later this year by changing leaders.
Gillard is expected to present more of a change of leadership style than substance, but investors hope she will soften the government’s controversial “super profits” mining tax, which is threatening $20 billion worth of investment and has rattled voters.
“The market is going to assume that the (mining) tax is going to be amended, and hence the worst case outcome they were staring at is not going to eventuate,” said Richard Schellbach an equity strategist at Citi.
Rudd become the shortest-serving Australian prime minister since 1972, with his leadership falling apart after a string of poor opinion polls showed him losing ground over recent decisions to shelve a carbon-reduction scheme and impose a new mining tax.
Miners have launched multi-million dollar advertisements warning of widespread job losses, spooking voters, if the 40 percent tax goes ahead in its current form in 2012.
Global miners such as Rio Tinto, BHP Billiton and Xstrata are expected to campaign strongly against the tax at the next election and help the conservative opposition’s bid to oust Labor.
Government lawmakers believe Gillard has a better chance than Rudd of winning back voters because she is a warmer personality who can sell policies more effectively.
Despite investor hopes that a leadership change might spell a major backdown on the mining tax, left-winger Gillard’s backers expect her to mount a much more effective defence of it.
But while investors hope Gillard will compromise on the mining tax, Gillard’s left-wing, trade union background has some concerned.
“She has been more left-wing than Rudd; she favours more regulation and spending. So maybe it means the budget deficit shrinks more slowly than otherwise,” said Su-Lin Ong, senior economist RBC Capital Markets.