MercoPress. South Atlantic News Agency

Labour victory in Australia means 30% mining tax will go ahead

PM Julia Gillard one seat majority is prisoner of the Green party

Australian Prime Minister Julia Gillard secured a razor-thin parliamentary majority ending a political impasse but investors are worried about the fragility of her government and its plans to tax mining profits.

Gillard's Labour Party, which was punished by voters in August 21's inconclusive elections despite a robust economy, secured enough support from three independents and one Green lawmaker to form a one-seat majority in the lower house of parliament.

The narrow victory means Labour can now implement its proposed 30% mining tax, a prospect that dented resources stocks and the dollar.

Shares in mining heavyweights BHP Billiton and Rio Tinto extended losses after the independents backed Labour, dashing hopes that the conservatives -who were opposed to the tax- would take power.

Gillard's plans to put a price on carbon emissions is also now firmly back on the agenda, given her support from the Greens, who will hold the balance of power in the upper house from mid-2011.

“Labour is prepared to govern, Labour is prepared to deliver stable, effective and secure government for the next three years,” Gillard told reporters at parliament after two weeks of secret negotiations on ending the country's political limbo.

“The Australian people have sent us a message in this election campaign. I've heard that message ... and what they are asking us to do is not to become waylaid in partisan bickering, but to build for the future,” she said.

To secure support from the last two unaligned independents, Gillard promised to spend billions of dollars on rural areas, partly with funds from the proposed mining tax.

But her fragile majority left some doubts over how long she could cling to power.

A single lawmaker in the 150-seat lower house changing sides could bring legislative defeat for her government or, worse, the loss of a no-confidence motion. The government could also fall if it loses one by-election over the next three years.