May 5 (Reuters) - Australian Prime Minister Julia Gillard has declared 2011 the year of policy delivery and decision after her ruling Labor Party limped back into power with support of one Green and three independents after last August's dead-heat elections.
Treasurer Wayne Swan will deliver the government's first budget on May 10, with tax revenues to be hit by a summer of natural disasters and an Australian dollar which has hit record highs against the US Dollar.
Gillard holds a one-seat majority in parliament, and needs support from three independents and one Green to hold on to power.
Following are the key policy challenges for Gillard in 2011.
BUDGET/ECONOMIC MANAGEMENT:
Gillard and Swan are determined to deliver a small budget surplus in the fiscal year to June 30, 2013, after running up big deficits due to stimulus spending to help Australia avoid recession during the global financial crisis.
Labor, under former prime minister Kevin Rudd from late 2007 and under Gillard since June 2010, has yet to deliver a budget surplus, leaving the government vulnerable to opposition attack on economic management. The summer floods, cyclones and fires, and falling demand from Japan after a massive earthquake and tsunami have put new pressures on finances.
At the same time, the central bank is starting to worry about rising inflation and economists expect interest rates could start to rise again in the second half of the year. [ID:nL3E7G3041]
MINE TAX:
Gillard has made her new mine tax a priority for 2011, and she should succeed in getting the plan endorsed by parliament with broad support from Greens and independents.
The government wants to impose a 30 percent tax on coal and iron ore mining profits from July 2012, to raise A$7.4 billion in its first two years and to help the budget return a small surplus by June 30, 2013. The opposition and mid-sized mining companies oppose the tax and want it scrapped.
Legislation is due to be released later in May, after the government offered more concessions by agreeing to refund any future state-based royalty increases. [ID:nL3E7EO04L]
Global miners BHP Billiton The Greens, who will hold the balance of power from July
this year, support the tax but want miners to pay more. That may
make mining companies nervous if the parliamentary debate drags
on beyond July, when the Greens will have the power to pass or
reject laws in the upper house Senate. CARBON PRICE: Gillard has promised to introduce a carbon tax from July
2012, ahead of a full emissions trade scheme three to five years
later. A committee of government, Greens and independents is due
to finalise the policy by July. [ID:nL3E7G406W] Agreement on the scheme is far from certain. The government,
Greens and independents continue to argue about the scope and
size of the tax, what compensation will be available to big
business and what emissions targets Australia should adopt. The government target is to cut emissions by at least 5
percent of 2000 levels by 2020. The Greens want cuts of 25
percent to 40 percent over the same period. GAMBLING: In order to win support from a key independent, Gillard has
promised to crack down on problem gambling by imposing new
restrictions on gaming machines. The Greens support the plans,
but the government is still short of the numbers needed to pass
the scheme through parliament. Gillard also faces a tough fight
with state governments, which rely upon gambling taxes for
around 10 percent of state revenues. Gillard needs to deliver on the promise in order to ensure
she can rely on independent Andrew Wilkie to support her
minority government. WATER REFORM: The government faces a difficult challenge to reform water
policy in the foodbowl Murray-Darling Basin. It must find a way
to balance the needs of farmers, while also ensuring the river
basin in sustainable. The basin has suffered more than a century
of over allocating water to farmers. A report in October last year proposed cutting more than a
third of irrigation water from farmers. That interim report
prompted anger in farm towns and forced the resignation of the
independent Murray Darling Basin Authority boss. Gillard's
government hopes to make a new decision by the end of 2011 on
how much water it will buy back from farmers. Any decision will
either anger environmentalists and Greens, or farmers and people
in towns who rely upon irrigation water.
(Reporting by James Grubel; Editing by Nick Macfie)