Gillard Calls Australian Election After Ending Mining Standoff

July 17 (Bloomberg) -- Australian Prime Minister Julia Gillard called a general election less than a month after she became the nation’s first female leader and settled a dispute with mining companies that propelled her to office.

Gillard, 48, called the ballot for Aug. 21, betting the ruling Labor Party’s record of delivering growth during the global financial crisis will help ensure re-election. Her ouster of former Prime Minister Kevin Rudd restored the party’s lead in opinion polls over Tony Abbott’s Liberal-National coalition.

“I want to keep the economy strong so people can enjoy the benefits of work,” Gillard told reporters in Canberra today. “We do not have to be afraid of the future, we can master big challenges like climate change together.”

The election will determine whether resources companies led by BHP Billiton Ltd. and Rio Tinto Ltd. pay higher taxes, a policy championed by Rudd and diluted by Gillard to win their support. Abbott, bidding to make Labor the first one-term government in 80 years, pledged not to adopt the tax, describing it as a punishment for the nation’s most profitable industry.

“It would defy recent history if the coalition were to defeat Labor: the last time we had a one-term government was during the Great Depression,” said Nick Economou, a political scientist at Monash University in Melbourne. “It’s going to be close. The government will probably just fall over the line.”

Voter surveys indicate a close race. Labor’s support fell three percentage points to 52 percent in a Nielsen poll published July 12, compared with when Gillard had just taken power. The coalition rose three points to 48 percent.

Gillard’s Compromise

Gillard on July 2 announced an agreement with resources companies on a reduced mining levy for a country that is the world’s biggest shipper of coal, iron ore and alumina. She scaled back the planned tax to 30 percent of coal and iron ore earnings from 40 percent on all resource profits.

The election will also be fought on climate-change policies and management of Australia’s A$1.2 trillion ($1 trillion) economy. Gillard said last week the economy is the foundation of her re-election campaign. She also reaffirmed the central bank’s annual inflation target of 2 percent to 3 percent. The Australian dollar is the third-best performer among the world’s 16-most traded currencies during the past decade, gaining about 50 percent against the dollar.

The economy expanded for a fifth straight quarter in the three months ended March 31 as government stimulus spending helped boost consumer demand amid the Group of 20’s most aggressive interest-rate increases. The Reserve Bank of Australia has increased the benchmark rate six times to 4.5 percent since early October from a half-century low of 3 percent.

China Demand

Central bank policy makers expect economic growth to almost double in the next two years as China’s demand for resources spurs a mining investment boom. China is Australia’s biggest trading partner, with two-way trade worth A$85.1 billion in 2009.

Gillard said the government will review plans for a carbon- trading system in 2012, and that the market should set the price for carbon. Labor also wants to generate 20 percent of the nation’s energy from renewable sources like wind, solar and geothermal projects by 2020.

Abbott, 52, opposes any form of carbon tax and proposes an A$1 billion emissions reduction fund to give companies incentives to cut pollutants 5 percent by 2020. The coalition plans to establish a 15,000-strong “green army” to repair and restore the environment.

Abbott in December became the coalition’s third leader since the 2007 election because of a party dispute over whether to support Rudd’s climate plans.

Immigration Policy

Immigration will also feature in the six-week election campaign after the number of asylum seekers arriving by boat jumped to 3,768 so far this year from 2,726 for 2009, immigration department figures show.

Gillard has vowed to open a regional center to process asylum seekers to curb the rising number of refugees from Southeast Asia arriving by sea. She came under fire for suggesting East Timor should house the refugee center before fully negotiating the plan with officials from that country. East Timor’s parliament on July 12 rejected having the facility there in a unanimous vote, the Australian Broadcasting Corp. said.

Rudd ended John Howard’s almost 12-year rule in November 2007. He withdrew Australian troops from Iraq, abolished the unpopular Work Choices labor laws, ratified the Kyoto treaty on climate change and offered the nation’s first apology to Aborigines taken from their families between 1910 and 1970 for assimilation with the white community.

Welsh Roots

Gillard, who emigrated from Wales when she was four after she contracted bronchial pneumonia, replaced Rudd after party factions and key labor unions switched their allegiance.

Abbott is a Rhodes Scholar who won two boxing Blues while studying at Oxford University. He was, under Howard, employment minister between 2001 and 2003 and then health minister until 2007.

He won the leadership of the Liberal Party in December last year, ousting Malcolm Turnbull, a former Goldman Sachs Group Inc. executive, when party lawmakers rejected Turnbull’s support for Rudd’s climate plan.

Labor has 83 lawmakers in the 150-member House of Representatives, compared with 63 Liberal-National coalition members, according to the parliament’s Web site. There are four independents.