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Australia gets first woman prime minister
Source: Agencies |
June 24, 2010, Thursday
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AUSTRALIA'S ruling party dumped Kevin Rudd as prime minister today, handing power to the nation's first female leader, former deputy premier Julia Gillard, in an effort to avoid election defeat later this year.
KEY POINTS
- Rudd's leadership fell 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.
- The tax sparked warnings from global miners such as Rio Tinto <RIO.AX> <RIO.L>, BHP Billiton <BHP.AX> <BLT.L> and Xstrata <XTA.L> that billions of dollars of new projects could be scrapped if the 40 percent tax went ahead as planned.
- Gillard is seen by party rank and file as a warmer and more popular politician than Rudd, who was viewed increasingly as bookish, cold and a poor communicator.
- The Labor party's major factions, right and left, have swung their support behind Gillard, hoping that she stands a much better chance of leading a successful re-election campaign.
- Next election is due within six months, though political experts have been expecting it to be called around October.
MARKET REACTION
The Australian dollar <AUD=> briefly jumped after the leadership change, stirring speculation the government would compromise on the mining tax proposal which had unsettled offshore investors.
Shares in BHP Billiton, the world's biggest miner, jumped 2 percent at the open, buoyed partly by hopes that Gillard will want to take the sting out of the mining-tax debate and be likely to make concessions to appease angry miners.
COMMENTARY
PETER CHILTON, CONSTELLATION CAPITAL MANAGEMENT
"I think the market can go up a bit on this today as investors sense the opportunity for change on key issues including the mining tax. But the uncertainty still remains until the new prime minister speaks publicly on her views on the tax. If she says there will be a moratorium on the tax or it will deferred, or if changes are proposed that will protect the competitivenes of the country ,then it is positive.
"But we need to keep in mind, prior to this she did fully support the tax."
TOBY HASSALL, CHIEF ANALYST, CWA GLOBAL MARKETS PTY LTD
"This will certainly be a positive news for resource companies and it shows that the Australian public isn't in favour of the mining tax."
MARK TAYLOR, SENIOR RESOURCES ANALYST, MORNINGSTAR
"It'll probably be viewed as a near-term positive (for the resources sector). If they've gone to the trouble to put a new leader in to get their re-election chances up, then obviously they're going to water down the mining tax as well -- all part of that strategy to shore up voter support. I think you'll find that they might do something fairly radical. They might either say they're going to put it on the backburner and look at the whole thing all over again from a fresh start, or they'll make a fairly large concession on the uplift rate or the headline rate ... Kevin Rudd had just a point blank no-negotiation sort of stance. His falling on his sword will allow them now to negotiate. It'll give them more licence to backtrack a bit on the tax."
CHRIS STOTT, PORTFOLIO MANAGER, WILSON ASSET MANAGEMENT
"The main thing is if she (Gillard) turns over on the mining tax. Unless she were to comment on further amending the tax, I don't think there is any short-term impact on equity markets."
DAMIEN BOEY, STRATEGIST, CREDIT SUISSE EQUITY
"Markets never really like this sort of political turmoil in leadership but I think the RSPT (mining tax) was weighing on the market and even indirectly on some of the financial stocks because there was talk of a super tax on them.
"I think one of the grounds this battle was fought on was the RSPT and it will have to be softened significantly.
"My suspicion in all of this, with all this disorder in the Labor Party and the very short turn-around leading up to the next election, some people will be thinking the (opposition) Liberal Party might win, in which case any RSPT is well and truly gone."
JAMES WILSON, MINING ANALYST, DJ CARMICAEL & CO
"There is no doubt the controversy over the super profits mining tax was what drove the final nail into Kevin Rudd's political coffin. It's a lesson the Labor party appears to have learned, that it must engage with the mining industry over this tax."
JULIANA ROADLEY, MARKET ANALYST, COMMSEC
"It's a decision that allows them to go back to the table and look at some of their policies. The focus there will be on the (listed) miners, and we're expecting them to move higher. We're expecting a solid rise ... With the Aussie (dollar), I don't think there'll be too much going on. Everything else is really strong, so a change in leadership is not going to make too much of a change in the market."
SU-LIN ONG, SENIOR ECONOMIST, RBC CAPITAL MARKETS
"Clearly this is a positive for the Australian dollar and stocks in the short and medium term. It removes the political uncertainty that had been growing and would have only got worse. We assume Gillard will negotiate on the mining tax and produce a watered-down version. Longer term, we're not so sure it's good for bonds. 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."
RICHARD SCHELLBACH, EQUITY STRATEGIST, CITI
"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."
KEY POINTS
- Rudd's leadership fell 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.
- The tax sparked warnings from global miners such as Rio Tinto <RIO.AX> <RIO.L>, BHP Billiton <BHP.AX> <BLT.L> and Xstrata <XTA.L> that billions of dollars of new projects could be scrapped if the 40 percent tax went ahead as planned.
- Gillard is seen by party rank and file as a warmer and more popular politician than Rudd, who was viewed increasingly as bookish, cold and a poor communicator.
- The Labor party's major factions, right and left, have swung their support behind Gillard, hoping that she stands a much better chance of leading a successful re-election campaign.
- Next election is due within six months, though political experts have been expecting it to be called around October.
MARKET REACTION
The Australian dollar <AUD=> briefly jumped after the leadership change, stirring speculation the government would compromise on the mining tax proposal which had unsettled offshore investors.
Shares in BHP Billiton, the world's biggest miner, jumped 2 percent at the open, buoyed partly by hopes that Gillard will want to take the sting out of the mining-tax debate and be likely to make concessions to appease angry miners.
COMMENTARY
PETER CHILTON, CONSTELLATION CAPITAL MANAGEMENT
"I think the market can go up a bit on this today as investors sense the opportunity for change on key issues including the mining tax. But the uncertainty still remains until the new prime minister speaks publicly on her views on the tax. If she says there will be a moratorium on the tax or it will deferred, or if changes are proposed that will protect the competitivenes of the country ,then it is positive.
"But we need to keep in mind, prior to this she did fully support the tax."
TOBY HASSALL, CHIEF ANALYST, CWA GLOBAL MARKETS PTY LTD
"This will certainly be a positive news for resource companies and it shows that the Australian public isn't in favour of the mining tax."
MARK TAYLOR, SENIOR RESOURCES ANALYST, MORNINGSTAR
"It'll probably be viewed as a near-term positive (for the resources sector). If they've gone to the trouble to put a new leader in to get their re-election chances up, then obviously they're going to water down the mining tax as well -- all part of that strategy to shore up voter support. I think you'll find that they might do something fairly radical. They might either say they're going to put it on the backburner and look at the whole thing all over again from a fresh start, or they'll make a fairly large concession on the uplift rate or the headline rate ... Kevin Rudd had just a point blank no-negotiation sort of stance. His falling on his sword will allow them now to negotiate. It'll give them more licence to backtrack a bit on the tax."
CHRIS STOTT, PORTFOLIO MANAGER, WILSON ASSET MANAGEMENT
"The main thing is if she (Gillard) turns over on the mining tax. Unless she were to comment on further amending the tax, I don't think there is any short-term impact on equity markets."
DAMIEN BOEY, STRATEGIST, CREDIT SUISSE EQUITY
"Markets never really like this sort of political turmoil in leadership but I think the RSPT (mining tax) was weighing on the market and even indirectly on some of the financial stocks because there was talk of a super tax on them.
"I think one of the grounds this battle was fought on was the RSPT and it will have to be softened significantly.
"My suspicion in all of this, with all this disorder in the Labor Party and the very short turn-around leading up to the next election, some people will be thinking the (opposition) Liberal Party might win, in which case any RSPT is well and truly gone."
JAMES WILSON, MINING ANALYST, DJ CARMICAEL & CO
"There is no doubt the controversy over the super profits mining tax was what drove the final nail into Kevin Rudd's political coffin. It's a lesson the Labor party appears to have learned, that it must engage with the mining industry over this tax."
JULIANA ROADLEY, MARKET ANALYST, COMMSEC
"It's a decision that allows them to go back to the table and look at some of their policies. The focus there will be on the (listed) miners, and we're expecting them to move higher. We're expecting a solid rise ... With the Aussie (dollar), I don't think there'll be too much going on. Everything else is really strong, so a change in leadership is not going to make too much of a change in the market."
SU-LIN ONG, SENIOR ECONOMIST, RBC CAPITAL MARKETS
"Clearly this is a positive for the Australian dollar and stocks in the short and medium term. It removes the political uncertainty that had been growing and would have only got worse. We assume Gillard will negotiate on the mining tax and produce a watered-down version. Longer term, we're not so sure it's good for bonds. 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."
RICHARD SCHELLBACH, EQUITY STRATEGIST, CITI
"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."
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