Battle lines drawn as Rudd tries for image shift

CANBERRA - The battle lines for this year's Australian elections are being drawn as Prime Minister Kevin Rudd works to overcome a series of backflips and blunders to define himself as champion of the nation's suburban battlers.

He has reinforced his strategy with new tax measures that will create a huge redistribution of wealth and improve the lot of small business, retirees, and the retirement savings of low-income earners.

But the decision to hit the resources sector with a new A$9 billion ($11.4 billion) "super tax" to fund superannuation incentives and infrastructure spending - as well as padding what is expected to be a tight Budget next week - has run into furious opposition from miners.

The Opposition has also attacked the package announced jointly by Rudd and Treasurer Wayne Swan at the weekend, especially for its failure to adopt more than a small handful of the exhaustive, long-term reforms recommended in the report on which the Government based its decisions.

Most of the 138 recommendations of the long-awaited review of the taxation system by Treasury Secretary Ken Henry have been pushed on to the back burner or rejected outright as Rudd prepares for what he fears will be a close-run election.

And while Opposition Leader Tony Abbott has yet to decide what position the Coalition will take when the legislation needed for the resources super-tax reaches the Senate, it is likely Rudd will defer the laws until after the election to avoid any risk of defeat.

"I can't give you a timetable, but we've got a fair bit of time to sort this one out and whether it happens before or after an election is not something I would speculate about," Swan said.

Despite polls indicating that even with a narrowing of its lead the Government is likely to be re-elected - the latest Morgan poll gives Labor a comfortable nine-point margin - Rudd has been showing signs of panic.

He has suffered a series of blows from scandals, poor programme management, the failure or ditching of promised policies and the decision to abandon efforts to force a greenhouse emissions trading scheme through the Senate.

The ETS was not only the central plank of Labor's climate-change policy, but also a litmus test of Rudd's credibility: he had defined it as the "greatest moral challenge of our time" and attacked as cowards anyone who opposed or backed away from the scheme.

Rudd is now trying to push all this behind him by swinging emphasis on to social issues, beginning with the health reforms he recently announced after a bruising row with the states and which cost not only significant compromises but also an extra A$5.3 billion.

He has also taken on the big tobacco companies, announcing a 25 per cent hike in excise and the mandatory introduction of plain packaging with the "bring it on" rhetoric he is now using to push the new resources tax.

"The fear campaign [against the new resources tax] will be large and the fear campaign will be well-funded, and ... our political opponents will use it for a scare campaign.

"But I'd ask the proponents of the fear campaign why it is that mining profits have risen by A$80 billion in the past decade but royalties for all Australians have only increased by A$9 billion?"

Under the proposed scheme, 40 per cent of pre-tax profits realised after mine development costs have been met will be collected by Canberra, raising an estimated A$9 billion a year.

This will be used for infrastructure programmes and to fund a fall in company tax from 30 per cent to 29 per cent by 2014-15 - two years earlier for small business - and superannuation tax incentives for people over 50 and those earning up to A$37,000 a year.

But Abbott said the move was a huge new tax that would kill the mining boom and that he was "deeply hostile" to what he described as a penalty tax.

"This is a Government just searching desperately for new sources of revenue to feed its spending addiction."

While the resources industry has launched a bitter counterattack, Rudd's moves have been welcomed by the superannuation industry, tax accountants and unions.

"All Australians should benefit from the resources boom, not just highly profitable mining companies," Australian Council of Trade Unions secretary Jeff Lawrence said.