By Rob Taylor
CANBERRA (Reuters) - Australia faces a hung parliament at elections due in months, opinion polls show, with the Greens emerging as potential kingmakers after the government stumbled into a brawl over a planned tax on mining profits.
Prime Minister Kevin Rudd is still favoured to win a second term but his credentials on the right and left have taken a battering. Having already found it difficult to pass legislation, a hung parliament would risk policy paralysis for Rudd.
Support for Rudd's government over the conservative opposition is a razor-thin 51 percent to 49, a Newspoll published in The Australian newspaper showed on Tuesday.
Backing for the minority Greens party rose to a record high, underscoring expectations they may become kingmakers with as many as seven seats in the upper house. Independents could also hold the key to the lower house.
"Some disappointment is being reflected against the government," Rudd told a closed meeting of government lawmakers on Tuesday, adding that he believed voters were still making up their minds and that the opposition was not gaining strength.
If the poll results were carried through to an election, Rudd could need support from three independent lawmakers to hold onto power in the lower house. [ID:nSGE64R00O] He would then face a substantial Green bloc in the upper house whose support he would need to enact new laws like the proposed 40 percent mining tax.
The poll will worry government strategists as they think of ways to combat Australia's rich mining sector, which has launched campaign-style opposition to the tax plan, and salvage Rudd's reputation among voters who increasingly see him as ineffective.
The next election is expected by political analysts to be held around October and be fought partly over the mining tax, which underpins Rudd's strategy to boost retirement incomes and wipe out the fiscal deficit by 2012-13.
Legislation for the planned tax is not expected to be written before 2011 and it would not come into force until 2012.
But Rudd's government is already in the opening stages of a protracted election campaign and political analysts have criticised its early tactics.
A multi-million dollar advertising campaign ordered by Rudd in support of the tax, but which broke Rudd's own rules against taxpayer-funded political advertising, rebounded. Only a third of voters supported the campaign, the latest Newspoll showed.
The $32 million (22 million pounds) campaign argues that mining giants like Rio Tinto and BHP BillitonAX> are making massive profits and taxpayers should get a bigger share.
HOSTILE RECEPTION
More than 80 mining companies have opened closed-door talks with the Treasury department over a tax which Rio Tinto last week said made Australia its top sovereign risk globally.
Rudd has pulled out of a national mining conference in Canberra on Wednesday which Australian leaders traditionally address, expecting a hostile reception. Resources Minister Martin Ferguson will speak at the conference instead.
Rudd and his senior ministers have dug in for a long fight and vowed no changes to the planned tax, Rudd describing the mining industry's campaign against the tax as "a rolled gold bucket of fear, and almost exclusively based on myth."
"This is important reform. We remain fundamentally committed to it," Rudd said on Tuesday.
After shelving plans for emissions trading and expanded childcare services, and dumping a troubled home insulation programme, satisfaction with Rudd's performance has slipped three points to 36 percent, a halving since September last year.
Support for the Greens, who hold five crucial upper house votes needed by the government to pass laws, jumped six points in only six weeks to 16 percent support, Newspoll showed, mostly because of reverses by Rudd on environment issues.
Despite that, the opposition has not gained much traction so far and they failed on Monday with a "no confidence" motion against Rudd in parliament.
The government has said it will not shift on either the 40 percent mining tax rate or its application to existing projects, although resource analysts expect Rudd to soften the planned 6 percent profit level at which it will kick in.
Thirty-six percent of respondents said they were in favour of the resource super profits tax against 41 percent opposed it, the closely watched Newspoll said. A third of voters thought they would be worse off under the tax and only 22 percent expected to be better off.
(Editing by Paul Tait)
