By James Grubel
CANBERRA (Reuters) - Australia's Labour government took a narrow lead into the final two weeks of the August 21 election on Monday, defending plans to impose a 30 percent tax on big miners.
Prime Minister Julia Gillard's campaign has struggled over the past two weeks due to internal divisions over the dumping of former prime minister Kevin Rudd, and some polls show opposition leader Tony Abbott could win power or that Australia.
However, the latest Newspoll gave Gillard's Labour a four point lead, with the government on 52 percent compared to 48 percent for the conservative opposition, prompting both sides to warn voters the election will be tight.
"What it shows is that the electorate is I suppose a bit volatile. The polls will go up and down," Abbott told Australian television while campaigning in the northern Queensland state.
Gillard would not comment directly on the polls, but echoed Abbott's sentiment while campaigning in the key mining state of Western Australia.
"I think here in Western Australia and right around the country, this election campaign is going to be tough, it's going to be close," Gillard said.
The latest Reuters Poll Trend shows Australia faces the risk of its first hung parliament since World War Two.
The government has proposed a 30 percent tax on big iron ore and coal mines, affecting companies such BHP Billiton, Rio Tinto and Xstrata, which have agreed to the tax plan.
The issue has hurt Labour in the mining states of Western Australia and Queensland, and the original plan for a 40 percent tax on all mining projects was partly responsible for Rudd losing power to Gillard.
Smaller mining companies remain angry about the scheme. Abbott has promised to abandon the tax if he wins office and his treasury spokesman Joe Hockey on Monday said the tax would stifle investment in the booming resources industry.
"I saw value-add mining businesses on their knees when the government introduced the mining tax," Hockey said in a televised debate with Treasurer Wayne Swan.
"Those people in particular are wondering just how, with an extra A$10 billion (5.7 billion pounds) of tax on their shoulders, they are going to have value add in Australia."
Swan said the tax would help pay for the government plan to cut company tax to 29 percent from 30 percent, and to fund higher employer contributions into worker pension fund accounts.
"Employment and investment in mining is surging, as we speak. Those investments are being made in the full knowledge that our minerals resource rent tax is fair, and equitable, and that the investment pipeline is very strong," Swan said.
The opposition and mining industry have warned that Labour could change its mining tax plan after the election, by doing a deal with the Greens, who are likely to win the balance of power in parliament's upper house Senate.
But Gillard ruled out any changes, saying she would stand by the deal forged with BHP Billiton, Rio Tinto and Xstrata, with the tax only to apply to mines with profits of A$50 million ($45 million) or more.
"I became prime minister, I reached the breakthrough agreement. It's done. Full stop. End of sentence," she said.
Labour under Rudd won power in November 2007. No Australian government since 1931 has lost after a single term.
(Editing by Jonathan Thatcher)
