By Rob Taylor
CANBERRA (Reuters) - Australia's next minority government will be under pressure to retain a proposed mining tax, with three out of four independent and Green MPs who hold the balance of power saying they supported the controversial tax.
Australia's mining-share index hit an intra-day low, shedding 1.6 percent at one point after the news, while the broad market hit a seven-week low on the political uncertainty.
"The sentiment in the resource sector and the banks particularly, has been hit quite hard," said Anthony Whitaker, an institutional equities dealer at CMC Markets.
The market has been hoping the tax, a key plank of Prime Minister Julia Gillard's ruling Labor party platform, would be ditched after Saturday's elections produced a hung parliament.
"The concept of a rent resource tax I think should be endorsed, because it's a more effective and efficient way to tax profit than to tax production," independent Tony Windsor told a press club lunch.
But the independents said Labor's current mining tax may need to be revised as part of wider tax reforms.
Opposition leader Tony Abbott opposes the plan for a 30 percent profits tax on big coal and iron ore mines.
Tim Schroeders, fund manager at Pengana Capital, said: "We would still assume the majority probability is that the mining tax gets implemented but would be happy to be pleasantly surprised if it were otherwise."
The independents said economic issues would guide their thinking on who they support, warning of fresh elections if a deal cannot be struck. They also called for a commitment to stable government for three years in any political deal.
Gillard and Abbott held their first meetings with the group, and both leaders committed to serving a full three-year term if they win power.
"I did make a commitment to serve a full term if I become prime minister. I did make a commitment that there would be no election prior to August 2013," Abbott told reporters.
SEVEN DEMANDS
The three independents made seven broad demands to Gillard and Abbott, including a call for a briefing by top Treasury officials on budget finances.
Other demands included briefings from senior public officials on resources, broadband policy, health, climate change and energy, defence, education, employment laws, infrastructure and transport, and agriculture.
"We do think this is about the economy and we do think the next three years needs some consideration of things such as election promises and election commitments, and both the costings and the impact on the budget and the economic cycle for the next three years," said independent Rob Oakeshott.
Another independent Windsor, a former farmer, said if talks broke down, he and the others were not afraid to withhold support from either side and force fresh elections in the hope of breaking an impasse that has unsettled financial markets.
The chances of a conservative government appeared to rise slightly after the ruling Labor party looked to have lost another seat to a fourth independent, Andrew Wilkie, in Tasmania. Gillard said she would meet Wilkie in Melbourne in the coming days.
As well as the fate of Labor's mining profits tax, the next government will also decide the future of the government's planned $38 billion (24.7 billion pound) broadband network and a future carbon price. Abbott's conservative coalition oppose these policies.
Bookmakers now put the opposition under Abbott as slight favourites to form a minority government ahead of Gillard, but shortened the odds of an early election.
Latest projections give Labor 72 seats and the opposition conservatives 73 seats, with 76 seats needed to command a majority. That would leave four independents and a sole Green MP holding the balance of power.
(Additional reporting by James Grubel in Canberra and Morag MacKinnon in Sydney; Editing by Alex Richardson)
