Interpac Business and Migration Solutions Melbourne Australia

(October 26, 2011)

Evy Hambro described the carbon and mining taxes as 'two new burdens that are having to be shouldered by resource companies'. Photo: Michelle Mossop

AUSTRALIA has become a less attractive place to invest since new taxes on carbon and mining were proposed, according to one of the world's most influential investors in mining and resource stocks.

But Prime Minister Julia Gillard yesterday insisted the government would deliver on the mining tax peace deal it stuck with the three mining giants, BHP Billiton, Rio and Xstrata.

And, in a dramatic escalation in the war of words over the carbon tax, Climate Change Minister Greg Combet accused Opposition Leader Tony Abbott of falling back on ''xenophobia'' in his attacks.

BlackRock is the world's biggest asset manager and the single biggest shareholder in BHP Billiton. Its managing director, Evy Hambro, told The Age: ''Australia has definitely dropped down the list relative to its historical position because of the uncertainty around the tax changes.''

He described the carbon and mining taxes as ''two new burdens that are having to be shouldered by resource companies''. ''A quick win on tax revenue can often cost many jobs and can often lead to significant lost investment into a country.''

Mr Hambro said several nations had followed Australia's lead and considered increasing their take of mining profits as part of a global trend towards ''resources nationalism''.

Despite looming parliamentary hurdles over the mining tax, Julia Gillard said: ''We will deliver the agreement that I entered into with the biggest mining companies in the middle of last year. ''I've deliberately taken the approach here that we wanted to work every step of the way in consultation with the mining industry, and we're continuing to do that.''

Lower house king-maker Andrew Wilkie - whose vote the government needs - has signalled he is listening to substantial criticisms about last year's peace deal being raised by smaller miners, who remain fierce opponents of the tax.

The government also faces pressure from the Greens in the Senate, with the balance-of-power players saying the government has already given away too much to make peace with the big companies.

Mr Combet, meanwhile, condemned Mr Abbott for eschewing an international carbon market. The Opposition has rejected the use of international credits, arguing that a global scheme is vulnerable to massive fraud and that Australia should clean up its own backyard rather than pay for other countries to cut their emissions.

''This stance reflects the Opposition Leader's preference for the crude and irrational politics of xenophobia over responsible and rational policy-making,'' he said. ''Business should be concerned at this new anti-market tendency in the Coalition's approach to economic policy.''

In July, Mr Abbott said in a speech he was ''all in favour of doing the right thing by the carbon traders of Equatorial Guinea and Kazakhstan and all the other places that Kevin Rudd likes to visit''.

In 2015, the government's carbon tax - due to start in July - will shift to a market system in which permits to emit carbon can be bought not just within Australia but from other countries deemed to have credible carbon schemes