Australian PM extends lead in election race

SYDNEY (Reuters) - Australian Prime Minister Julia Gillard's chances of winning an August 21 election were boosted on Monday with an opinion poll showing voters overwhelmingly preferred her as prime minister.

The country's first woman prime minister, appointed in a Labor party coup last month, held a commanding 57-27 lead over conservative leader Tony Abbott as preferred prime minister, according to the Newspoll survey in The Australian newspaper.

The Labor government held a 55-45 lead over the Liberal-National opposition, the survey showed. This compared with weekend Galaxy polls putting Labor just ahead or neck and neck.

"There will be many, many polls between now and election day. What I know is that this election is genuinely on a knife-edge," Gillard told radio on Monday, the second day of the campaign.

The opposition only needs nine more seats from its current strength to form a government with four independents, or 13 to take office outright.

The election is being fought over the government's plans for a new 30 percent mining tax, its promise of a carbon price to tackle climate change, management of Australia's robust economy and asylum seeker/border protection issues.

Financial markets did not react to the fresh poll numbers, but there are some market risks.

"Because both parties are close to the center of the political spectrum, the economy is in good shape and there are no defining issues, the risk is that minor parties and independents will pick up ground. That creates the risk of a very tight result, a hung parliament or a minority government," Craig James, chief economist at CommSec, said in an election analysis.

A conservative win is expected to see mining stocks jump.

The opposition has vowed to dump the government's mining tax, which is estimated to raise A$10.5 billion from 2012 and has been signed off on by global miners BHP Billiton, Rio Tinto and Xstrata.

The opposition is also opposed to a carbon price, saying it would be a burden on consumers and business. But business has warned the lack of a climate policy and carbon price is having a negative impact on investment, especially in the power sector.

Gillard has yet to announce her climate policy.

Fund managers said aside from mining tax, some uncertainties had been cleared after an A$11 billion agreement with Telstra Corp to help build a national broadband network.

"The government's done a fair bit to remove some of those uncertainties already as we go into an election. Those are the sort of things that catch the market to some degree," said George Clapham, head of equities at Arnhem Investment Management.

DEAL WITH GREENS

The Labor government was headed for electoral defeat before a Labor party coup saw Gillard replace Kevin Rudd on June 24.

The postponement of a carbon trading scheme by Rudd saw Green voters desert Labor and Gillard needs to woo them back.

Labor and the small Greens party agreed a deal on Monday to ensure Labor gains Green votes in the lower house, which will determine government, if a Green candidate fails to win.

It will also mean that the Greens receive Labor votes in the upper house Senate, where they are expected to have the balance of power, if a Labor candidate fails to win.

A Greens-controlled Senate could push Labor to introduce an interim carbon price in return for support on other legislation.

(Additional reporting by Sonali Paul; Editing by Ed Davies and Sanjeev Miglani)