China's demand for metals and energy is splitting Australia in two, pitting resource-rich Western Australia and mining companies from BHP Billiton Ltd. to Xstrata Plc against the rest of the country.

Coal and metal sales to the fastest-growing major economy prompted Reserve Bank of Australia Governor Glenn Stevens to raise interest rates six times in seven months, fuelling a 27 percent gain in the Australian dollar since the first quarter of 2009 that hurt exporters like wheat farmer John Springbett.

"We're going broke by the minute," said Springbett, who ships about 4,000 tons of grain a year to Indonesia, India and the Middle East from his farm, 100 kilometers east of Perth.

Prime Minister Kevin Rudd, facing an election within 10 months, has reacted by proposing a 40 percent tax on mining income and reducing levies on other businesses in an effort to redistribute profits. BHP, the world's biggest mining company, and Xstrata, the top thermal coal exporter, are fighting the tax, saying it undermines the competiveness of Australia, the world's largest shipper of coal and iron ore.

"It's very much a two-speed economy that's emerging," said Saul Eslake, an economist at the Melbourne-based Grattan Institute, a non-partisan state-supported research group. "If the mining tax has the incidental effect of slowing down the rate of investment in the resources sector, it might lessen the role monetary policy has to play."

David Fuller's view These are cyclical industries. A generation of miners experienced difficult times before the current boom. I sympathise with the farmers but they had an exceptional run in the first half of 2008, provided they had decent crop yields. It is swings and roundabouts and a Robin Hood policy by government, however well intentioned, is probably more contentious than helpful.

I trust Australian subscribers to tell me if I am wrong on this point.