Australian Treasurer Wayne Swan said he supports the 40% resource tax, dismissing claims that the tax on mining profits will hit investment or increase domestic prices.

Swan said the 40% Resource Super Profits tax will replace an inefficient royalty system and thereby should increase investment.

The tax will not affect the prices of coal, gas or electricity within the country as these are based on international markets.

The proposed tax will be enforced on mining companies with returns that exceed the rate of long-term Australian Government bonds, currently at 6%, counterbalanced by credit for royalties paid to state governments.

Swan also said the tax will not harm existing projects, saying mining companies will receive generous recognition of their past investment costs.

Mining companies currently pay less tax than any other retail or manufacturing industry in the country, according to the treasurer.

Meanwhile, BHP Billiton and Rio Tinto have urged the government to consider all aspects of the tax while Fortescue Metals said bankers have pulled out of funding its two major projects in light of proposed profit tax.

The tax is projected to raise about $11bn in its first two years and is due to be implemented from July 2012.