Losing to rival party in New South Wales, Australia's Labour Party now faces the prospect of having tougher times seeing the taxes on carbon emissions and mining profits legislation getting approved.

NSW, still the most populous state in Australia, voted for Barry O'Farrell's Liberal-National coalition inflicting the worst defeat in Labour Party's history in the March 26 ballot.

This win by the Liberal-National Coalition pushes down the Labour seats to 19 from 50, reports said.

Bloomberg News said this new development spells a gloom and doom scenario for Prime Minister Gillard and her Labour Party.

"This is doom and gloom for Julia Gillard," said John Warhurst, a political analyst at Australian National University and quoted by Bloomberg News. "If federal-state relations break down, it will be very difficult for Gillard to get runs on the board -- particularly on climate and mining laws."

O'Farrell's coalition joined those elected in Victoria and Western Australia states since 2008 that oppose Gillard's plans to price carbon emissions from next year and place a 30 percent tax on iron ore and coal profits. The three states contribute 67 percent of Australia's A$1.3 trillion ($1.33 trillion) economy.

"A carbon tax pushes up prices, it threatens jobs," O'Farrell told Sky News television yesterday. "You can't support a carbon tax and say you're trying to reduce costs for families."

O'Farrell, a 51-year-old father of two, said he also opposed a plan to limit the increase of state mining royalties through a tax on profits of companies like Rio Tinto and BHP Billiton.

The federal government, due to hold its Cabinet meeting on March 30 in the Western Australia state capital, Perth, is forecast to raise A$7.4 billion in the levy's first two years starting in 2012.

Compromises

O'Farrell told Sky: "Mining royalties are clearly important to all states including New South Wales. We can't afford to have an attempt to reduce our revenues from such critical areas if we're to fix our services and fix our infrastructure."

The coalition promised to solve traffic problems in the capital, Sydney, home to more than half NSW's population of 7.2 million people, and fund more police, nurses and teachers.