Australia PM plays down setback in carbon tax repeal plan

Australian Prime Minister Tony Abbott Friday brushed off a defeat in the Senate on repealing the country's carbon tax, calling it normal "argy bargy" that would not derail a key election promise.

Abbott went to the polls in September vowing that the divisive pollution levy would go, arguing the cost was being passed to consumers, resulting in higher utility bills.

But his plans took a hit on Thursday when the Palmer United Party (PUP), which previously said it would support the repeal, made a last-minute about-turn and the bill was narrowly defeated.

The government must walk a tightrope in the upper house, needing the backing of minor party senators such as those from PUP to get its legislative agenda passed if it cannot secure support from Labor or the Greens.

This includes not only scrapping the carbon tax but the massive spending cuts it has planned to bring the budget under control.

Abbott called the setback "situation normal" and denied his entire platform of reforms was under threat by a divisive new-look Senate that came to power on July 1.

"Look, one or two days of argy-bargy certainly doesn't make a political stalemate and I think it is a mistake to see the whole of the life of this new Senate being like the last couple of days," he said.

"I'm confident that once things settle down that it will be more than possible for the government to get the vast majority of its measures through in some reasonable shape or form."

He said the government would talk with all the crossbenchers, including PUP.

Abbott said he was confident the tax would be scrapped next week, with the bill set to be re-introduced on Monday.

"We will work patiently and carefully and methodically over the weekend," he said, to "ensure that the parliament deals with this next week and the carbon tax is gone once and for all".

The tax was imposed by the former Labor government on major polluters from 2012 in a bid to reduce carbon emissions.

The government says its axing would save the average household Aus$550 ($517) a year and strengthen the economy, which is among the world's worst per capita polluters due to its reliance on coal-fired power and mining exports.

Under the levy, the country's biggest polluters pay for the emissions they produce, giving them an incentive to reduce them.

Abbott favours a "direct action" plan that includes financial incentives for polluters to increase their energy efficiency.

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