Resource tax compromise 'sought'

Independent senator Nick Xenophon believes the Rudd government and the mining industry are working frantically to thrash out a compromise on the resources super profits tax.

The government is under pressure from miners and some state governments to give ground on the 40 per cent tax which it plans to impose from 2012.

Leading economist Ross Garnaut, a proponent of a resources rent tax for nearly 30 years, has said the government should "contemplate variations to their approach".

Professor Garnaut has won the backing of Senator Xenophon who says cool heads need to prevail on both sides of the debate.

"I suspect the mining industry and the government are frantically trying to thrash something out behind closed doors," he told ABC Television on Friday.

"I don't think the federal government relishes the thought of the mining industry providing a multi-million dollar war chest against them.

The South Australian government says the commonwealth must ensure the tax won't deter new investment in its state, which is on the "potential cusp" of mining growth.

"If the final design of the tax ... does have negative reactions the commonwealth will have to wear that," Mineral Resources Development Minister Paul Holloway told ABC Radio.

A super profits tax was justified, something the mining industry "begrudgingly" accepted.

The question that needed to be addressed was the rate of tax and how it was applied, Mr Holloway said.

"I would like to think that certainly in some of these key design features that they (the federal government) will compromise."

Mr Holloway is also skeptical that mining giant BHP Billiton will shelve plans to expand the Olympic Dam project because of the tax.

"I'm not sure that they've actually put it on hold," he said, noting that an initial environmental impact statement had been released.

"There's been response to that (statement) from government and the community."

A supplementary statement is due for release later this year.