* Opposition leader says wary on majority foreign
investments

By Rob Taylor

CANBERRA, Aug 17 (Reuters) - Australia's opposition said on
Tuesday it would be cautious about investments by foreign
state-owned firms if it won cliffhanger elections on Saturday,
as economic credibility emerged as a key voter issue.

Conservative opposition leader Tony Abbott said he would
take special care about these investments in local firms, as
China in particular eyes Australian resource companies.

China is the third largest foreign investor in Australia
and its biggest trading partner, but increasing investment in
the resource sector by state-owned Chinese firms has led to
concerns among many voters and lawmakers.

"I would be very careful about majority ownership of
Australian assets by government-controlled entities. And I'm
not singling out China here," Abbott told the National Press
Club in a nationally televised address.

"I believe in private enterprise above all else. I don't
particularly want to see nationalisation of businesses by
Australia, yet alone nationalisation of Australian business by
other countries' governments," he said.

Australian mining companies have voiced alarm about foreign
investment rules, demanding more transparency, although most
deals are approved by the Treasury's foreign investment
regulator, including a $2.9 billion takeover of coal miner
Felix Resources by China's Yanzhou Coal completed in January.

INTEREST RATES KEY

After Labor Prime Minister Julia Gillard placed financial
competence at the centre of her campaign on Monday and cast
Abbott as a jobs and investment risk, the conservatives
unveiled an economic action plan and sought to reassure the
central bank on support for its inflation target of 2-3
percent.

"We stand by that," opposition treasury spokesman Joe
Hockey told reporters. "We believe that to be a reasonable
level. I have spoken to the governor of the Reserve Bank about
that issue."

The conservatives have blamed rising interest rates on
stimulus spending by the centre-left government, saying its
largesse has forced the central bank to tighten credit more
than otherwise necessary.

Interest rates are an election-swinging issue in Australia,
where house ownership is seen as almost a right and two-thirds
of voters own or are buying their own home.

The Reserve Bank of Australia (RBA) has been credited with
helping Australia avoid recession during the global financial
crisis, cutting interest rates aggressively during the downturn
and quickly raising them as recovery signs emerged.

"It's significant. It's very positive for domestic and
overseas financial markets because the adoption of a formalised
inflation target here was a very positive development for
overseas investors," said Michael Workman, senior economist at
Commonwealth Bank of Australia.

The bank is independent, but Saturday's election winner
will have the rare opportunity to re-shape its leadership, with
almost the entire board coming up for reappointment in the life
of the next three-year parliament.
Gillard's Labor has a slight lead over Abbott, who has run an
anti-reformist platform opposing new mining and carbon taxes.
He also wants to scrap construction of a new $38 billion
broadband spanning the country which Labor proposes.

Gillard unseated ex-Labour leader Kevin Rudd in a party
coup in June after opinion polls showed a post-global financial
crisis mood for economic restraint sweeping Australia and
damaging Labor in opinion polls.

The latest Reuters Poll Trend shows Labor marginally ahead,
while a Newspoll poll on Monday was the second in a few days
which showed Labor with a four-point lead over the opposition,
although surveys have shown the lead changing hands frequently.

(Additional reporting by James Grubel in Canberra and
Morag MacKinnon in Sydney; Editing by Miral Fahmy)