SYDNEY, Australia (CNN) -- Australia's parliament resumes for 1999 on Monday with Prime Minister John Howard's re-elected government facing a showdown with the Senate over key legislation on tax reform and privatization.

Howard's conservative government has a five-month window in which to pass legislation before newly-elected senators take their places in the upper house, leaving it dominated by left-leaning parties that will almost certainly block key elements of his second-term reform agenda.

Howard has made it clear he intends to overhaul Australia's tax system. The centerpiece of the prime minister's reform plan is a 10 percent value-added goods and services tax.

Howard's argument is that tax reform is critical to Australia's economic well-being -- particularly at a time when much of Asia is embroiled in financial turmoil.

The government says the proposed tax, which would replace a myriad of indirect taxes, would broaden the tax base. Offset by hefty income tax cuts designed to increase public support, the plan would cost the budget about one percent of gross domestic product once it begins in 2000.

The conservative government "has this window of opportunity, which lasts until the first of July, and if it can get something through in that period it has succeeded," Australian Defense Force Academy political analyst Malcolm Mackerras told Reuters.

Howard also wants to sell the remaining two-thirds of telecommunications company Telstra.

Although the government does not control the Senate, Howard has managed to get controversial measures, such as Telstra's partial sale, through the upper house, with the support of independents Brian Harradine and Mal Colston.

Howard's problem in trying to pass legislation before July is that Harradine has also expressed concerns about the equity of the government's tax package and the benefits of selling Telstra.

In an attempt to win Harradine's support the government has set up a special Senate inquiry into the goods and services tax that will report in time for a vote before mid-year.

However, Howard has said he would not accept any changes to the tax package, such as removing the goods and services tax from food.

The government has also tried to increase the pressure on the minor parties in the Senate by linking tax reforms to other benefits.

Treasurer Peter Costello said earlier this week that if economic growth were maintained, and tax, welfare and labor market reforms were introduced, unemployment could fall from around eight percent to levels of four to five percent.

He did not give a timeframe or commit to any target.

"It's interesting that the government is raising questions on unemployment levels," said Rodney Smith, a political scientist at the University of New South Wales.

"I think what's happening there is unemployment, which is a problem everyone is worried about, can be used to lever a whole set of other economic objectives through the parliament."

Howard has claimed he has a public mandate for tax reform.

"I hope they respect the fact that the public voted for us in the last election," Howard said in a radio interview on Thursday.

Analysts say the government's hardline no-negotiation position is unrealistic given the Senate makeup and it must decide on a compromise before July 1.

While Howard's next six months will be dominated by economic issues, the second half of 1999 will also see him face the seemingly intractable issue of whether Australia should become a republic, with an Australian president replacing Britain's Queen Elizabeth as head of state.

Howard, an avowed monarchist, has promised to hold a national vote on the republic issue in November, but not only is the Australian public divided on the issue, so too is his government and senior ministers.

Reuters contributed to this report.