Death of Australian mining boom exaggerated, says PM
September 5, 2012, 11:25 am TWN
SYDNEY -- Australian Prime Minister Julia Gillard Tuesday denied claims that the mining boom was over, saying its benefits would last decades even as a key forecaster warned more projects may be shelved.
Resources Minister Martin Ferguson last month declared “the resources boom is over,” prompting a flurry of speculation that falling commodity prices could see the lucrative industry wind down.
Gillard's declaration came on the day that iron ore miner giant Fortescue announced it would defer planned developments, while BHP Billiton last month shelved its multibillion-dollar expansion of the Olympic Dam copper and uranium mine.
But the prime minister said the resources boom, which helped Australia to avoid recession during the global financial crisis, had three distinct phases and only the first — the commodity prices boom — was “now passing.”
“Reports of the mining boom's death have been exaggerated,” she told a mining conference in Perth.
Gillard said the investment boom was still to reach its peak — with investment set to hit AU$119 billion (US$122 billion) by the end of this financial year.
This would be followed by the production boom which would come to fruition in the decades ahead, she added.
Key market China was still only about halfway through its process of urbanization and industrialization and India was yet to undertake the most dramatic stage of its rise, she said.
Australian mining projects have faced headwinds from depressed conditions in Europe and the United States, softening growth in China and increased competition from other producers as well as falling commodity prices.
Chief economist at Australia's Bureau of Resources and Energy Economics, Quentin Grafton, said Tuesday that more mining developments could be shelved given the sharp fall in commodity prices.
“If prices continue to decline — and they declined substantially in the last six to eight weeks — then that clearly will have a negative outlook in terms of what companies are prepared to invest over the long term in projects,” he told Dow Jones Newswires.
The price of iron ore, a crucial ingredient in steelmaking, has fallen dramatically in the past two months as the Chinese economy slows, while the price of coal, another major Australian export, has also dropped sharply.