Australian Resources Minister Martin Ferguson said the nation’s mining boom has ended as BHP Billiton Ltd. (BHP) delayed approval of its Olympic Dam expansion that Deutsche Bank AG estimated at A$33 billion ($34.7 billion).
“You’ve got to understand, the resources boom is over,” Ferguson told Australian Broadcasting Corp. radio today. “It has got tougher in the last six to 12 months.”
Australia’s economy has been powered by the biggest resource bonanza since a gold rush in the 1850s as Chinese-led demand for iron ore, coal and natural gas brought investment projects the government estimated to be worth A$500 billion. BHP, the world’s biggest mining company, said yesterday it doesn’t expect to approve any spending on major projects this fiscal year as metal prices decline amid sluggish global growth.
Prime Minister Julia Gillard’s government is seeking to end four years of budget deficits and return to surplus by mid-2013, and weaker resource investment may threaten that goal ahead of elections due next year. The opposition Liberal National coalition has attacked Gillard’s new taxes on carbon emissions and mining profits, saying they have created investor uncertainty and risk stifling economic growth.
Gillard’s Labor Party is trailing in opinion polls, on 35 percent in a Newspoll survey published in the Australian newspaper on Aug. 21, up 2 percentage points from two weeks earlier, compared with 45 percent for the coalition.
“The investment environment is nowhere near as healthy as before this government came into office and implemented these policies,” Julie Bishop, deputy leader of the Liberal-National opposition, told reporters in Canberra today.
Ferguson’s suggestion that the boom has run its course contrasts with a forecast from the Reserve Bank of Australia, which said in its quarterly statement on monetary policy Aug. 10 that “it is estimated that the peak in spending on resource investment will be sometime in 2013-14.”
There is a “very large stock of work in the pipeline,” the RBA said in minutes released this week of its Aug. 7 policy meeting, when it left the benchmark interest rate at 3.5 percent. “This had occurred despite some mining companies adopting a more cautious approach to potential, but yet to be approved, investment projects.”
The Australian dollar advanced for a fourth straight day, trading at $1.0518 at 3:44 p.m. in Sydney. The currency has jumped about 50 percent since the end of 2008.
The local dollar’s strength has contributed to what policy makers have called a two-speed Australian economy, led by the resource-rich regions in the north and west, while tourism and manufacturing in the south and east struggle.
The unemployment rate in Western Australia state that’s a hub of iron-ore mining was 3.6 percent in July, compared with 5.4 percent in South Australia, where BHP’s Olympic Dam project is located, according to government figures.
A proposed expansion of Woodside Petroleum Ltd. (WPL)’s A$15 billion Pluto project in Western Australia is on hold after the company said yesterday it failed to find enough gas to support a second phase.
“There’s no doubt that it’s a more cautious time, particularly the short-term outlook is indeed more cautious,” Lance Hockridge, chief executive officer of QR National Ltd. (QRN), Australia’s biggest rail freight operator, told Bloomberg Television today.
Gillard told parliament today that while the commodity price boom was over, the investment boom wasn’t. Those comments were echoed by Finance Minister Penny Wong.
“We’ve still got a long way to run when it comes to this investment boom,” Wong told ABC radio today. “The doom and gloom that some are putting about isn’t appropriate.”
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