Mining boom is over, says key minister

Published on 24/08/2012 00:00

AUSTRALIA’S resource minister has declared the end of its mining boom, a day after the world’s biggest mine company, BHP Billiton, shelved two expansion plans worth at least ­­£25 billion.

“The resources boom is over,” resources and energy minister Martin Ferguson told Australian radio yesterday. “We’ve done well – A$270bn (£176bn) in ­investment, the envy of the world. It has got tougher in the last six to 12 months.”

Mr Ferguson’s comments came after BHP scrapped plans for a £12.5bn-plus expansion of its Olympic Dam copper mine in South Australia and a new harbour, estimated at more than £12.5bn, to nearly double its iron ore exports in Western Australia. BHP blamed soaring development costs, a high Australian dollar and falling commodity prices for pulling the projects.

Fuelled by Chinese-led demand for its coal, iron ore and other resources, Australia’s economy was one of the very few in the developed world to sail through the global financial crisis without sliding into recession – but that Chinese growth has now slowed.

The resources boom has fuelled a two-speed economy, which has pumped up the Australian dollar and exacerbated the pain felt in manufacturing and retail in the most populous states.

While manufacturers, such as Ford and Bluescope Steel, have cut production and axed jobs, Australian unemployment has stayed at around 5 per cent, thanks to jobs growth in resources projects, where lorry drivers command six-figure pay packets.

BHP’s Olympic Dam expansion alone would have created 25,000 jobs, officials said.

Mr Ferguson later backed off his comments, saying commodity prices had peaked while investments in big projects would continue, especially in the energy sector.

Other ministers, worried about attacks by the opposition blaming the beleaguered Labour government’s carbon and mining taxes for hurting the resources sector, weighed in to say the construction boom in resources was far from over. Finance minister Penny Wong played down fears of a collapse in the mining boom, saying the government has factored in a peaking in the balance of trade, between export earnings and import costs.

“We’ve still got a long way to run when it comes to this investment boom,” she said.

“We’ve got over half a trillion dollars of investment, and over half of that is at the advanced stage. So I think the ‘doom and gloom’ that some are putting about isn’t appropriate.”

Prime minister Julia Gillard was questioned on Mr Ferguson’s comments in parliament, with the opposition seizing on them as proof that Canberra’s return to a budget surplus in 2013 as planned was at risk.

Ms Gillard insisted mining would continue to buoy the economy, despite commodity prices appearing to have peaked. “We will continue to see this nation earn a great deal of prosperity and wealth from exporting resources,” she told MPs.

BHP put the Olympic Dam expansion and its Port Hedland outer harbour plan on hold indefinitely as it reported a 35 per cent slide in second-half profit, the biggest sign of the pain inflicted by China’s slowdown.

Weaker demand from China has knocked prices of all key commodities, including iron ore, languishing at its lowest levels since December 2009, copper, coal and aluminium.