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Vox pops | How strong is the mining boom?

Jason clout

Ben Elias, non-exec chairman, Chameleon Mining

Mining boom status?

It is the biggest one since the gold rush of the 19th century. The only difference is we have far more advanced machinery now. Demand around the world, particularly from China, has been very high and that has been to the benefit of the economy. At a time when the global outlook has been at its gloomiest since the Great Depression, the country has maintained its economic rating.

Will it save us?

It still has another two decades to run. But the government must be very careful to avoid killing the golden goose. Take out the mining results for Australia and in my opinion our country would experience a financial collapse. The growth of this industry is essential to all Australians as it is the small-cap start-ups that offer opportunity and jobs. We must make the most of it while the demand is evident. If it is not China, it will be another country that needs our resources.

Brian Parker, investment strategist, MLC

Mining boom status?

It is well and truly intact. China’s evolution into a modern industrial state has years to run and India’s has barely started. There are an enormous number of resource-related projects under way and plenty that are likely to proceed even in a fragile global environment. There will be setbacks and we may not continue to get the prices for our key exports, but it will have a profound impact for years.

Will it save us?

This prompts the question, does the economy need saving? Clearly there are sectors that are struggling. If you’re in an industry that has prospered on ready access to cheap credit, like some retailers and property developers, then things aren’t likely to improve with the Reserve Bank in easing mode. The high Australian dollar is hurting manufacturing, inbound tourism and higher education. But if you look at the overall numbers, economic growth has accelerated.

Savanth Sebastian, economist, CommSec

Mining boom status?

The Reserve Bank recently stated that business investment will reach its highest level, relative to GDP, in half a century. That pick-up will be firmly driven by the mining sector, especially given the high Australian dollar is strangling many other industries. On smoothed data, spending within these companies surged by 63 per cent in September last year, much higher than in other businesses.

Will it save us?

The mining states are the winners, and Western Australia is the undisputed leader. WA wage growth was 11.3 per cent over the past year. Even the Northern Territory’s average is higher than in the eastern states. However, excessive wage pressure is what the RBA is attempting to curtail and the federal government will need to play a key role in implementing measures to improve productivity and ensure skilled migration targets are constantly reviewed.

Natalie Tam, Equities manager, Aberdeen Asset Management

Mining boom status?

It is still under way, with private investment expanding rapidly and widely expected to reach record levels. Commodity prices, despite increased volatility, have generally remained historically high. China’s rate of growth is solid this year. However, Europe is a prominent risk to the world economy. If it slumps more than expected, that could hurt Australia, but we view that as a worst-case scenario.

Will it save us?

Two powerful and competing forces are at work: the mining boom and the persistently strong Australian dollar. Outside the sector, conditions are soft and the high exchange rate has brought a tightening of monetary conditions for a number of industries. Small businesses are especially vulnerable. The key issue is whether the miners will drive enough job growth to counter weak conditions in in other parts of the economy. There is room for the RBA to cut again.

George Tharenou, senior economist, UBS

Mining boom status?

It is the strongest on record and will become even bigger. Nominal mining investment has expanded an average 21 per cent over the past decade. Outside that sector, it has been flat for four years. The outlook is very strong. Government forecasts indicate mining and related activities could account for 25 per cent of the economy and contribute two-thirds of the growth.

Will it save us?

The transmission of mining boom II is being slowed by fiscal consolidation and a high currency. A key method of transmission the first time was recycling a large amount of revenue to households via big income tax cuts. However, now the government has a return-to-surplus target that is pushing record fiscal consolidation. The high currency is a headwind. China should have a soft landing, commodity prices will ease and capital expenditure will cool but won’t stop.

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Market Summary

Price % Chg
FMG FORTESCUE $ 2.400 + 10.60%
OFX OZFOREX $ 2.380 - 10.53%
MRM MMAOFFSHOR $ 0.620 + 6.90%
ALL ARISTOCRAT $ 8.380 + 6.48%
AGL AGL ENERGY $ 16.470 + 6.40%
BSL BLUESCOPE $ 3.530 + 5.69%
VRT VIRTUS $ 7.590 + 4.26%
IGO IND GROUP $ 4.950 - 3.88%
MIN MINERALRES $ 7.410 + 3.64%
MND MONADEL $ 11.430 + 3.63%

Commodities

Price Change % Chg
BRENT SPOT (USD/BBL) 63.810 0.000 0.00%
LIGHT CRUDE JUL5 (USD/BBL) 58.460 - 1.260 - 2.11%
NAT GAS JUN15 (USD/MMBTU) 2.819 - 0.068 - 2.36%
Bid Ask Bid Chg Bid % Chg
GOLD (USD/OZ) 1186.31 1187.08 - 20.49 - 1.70%
SILVER (USD/OZ) 16.66 16.75 - 0.46 - 2.69%
PLATINUM (USD/OZ) 1123.98 1129.02 - 23.52 - 2.05%
PALLADIUM (USD/OZ) 780.98 786.02 - 5.00 - 0.64%

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AUD USD EUR JPY GBP
AUD AUD 0.7762 0.7104 95.55 0.504
USD 1.2873 USD 0.9152 123.08 0.65
EUR 1.4069 1.0926 EUR 134.49 0.7093
JPY 0.0105 0.0081 0.0074 JPY 0.0053
GBP 1.9825 1.5399 1.4094 189.56 GBP

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