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Mining will continue to drive Australian economy for the next five years

12th November 2013

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

  

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PERTH (miningweekly.com) – Economic forecaster BIS Shrapnel has said that the mining industry would continue to be a positive driver of the Australian economy over the next five years, despite a predicted fall in investment in the sector.

In its ‘Mining in Australia 2013 to 2028 report, BIS said that mining investment, production, contractor services and employment would follow very different paths over the next five years.

While the mining investment boom peaked in 2012/13 and was forecast to decline 20% over the next five years, mining production was poised to grow 41% over the same period, driving commensurate increases in mining operations activities, maintenance and exports.

The value of mining production rose 8.8% in 2012/13 to A$151-billion, and BIS noted that the outlook for production was strong, with yearly average growth of 7.1% forecast to 2017/18.

This would lift the mining sector’s share of Australian gross domestic product (GDP) to 12.2%, making it Australia’s second-largest industry sector.

“With respect to the mining boom, it’s probably fair to say that this is not the beginning of the end, but the end of the beginning,” said senior manager of BIS’s infrastructure and mining unit, Adrian Hart.

“Over the next five years, the strong boost from mining production, led by liquefied natural gas and iron-ore, will more than offset the economic negatives from falling mining investment, which will flow through to construction and manufacturing.

“Consequently, BIS Shrapnel is forecasting mining activity as a share of GDP to rise from 18.7% to 19.8% by 2018; Australia becomes a more mining-focused economy from here.”

However, Hart noted that growth in mining employment would not keep pace with the expansion in production as miners sought to restore productivity lost during the furious race to invest in new capacity since the mid-2000s.

“Miners will continue to be squeezed by lower commodity prices and a high Australian dollar over the next few years. As such, they are going to extraordinary lengths to cut back on the high costs/low productivity culture, which characterised the construction phase of the boom.”

BIS expected that mining operations employment would rise only 11% over the next five years, mainly in oil and gas and iron-ore, whereas mining construction employment would slump 40%.

“Given the strong increases in production expected, this translates to a 60% labour productivity surge over the next five years,” Hart said.

He added that this would provide both challenges and opportunities for suppliers and contractors to the mining industry.

“High cost/high service contractors to the mining sector are currently facing the brunt of the adjustment. There is still a lot of work, but it is either being redirected in-house or to lower-cost suppliers.

“While this is not expected to be a permanent shift, contractors need to navigate region by region, and sector by sector, to identify opportunities opening up in operations, maintenance and facilities management to offset an aggregate decline in construction and development work.”

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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