Australia’s Treasury secretary Martin Parkinson is not one to buy into the rumors of the demise of the mining boom in Australia. In fact, Parkinson recently said the mining sector’s expansion has much further to run, with resources investment poised to remain near historically high levels until the middle of the decade.
“Rumors of the death of the mining sector have been greatly exaggerated,” Parkinson said in Perth.
Instead of the boom ending, mining would expand its share of the economy to 10 to 12 percent of gross value added in coming decades, compared with 5 percent early last decade the Sydney Morning Herald reported.
“Mining investment is expected to reach record highs as a share of GDP in 2012-2013 and remain at or close to historically high levels through to at least the middle of this decade.”
Numerous slow downs and cut backs by mining companies in Australia and the decision by Australia’s Reserve Bank to cut interest rates to 3.25 percent because of a lower peak in mining investment than it had expected have created speculation about the end of the mining boom.
As the economy adjusted to mining playing a bigger role, Parkinson also called for the nation to face up to several major challenges in the years ahead.
Pressures on government budgets were only going to intensify, he said, forcing a frank national debate about higher taxes and what services can be funded by the public funds.
Since the global financial crisis, Australia's tax base had been “dramatically hollowed,” Parkinson said, and the recovery since then had been weaker than expected.
With an ageing population set to put extra demands on future government spending, Parkinson said it was time for a “mature conversation” about the sustainability of the tax system.
“The slowing economic growth, rising expectations of government, and a constrained revenue base, are likely to force an explicit debate about the size and scope of government, both at each level of government and between the levels of government,” Parkinson said.
He said a further challenge confronting Australia was the need to increase productivity now that the national income was no longer being boosted by climbing commodity prices.
How businesses responded to the rise of Asia's middle class, which is set to create multibillion-dollar export opportunities, would be crucial.
Australia’s natural resources and location had given it an automatic advantage in the resources bonanza so far, but the nation had no “obvious comparative advantage” in selling services to Asia, he said.
“While global economic weight is shifting towards the Asia Pacific region, we can’t count on proximity alone to deliver advantage. After all, Beijing is closer to Berlin than it is to Brisbane,” he said.