A few Ministers are out this morning trying to make sense of the growing questions around mining investment. First they seem unable to get their story straight. According to the AFR, Martin Ferguson has said:
Resources Minister Martin Ferguson has declared the mining boom is over, a day after BHP Billiton shelved the $US20 billion-plus Olympic Dam project, blaming rising capital costs and lower commodity prices.
But Penny Wong is out saying:
Australia remained the envy of the world, he said, while the global economic outlook had deteriorated in the last six months.
…“We still have a lot of investment coming into this country, half a trillion dollars in the pipeline and more than half of that at the advanced stage. But the government has always said you have to plan for beyond the boom as well as for the boom,’’ she told the ABC.
“No, I think the mining boom has still got a long way to run. But what I would say is that the government has always assumed that the terms of trade would step down over time, that’s what our budget is predicated on.”
More importantly, Penny Wong is wrong. The Budget is not predicated on that at all. The $500 billion pipeline is tumbling before our eyes. And the Budget currently projects a 5.75% fall in the terms of trade for all of 2012/13. We’re down 10% in about eight weeks and 15% or so from the peak already. Here is the forecast that Treasury’s David Gruen made for the decline in the terms of trade recently:
Not easy to read but looks like we are some two or three years ahead of schedule already (as a quick aside, look at that slide in the boomers to go with it). Stop treating us like dills, Penny. The MYEFO will need to deliver another big round of spending cuts if we are to aim for the unachievable surplus.
