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Published on August 30th, 2012 | by john.weir

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Australia’s mining boom not over yet

Newly released figres show that Australia’s mining boom is far from over, and that more investment is coming.

The Australian Bureau of Statistics reported that June quarter new private capital expenditure rose by 3.4 per cent, seasonally adjusted, matching market expectations. It also released the third estimate of planned expenditure for 2012/13, which is 20.8 per cent higher than the third estimate for 2011/12.

JP Morgan Australia chief economist Stephen Walters said the solid gain in capital expenditure for the June quarter is a good sign that next week’s June quarter gross domestic product (GDP) figures will be strong. “More importantly in the forward looking estimate there is still a heck of a lot of spending that is yet to be done,” he said.”Firms are saying they are going to do about $180 billion worth of spending in the current fiscal year, so that’s a lot of spending.

“The mining boom is not over, the price side may be over given that iron ore and coal prices are going down but the volume side in the capex story and the export story is still to come.”

Last week, BHP Billiton shelved $US50 billion ($47.89 billion) of major projects, including an expansion of the massive Olympic Dam uranium mine, blaming the lower commodity prices and increased operating costs.

Mr Walters said today’s capital expenditure data precedes the BHP Billiton decision and won’t allay fears about an end to the mining boom.”I think the lower commodity prices go the more projects you’re going to get deferred,” he said. “You’re still going to get a lot of negative news, but if you look at these numbers there is still a lot of spending to be done.”

AMP chief economist Dr Shane Oliver said the data suggested the mining investment boom still had a while to run and was likely to peak in 2014.”The pipeline of work yet to be done is still running at a very high level,” he said. However, he said the figures also showed growth in investment outside of the mining sector.”The uptick in expectations between 2012 and 2013 was actually in manufacturing and other sectors. “That is a bit of a positive sign.”

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