Transporters relying on the mining sector are set to benefit, with Treasury forecasting positive signs
By Brad Gardner | November 10, 2010
Transporters getting by on the back of the mining sector are set to benefit, with Treasury forecasting positive signs and increased investment.
In its mid-year economic review released yesterday, Treasury says the mining industry is planning $55 billion of investment this financial year, pushing up business investment to near 40-year highs as a percentage of GDP.
Treasury says demand for non-rural commodity exports is driving the investment boom.
“The strength in the mining sector is also expected to drive higher levels of investment in new machinery and equipment,” the Treasury outlook says.
Australia’s major trading partners – namely China and India – are forecast to grow by 6 percent this year and 4 percent the following two years, while exports and imports are also tipped to rise.
“Total exports are forecast to grow by a solid 7 per cent in 2010-11 and by 5 per cent in 2011-12,” Treasury says.
“Imports are expected to grow by 11 per cent in 2010-11 and by 8 percent in 2011-12.”
Operators will need to deal with higher costs, however, with Treasury forecasting wages to grow by 3.75 to 4 percent between now and June 2012.
The international outlook is not as positive, with Treasury saying there is still uncertainty in the world economy and that major developed countries will operate well below capacity due to weak credit markets and high unemployment.
“Were the globally economy to falter, it is likely that Australia would be affected trough both financial and trade channels, including through lower prices for our key commodity exports,” Treasury says.
However, it adds that the world economy is forecast to grow at an annual rate of 4 to 4.75 percent.
Despite the global financial crisis only recently subsiding, Treasury says Australia is already experiencing a tight labour market.
While saying inflation is expected to remain contained, it concedes that a low unemployment rate will put pressure on the economy.
“Over 360,000 jobs have been created in the past year and the unemployment rate has fallen to around 5 per cent,” it says.
“Timely and targeted stimulus helped Australia to avoid recession during the global financial crisis and real GDP is now growing at around its trend rate.”
The Budget is still expected to return to surplus in the 2013 financial year despite currently being $41.5 billion in deficit this financial year.