Tuesday, October 12, 2010

Australian prime minister warns of mining boom 'risk'

Prime Minister Julia Gillard warned on Tuesday against over-reliance on Asian demand for Australia's natural resources as she outlined a series of measures to try and make growth more broad-based.

Mining is Australia's biggest export sector as it rides a wave of demand from China for energy and minerals, but Gillard said an economy that becomes too dependent on any one sector "takes a big risk".

Her efforts to sell economic reforms follow a furious backlash from mining giants against her predecessor Kevin Rudd's proposed "super tax" on the sector.

"Even while demand for commodities remains strong, we face the risk of a 'patchwork economy'.

She warned against "an economy where some of the country booms while other parts go backwards, where some regions cry out for skilled labour while in others, Australians live aimless lives without skills, work or hope".

Gillard said if the demand for raw materials fell away, Australia would only remain strong if economic growth was broad based -- encompassing services, manufacturing and agriculture.

"If the emerging Asian economies continue to grow, while Europe and the US stagnate, then the gap between global demand for our mining and energy compared to our manufactured goods and our services will continue to widen," she said.

"While consumers and capital-intensive industries reap real benefits from a strong (Australian) dollar, the upward pressure on our currency makes life even harder for exporters of services and manufactured and farm goods."

The prime minister said her Labor-led coalition government would embark on a series of reforms to broaden economic growth, including cutting the company tax rate, building infrastructure and investing in skills.

"Some governments have the freedom to throw cash at those who lose from reform," she said. "It's clear mine won't be one of them."

Gillard's comments come as Treasurer Wayne Swan said Australia's mining boom would see the biggest investment in the sector for more than 160 years, despite a new heavy tax on iron ore and coal.

Addressing the New York Stock Exchange on Monday, Swan defended the new mining tax, which seeks to funnel some of the benefits of the skyrocketing price of commodities into the national coffers.

"What we know is that Australia is about to embark on its biggest mining investment boom since the 1850s Gold Rush," Swan said.

"This pushes us to pick up the pace of reform -- to make Australia an even more attractive investment destination."

The government scaled back its plans for a 40 percent levy on all minerals after concerted resistance from the mining sector -- revamping it so it only applies to iron ore and coal, and setting the rate at a lower 30 percent.

The Australian economy has been hailed as the "Wonder from Down Under" for its resilience in the face of the global slump, continuing to grow as other advanced economies went into recession.

Gillard said her government, which hopes to return to a budget surplus by mid-2013, would have to again lift the speed limit of the economy, as the global economy recovers.

"Just as our strong budget position in 2008 allowed us to navigate a difficult global challenge, so we must strengthen our budget position now to deal with the next global challenge to arise," she said.

Source http://www.google.com/hostednews/afp/article/ALeqM5isX2a_2D-t8EXLxv0ZrehCQ37utw?docId=CNG.08f7f85b62df316e015d94739f07df92.5a1

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