http://www.rba.gov.au/speeches/2012/sp-gov-240812.html
http://www.bloomberg.com/news/2012-08-24/stevens-sees-mining-boom-peak-in-2013-14-while-rba-ready-to-act.html
Stevens Sees Mining Boom Peaking, RBA Ready To Act
By Michael Heath - Aug 24, 2012 10:13 AM GMT+0900
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Reserve Bank of Australia Governor Glenn Stevens said the nation’s mining investment boom has at least another year before it starts declining and policy makers are prepared to respond in the event the economy slows.
“The peak of the resource investment boom as a share of gross domestic product -- the highest such peak in at least a century -- will occur within the next year or two,” Stevens said today in semiannual testimony to a parliamentary panel in Canberra. The RBA’s central outlook is for growth “close to trend” and inflation within a 2 percent to 3 percent target range, and the central bank is “prepared to respond to significant deviations,” he said.
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Glenn Stevens, governor of the Reserve Bank of Australia (RBA). Photographer: Torsten Blackwood/AFP/Getty Images
Australia’s economy has been powered by the biggest resources bonanza since a gold rush in the 1850s as Chinese-led demand for iron ore, coal and natural gas brought investment projects the government estimated to be worth A$500 billion ($522 billion). BHP Billiton Ltd. (BHP), the world’s biggest mining company, said this week it doesn’t expect to approve any spending on major projects this fiscal year as metal prices decline amid sluggish global growth.
Stevens today said he’s cautiously optimistic about the outlook for the global economy and that Australian policy makers are “well equipped” to manage any turmoil that arises. He cited several favorable domestic signals, including low unemployment, a AAA rated government, tame inflation and a strong banking system.
Forecast Risks
He also highlighted risks, including pessimism tied to Europe’s fiscal problems. “At a time of significant global uncertainty, and of important structural changes in the Australian economy, the degree of confidence we can attach to particular forecasts is, unavoidably, reduced,” he said.
The local dollar traded at $1.0426 at 10:47 a.m. in Sydney, compared with $1.0429 before the governor began his testimony.
Australia’s central bank lowered borrowing costs by a total of 50 basis points late last year and a further 75 basis points in May and June to help shield the economy from Europe’s debt crisis and slower growth in China. It held the key rate at 3.5 percent, the highest among major developed economies, at the past two meetings.
The reductions in rates have resulted in borrowing costs “a little below their medium-term averages,” Stevens said.
Inflation Outlook
The RBA this month predicted average GDP growth of 3.75 percent in 2012, stronger than its May estimate of 3 percent. Consumer prices will rise 2.25 percent in the year to December, from a previous prediction of 2.5 percent; underlying inflation is predicted at 2.5 percent from a previous 2.25 percent, the the central bank said in its Aug. 10 statement on monetary policy.
Traders are estimating a 29 percent chance Stevens will reduce rates by a quarter point to 3.25 percent at the next meeting in September, according to swaps data compiled by Bloomberg.
“The governor continued to paint an upbeat picture of the Australian economy, traveling well through global headwinds,” said Katrina Ell, an economist at Moody’s Analytics in Sydney. “With the economy growing close to trend, further rate cuts are unlikely.”
The central banker’s comments on the timing of the resource-investment peak contrast with Australian Resources Minister Martin Ferguson, who said the nation’s mining boom has ended.
Boom ‘Over’
“You’ve got to understand, the resources boom is over,” Ferguson told Australian Broadcasting Corp. radio yesterday. “It has got tougher in the last six to 12 months.”
Resource investment to meet Chinese demand and foreign investment funds seeking a haven have spurred gains in the nation’s currency, which closed above parity with the U.S. dollar for all but 23 days this year, remaining stronger than the average 75 U.S. cents since the currency was freely floated in December 1983.
Stevens, responding to questions today, said the local currency would probably fall in the event of a global downturn, while noting that past experience isn’t always an accurate guide to the future, given the recent flows into the local dollar as a haven from global risk.
It’s “not inconceivable it would actually go up,” he said, referring to the so-called Aussie. “I don’t think it will. That would be different to past experience and obviously the implications for the economy could be important because in the past this particular stabilization mechanism worked in a particular way. If it worked differently that could be important.”
The local dollar has advanced 7 percent since the central bank last lowered rates June 5, making it the best performer after the Swedish krona and the New Zealand dollar among the Group of 10 major currencies tracked by Bloomberg.
http://www.theaustralian.com.au/business/economics/australias-mining-investment-boom-has-yet-to-peak-says-rba-governor-glenn-stevens/story-e6frg926-1226457233037
Australia\'s mining investment boom has yet to peak, says RBA governor Glenn Stevens
BY: BEN PACKHAM From: The Australian August 24, 2012 10:24AM
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Reserve Bank governor Glenn Stevens gives evidence to the standing committee on economics in Canberra. Picture: Gary Ramage Source: The Australian
RESERVE Bank governor Glenn Stevens says the nation\'s resources investment boom still has several years to run.
Mr Stevens told the House of Representatives Economics committee today that the Australian economy was growing at close to trend, and the dampening impact of the high Australian dollar had begun to wane.
But he said global risks were “weighted to the downside” and while he was optimistic about the future of the Australian economy, “bad things can happen”.
Mr Stevens said inflation was low and unemployment contained, while house prices “may have stopped their earlier gentle decline”.
A day after Resources Minister Martin Ferguson declared the mining boom over, Mr Stevens said investment in the sector was yet to peak.
“Looking ahead, the peak of the resource investment boom as a share of GDP - the highest such peak in at least a century - will occur within the next year or two,” he said.
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“After that the rate of resource investment is likely to decline, while the export shipments of the resources themselves will pick up.”
Mr Stevens said by then the RBA expected some other sectors that had been weak of late, like residential and non-residential construction, might start to pick up.
“Overall, growth is forecast still to be close to trend, albeit with a different composition from that seen in the past year or two, and inflation consistent with the target,” he said.
The central bank cut the official cash rate by 75 basis points in May and June, following on from two reductions in late 2011.
Mr Stevens said the RBA had “judged this to remain the appropriate stance”.
He said despite concerns over cost of living pressures, price pressures on households had eased.
“There are plenty of prices falling,” he said.
He said Australians seemed to be overly pessimistic about future economic prospects.
“I have begun to wonder if we worry about the Greek economy more than the Greeks do,” Mr Stevens said.
Mr Stevens there were “risks and uncertainties” in relation to the bank\'s outlook, and global uncertainty meant the degree of confidence that could be attached to forecasts was “unavoidably reduced”.
He said the bank remained prepared to respond to any significant deviations from the outlook while fostering sustainable growth and inflation at 2-3 per cent over time.
Addressing the Securency scandal involving claims of bribery by an RBA-linked entity, Mr Stevens said there had been no “cover-up” by the RBA or by Note Printing Australia, and fresh doc-uments would be released soon.
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