MCA - Quarterly economic Brief • Winter 2011

Overview
  • Global growth moderated in the June quarter 2011. Weaker activity in the United States, output disruption following the March earthquake and tsunami in Japan and debt problems in Europe acted as a drag on recovery among advanced economies. Emerging economies in Asia, particularly China, continue to underpin world economic growth, though there are signs of slowing activity due to monetary tightening.
  • Following the March quarter contraction in GDP, Australia’s economy remained patchy in the June quarter with cautious consumers and soft business conditions across a number of sectors. The economic outlook remains heavily reliant on strong mining investment.
  • Most mineral commodities are forecast to record higher production in the June quarter following weather-related disruptions earlier in the year. A strong rebound in iron ore production is expected. Coal production is also recovering, though output is likely to remain down on full capacity, especially in Queensland. Other mineral commodities expected to record production growth in the June quarter include aluminium, alumina, refined gold and nickel.
  • Preliminary estimates by the Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES) point to mineral commodity export earnings rising to around $42.8 billion in the June quarter. With some exceptions, mineral commodity spot prices drifted lower in the quarter; however, negotiated bulk commodity contract prices were up strongly reflecting earlier spot price rises.
  • The value of committed major development projects in the minerals sector in April 2011 is estimated by ABARES at $62.9 billion, up more than 50% on the October 2010 figure. The total value of less committed development projects in the sector was $144.6 billion in April, a 12% rise on the previous period.
  • Royalties and company tax payments combined are expected to reach a record $23.4 billion in 2010-11 based on new estimates of mineral resource taxation by Deloitte Access Economics (DAE). The claim that traditional revenue sources from mining are unresponsive to movements in commodity prices is not correct.

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