Prices peak but investment booms: govt

23 Aug 2012, 6:27 pm   -   Source: AAP

The federal government insists the mining investment remains in full swing despite BHP Billiton's decision to shelve the Olympic Dam project.

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The federal government insists that while commodity prices have peaked, the mining investment boom continues unabated, despite BHP Billiton's decision to shelve its $30 billion Olympic Dam expansion in South Australia.

Prime Minister Julia Gillard believes growth in the resources sector will continue for a long period of time in a "world beating economy", while Treasurer Wayne Swan has rejected the opposition's notion that BHP Billiton's decision was linked to the carbon and mining taxes.

Resources Minister Martin Ferguson declared the mining boom "over" in regard to commodity prices.

"(But) the boom in terms of construction will continue," Mr Ferguson told Sky News on Thursday.

Analysts at Commonwealth Bank of Australia say the peak in the commodity prices occurred in the September quarter of 2011.

Despite this, Australia's third largest iron ore producer, Fortescue Metals Group, managed a 53 per cent increase in its full year net profit to a record $1.49 billion, which it said on Thursday was achieved by shipping a record 55.8 million tonnes.

Fortescue chief executive Nev Power told reporters the boom was not over "by any show of imagination" due to the growing volumes of resource exports heading out from Australia to Asia.

Ms Gillard was equally upbeat about the outlook.

"Our nation will continue to see that growth in resources for a long period of time to come and it will be part of a world beating economy," she told reporters in Canberra.

Mr Swan said there had been an additional $90 billion in investment in the past year alone.

"Since we announced both the carbon price and the (minerals) resource rent tax (MRRT), investment has gone through the roof," he told parliament.

"The decision that has been taken by BHP on Olympic Dam has been taken for entirely commercial purposes, which has got nothing to do with carbon pricing or the MRRT."

But Opposition Leader Tony Abbott disagrees, saying the only way to extend the boom is to repeal those taxes.

Doing so would ensure that "you don't have the sovereign risk issues hovering over Australia", he told reporters in Canberra.

Opposition finance spokesman Andrew Robb said BHP Billiton and many other major companies had been warning for months that government policy had eroded Australia's competitive advantage as an investment location.

"What this government fails to understand is that companies like BHP and others have investment options around the world," he said in a statement.

West Australian Premier Colin Barnett said there was "no doubt" demand-driven commodities prices had reached an "unsustained peak" in recent years, but they were still at historic highs.

"I would suspect you will probably see in six months time they gradually start to rise again," he told reporters in Perth.

But Minerals Council of Australia chief executive Mitch Hooke told Sky News the biggest danger for Australian was complacency.

"We think natural endowment means that we have got a competitive strength," he said.

The Greens say an inevitable bust of the mining bubble means Australia must begin the transition to a stronger, more sustainable and more diverse economy.

Mining spokeswoman Larissa Waters said there would be consequences if the government and the coalition continued to allow the sector to drive up the dollar, poach workers from other industries and destroy the environment.

Interview with AMP's Chief Economist Shane Oliver:

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