1. The challenges of managing Australia’s mining boom
Asian Economics
The challenges of managing Australia’s mining boom
November 2011
Paul Bloxham
Chief Economist (Australia and New Zealand)
HSBC Bank Australia Limited
+61 (2)
Disclosures and Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it

2. The world’s economic centre of gravity is moving east
Source: Quah (2010)

3. Transition from west to east has accelerated

4. Euro area has substantial divergence across nations

5. United States faces big challenges
Source: Bloomberg

6. But global growth is now driven by the emerging economies

7. Asia needs a lot more commodities in order to develop
Source: RBA

8. Australia’s export prices relative to import prices at very high levels
Source: ABS; RBA, HSBC estimates

9. Australia’s mining investment boom is the biggest ever, by a long way
Source: ABS; RBA; HSBC

10. Australian dollar around highest during post-float, but not highest ever
Source: Butlin (1977); RBA; HSBC

11. Not all good news … some sectors have to shrink to make way …
Source: ABS, Butlin (1977); RBA; HSBC estimates

12. … already seeing that some are weak and some are strong
Source: Datastream

13. High AUD has put manufacturers under pressure
Source: ABS; RBA

14. Big swing in tourist numbers partly reflects high AUD
Source: ABS; RBA

15. Retail sales have been weak … although household consumption is stronger

16. House prices have declined modestly, and mostly at the top end
Source: RP Data

17. There is divergence in jobs growth across industries
Source: ABS; HSBC

18. But, so far, the weak sectors have been offset by the stronger ones …
Source: ABS

19. Unemployment rate is low, though it has ticked up…
Source: ABS

20. The divergence across the states is less than average
Source: ABS

21. But more divergence can be expected … particularly in investment …
Source: ABS; RBA

22. … and profitability
Source: ABS

23. Population growth has slowed
Source: ABS

24. … and productivity growth is very weak
Source: ABS

25. Wages have risen ahead of productivity, driving up unit labour costs…
Source: ABS

26. … but the high exchange rate has kept inflation contained

27. Underlying inflation was low in Q3, after being high in H1

28. RBA’s inflation forecasts have been lowered significantly
Source: ABS; RBA

29. But some inflation will persist due to lack of infrastructure

30. Key global risks include bank offshore funding …

31. … weaker business confidence …
Source: Datastream

32. … low consumer confidence …
Source: Datastream

33. … as well as declining commodity prices
Source: RBA