May 30, 2008

Australia’s miners go on a spending spree

by Alan Thornhill

Business confidence is down. Consumer confidence has plunged.

And the Australian economy is said be heading for an abrupt slowdown.

Yet Australian companies still expect to spend $87 billion on new capital projects this financial year.

That is 11.1 per cent more than they said they would spend, last financial year.

This shows up in the latest estimates of likely new capital spending, published by the Australian Bureau of Statistics.

These estimates, in both cases, are the sixth in the regular series, collected by the Statistician.

So why are the nation’s CEOs planning to spend so much, when the world is facing a global credit crisis?

The answer, for once, is simple.

Demand for Australia’s resources, such as iron ore and coal, is high.

China and India are particularly good customers.

But there are problems.

Australia’s ports, railways and mines cannot cope, even with the present level of demand, let alone increased orders.

And, if that continues, these customers -and others – will start looking for new suppliers.

So Australia’s resource companies companies are responding, as enthusiastically as they can.

They are doing that by expanding their operations.

And that – as the latest new capital spending figures show – is an extremely expensive business.

Related stories:

  1. Miners:the black side of the boom
  2. Spending cuts “will hurt”:Prime Minister
  3. Federal spending:expect savage cuts

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Alan ThornhillAlan Thornhill is a parliamentary press gallery journalist. Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
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