Deficit will not hurt mining sector, analyst

An IBIS World analyst says the 2009 budget will not have a significant impact on the mining industry.

Forecasters are predicting the Federal budget, which will be released at 7:30pm Tuesday 12 May, will boast the largest deficit in Australian History.

The deficit could be as high as $70 billion, a $90 billion turnaround over last year’s projected $22.4 billion surplus.

However, IBIS World senior analyst Ben Butler says a budget deficit would not have a negative impact on the mining industry.

“There has not been a great deal of Government sponsorship in the mining sector,” Butler told MINING DAILY.

“Miners tend to benefit from inflated resource prices more so than anything else.

“While a deficit is not a good thing for mining infrastructure, a lot of the infrastructure is already in place for miners. There has been a high level of expansion over the last ten years, so regardless of what the budget says, a lot of the mines that are set open in the near future will probably still do so.”

Butler said the mining industry is fairly insulated from dramatic Government changes and has the ability to march to the beat of its own drum.

“The mining industry works with annual contracts, so that will keep prices at fairly average levels,” he said.

“The contracts from last year were so high that even if they took a hit, they will still remain at adequate levels.

“Employment levels should also remain fairly stable. Demand will drop but production should stay solid so there is no reason to think that mining companies will make wholesale sackings any time soon.”

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