Growth will be clipped, but challenge ahead is mining boom: Swan
Sydney Morning Herald
Saturday January 29, 2011
THE floods have not changed the longer-term challenge of coping with a mining boom, Wayne Swan said yesterday as he warned of sharp rises in fruit and vegetable prices.The Treasurer, giving the government's most detailed assessment yet of the post-flood economic outlook, said the negative effects would mainly occur in the March quarter.Higher fruit and vegetable prices would drive a 0.25 percentage point rise in inflation this quarter, he said, after floods wiped out vast tracts of Queensland's food bowl.Mango and tomato prices would be particularly affected because Queensland growers produce more than half the national supply of these fruits.Mr Swan also said coalminers would lose "several billion" dollars, farmers faced a $1 billion hit and the damage to tourism was worth $300 million.The government expects economic growth to be 0.5 percentage points lower and spending on rebuilding will not offset this impact upon economic activity.Queensland will carry a far heavier burden Yesterday its government slashed the state's growth forecast for 2010-11 to 1.25 per cent, from 3.75 per cent previously.Despite this fallout, Mr Swan stressed that other parts of Australia's economy faced very different challenges of coping with the resources boom."As awful as these floods have been, they haven't knocked the Australian economy off its longer-term course, and they haven't altered the longer-term challenges we face, particularly the mining boom mark II," Mr Swan said in Brisbane."As one part of the country rides high, another struggles."As flood reconstruction gets under way, Mr Swan warned that skills shortages were likely to worsen, putting further pressure on the economy's ability to cope with a mining investment boom."Even before the Queensland floods and the massive reconstruction effort they will bring, we were already expecting to see the re-emergence of labour shortages and bottlenecks in some industries," he said.In response, he signalled the budget would focus on education and skills, to make sure the economy could "get the people it needs".Underlining the mixed picture facing different parts of Australia, Queensland's government revealed the floods would cost $5 billion in damage to assets, driving the state deeper into debt.The Treasurer of Queensland, Andrew Fraser, said the floods would punch a $1 billion hole in state revenue, led by a $286 billion write-down in mining royalty payments.In a positive sign for the federal government - which is attempting to strike a deal with the states to freeze royalties as it promotes the mining tax - Mr Fraser ruled out royalty increases."We have absolutely no intention of revisiting the royalty rate, full stop," he said.
© 2011 Sydney Morning Herald