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Home / Business / Markets / Commodities

Warnings of end to mining boom blow to Gillard

NZ Herald
23 Jul, 2012 05:30 PM3 mins to read

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Prime Minister Julia Gillard has been hit by the glare of a new set of headlines warning that the mining boom that has kept Australia's economy afloat through global crises is about to end.

Although the prediction by leading economic analyst Deloitte Access Economics offsets the gloom by pointing to the continued strength of the economy - a world record 21 years without recession - it says the Government's budget surplus is vanishing.

The forecast follows a long series of others highlighting serious pain outside the big mining states, rising unemployment, mass layoffs and plunging consumer and business confidence.

Gillard's threadbare remnants of credibility have largely been held together by the nation's continued economic resilience, although polls show both that voters believe mining - rather than Government competence - has kept Australia afloat, and that most consider the Opposition to be more skilled economic managers.

The threat of losing the insulation of mining and resource exports will add to concern over rising costs of living and a widening sense of insecurity that has contributed to the consistent record lows recorded by the Government in major opinion polls.

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Labor's victory in a Victorian state byelection at the weekend may have given Gillard some brief respite from the long run of bad news, and even let some of the air out of leadership speculation, but it has no real impact on federal politics.

On the national stage the party continues to sink. The most recent Morgan poll on the problems facing Australia puts a grouping of government, politics, immigration and human rights issues at the top of the list, followed by economic and financial issues.

Politicians have been hammered on both sides by popular anger at the failure to reach any compromise or to form an effective policy on asylum seekers, although Labor has suffered worse than the Opposition. This paralysis was underlined yesterday when yet another boat was intercepted off Christmas Island with 123 people aboard, following one carrying 144 on Saturday - 90 have arrived since January.

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The economy, including unemployment and the new carbon tax, are increasing headaches for Gillard and easy targets for a highly effective campaign led by Opposition Leader Tony Abbott.

Unemployment is rising, reaching 5.2 per cent last month after 33,500 full-time jobs were lost, according to the Bureau of Statistics.

Morgan Research, which uses broader criteria, is gloomier: it says 17.4 per cent of the workforce, more than two million workers, are out of work or underemployed, concentrated heavily among the young.

New reports by CommSec and Westpac also confirm that prosperity is missing industries and large areas of the country outside mining's boom regions, among them tourism centres such as Queensland's Gold and Sunshine coasts, and manufacturing in Victoria and South Australia.

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The Government has relied for its optimism on data showing a record A$260 billion ($338 billion) of investment committed to mining, and a predicted doubling of exports of iron ore, coal and LNG by 2025.

But Deloitte Access said the peak of the project pipeline was in sight and the boom that continued to do the heavy lifting on economic growth would last only another two years as costs rose, commodity prices fell and doubts grew over demand from Asia.

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