For a country that has a deep and prosperous mining heritage, Australia was shocked by the latest report from its Resources Minister Martin Ferguson: the resource boom, one of the largest engines in Australia's economy, was over. The statement came following BHP Billiton's announcement that there has been a 35% dip in profits and postponed plans to expand the nation's Olympic Dam mine. There have also been considerable concerns in the country that the weak global economy might also decrease the demand for coal, metal ores, and other commodities. For foreign investors and Australian economists alike, a slowdown in the prosperous mining sector will surely leave a noticeable dent in Australia's economic growth.
The recent introduction of new lax laws has also raised concerns about the future of Australia's mining industry. The Australian government has adopted the mineral resources rent tax, which will impose a 30% tax on mining firms with an annual profit of more than $79 million (USD). This tax will have an impact on several of the country's largest mining firms, including BHP Billiton, Rio Tinto, and Xstrata. A new carbon tax law has also been adopted by the Australian government to cut down on the pollution that mining firms, airlines, steelmakers, and energy firms produce. These new measures have lead many politicians and economists to believe that foreign investors will look for less regulated markets to invest in, which would contribute to the industry's decline.
For over 200 years, Australia has played a vital role in the global mining industry, making it what Ferguson described as "the envy of the world." Although the industry started at the beginning of the 19th century, investment started to pour into Australia's mines in the 1970s, reaching a peak level in 2008-09 at $139.4 billion (USD). The current mining boom, which economists date back to 2002, has played a large role in keeping Australia away from most of the global financial crisis, mostly in part to China's large demand for natural resources and minerals that has spiked in the past decade.
In spite of Ferguson's words, many Australians still believe that the country's mining boom has yet to see its last sunrise. Senator Penny Wong, Australia's Minister for Finance and Deregulation, stated that "We still have a lot of investment coming into this country, half a trillion dollars in the pipeline and more than half of that at the advanced stage." Australia still ranks as the world's leading producer of minerals, and produces 22 minerals in large quantities from more than 300 operating mines. Although doubts reside over whether Australia's mining industry will be able to evade the current global recession, the abundant natural minerals that the country is blessed with will surely be a resource that investors in the market keep an eye on, since there are very few places left in the world where one still can "strike gold."