An overview of key themes from Treasury’s Business Liaison Program, held in February and March,  has noted that the economy’s continuing strength has been underpinned by the mining sector, with strong external demand for resources exports and a range of major mining investment projects underway and in the pipeline.

 

However, the floods and Cyclone Yasi in Queensland have had a severe impact, in particular on coal production and exports, halting production in mines and cutting key transport infrastructure.

 

The report noted that the loss of coal production was estimated to be between 20 million and 30 million tonnes. 

 

“Although weather conditions have normalised, mines are still affected by flooding: some mines are still flooded and face logistical and regulatory hurdles (because of the water salinity) in pumping out the water.”

 

The report predicted that while the greatest impact will have been in the March quarter, effects appear likely to extend into the June quarter, although lower coal exports have been partly offset through higher prices as a result of temporary supply constraints.

 

However, in the longer term, prospects for the coal industry were regarded as strong, with businesses looking to expand production through increased investment.

 

The report also noted that skills shortages within the resources sector and in some other sectors, notably construction, may start to drive wage pressures, with some employers saying they are willing to pay a premium to attract skills.

 

Overall  the prospects for the resources sector are strongly positive.

 

"The robust outlook for mining continues to underpin a pipeline of strong mining investment, which will boost production. Along with infrastructure and port

expansions, this will help the sector to meet demand, reducing some of the costly delays at ports and terminals which are currently hampering the industry.”

 

The overview is reported in the recently-released Treasury Economic Update: Issue 1, 2011, available at http://www.treasury.gov.au