Mining boom forecast to end in two years

Australia’s budget surplus has evaporated and its mining investment boom has only two years to run, according to Deloitte Access Economics, reports the Sydney Morning Herald.

The forecast marks a watershed in assessments of Australia's prospects, implying in the words of this morning's publication: ''The strong bit of Australia's two-speed economy won't stay strong for more than another two years or so''.

Deloitte Access Economics is Australia's leading private-sector budget forecaster, set up by former Treasury economists in 1988 to provide services to both sides of politics.

Its report says the mining investment boom will slow more sharply than expected.

''Mining companies are making it clear the current spike in investment is due to decisions taken a while back, whereas we are getting few new mining mega-projects across the line,'' it says.

Fix mining tax, says Garnaut

Eminent Labor economist Ross Garnaut has called for a wide-ranging shake-up of federal-state relations, including the way GST money is shared among the states and how the system of state mining royalties is undermining Canberra’s resources tax, according to the Australian Financial Review.

Professor Garnaut describes proposals put forward in the current GST review, being conducted by former premiers Nick Greiner and John Brumby, as “incremental” and says a more substantial constitutional convention should be convened in a process that may take until 2020.

This was needed to clear up the confusion in federal-state financial relations, overhaul goods and services tax handouts and tear up the deal with big resources companies over the mining tax, Professor Garnaut has urged.

New capacity puts wind up clean coal projects

New wind and gas-fired power projects are mainly displacing electricity from cleaner black-coal generators rather than more emissions-intensive brown-coal plants, a report to be released today shows, according to the AFR.

The figures contained in Electricity Gas Australia 2012, the latest in a series of annual reports on the state of the energy sector by the Energy Supply Association of Australia, confirm the impact of falling consumer demand and the low price of wholesale electricity on the generation sector.

But the figures for the year ending June 30, 2011 also highlight the difficulties in reducing emissions intensity from the energy sector after July 1 this year, when the carbon price took effect.

Pricing carbon is intended to result in the dirtiest generators leaving the market first. But the provision of financial assistance only to brown-coal plants has resulted in black-coal operators – which produce more expensive power – feeling the greatest pinch.

BHP, Rio bosses feel heat as prices plunge

BHP Billiton boss Marius Kloppers and his counterpart at Rio Tinto, Tom Albanese, pulled in more than $20 million in pay between them last year, according to The Australian.

Yet the collective values of the two companies has plunged by $118 billion in the last 12 months, with BHP's share price down 28% (down $65 billion in total) and Rio down 34% ($53 billion).

The major factor in the value crunch has been the slide in commodity prices in response to Europe's debt fears, US economic growth concerns and a slowdown in China, the economy that consumes most of the commodities important to BHP and Rio.

But with Kloppers to soon preside over the release of BHP's sharply lower June year profit, and Albanese over Rio's equally damaged June half, the pressure is on both men to earn their pay.