Shale gas a trigger for major reform, says McKibbin
Eminent economist and former Reserve Bank of Australia board member Warwick McKibbin has warned that the slowdown in the natural resources sector will accelerate due to the competitive threat of the shale gas revolution in the United States, according to the Australian Financial Review.
Launching a scathing critique of successive governments “wasting” the proceeds of the mining boom, Professor McKibbin said the economy faced headwinds from falling coal prices as shale gas emerged as an alternative.
The cheap US gas, due to be exported from 2016, will lower terms of trade, which Treasury secretary Martin Parkinson said on Tuesday could fall 9% over the coming year – beyond the 7.5% fall estimated in the budget.
“That’s a fairly big negative shock and will weigh quite heavily on the Australian dollar,” McKibbin told a Morningstar conference in Sydney.
Mining and metals companies face volatility
Australian mining and metals companies face unprecedented volatility in commodity prices in the next few years as Chinese demand slows and the Australian dollar fluctuates, according to the Australian Financial Review.
Growth in China has driven demand for commodities for the past 10 years, outstripping supply and propelling commodity prices higher.
But Ernst&Young’s global mining and metals leader Mike Elliott said in a report to be released today that the resources sector would be affected by a return to equilibrium in supply and demand, as well as continued volatility in the Australian dollar throughout this year and next.
The report follows warnings by the Bureau of Resources and Energy Economics that the resources construction boom had peaked and could sharply drop in the next five years.
Mining reporting standards to be clearer
A global initiative to strengthen reporting standards in the resources sector has received a major boost, with Britain and France announcing yesterday they will join the Extractive Industries Transparency Initiative, according to The Australian.
British Prime Minister David Cameron made the announcement via a video link to an audience of more than 1000 participants at an EITI conference in Sydney yesterday.
