News Wrap

IN THIS morning’s wrap: deficits loom for next two years; China’s State Grid shows the way; and private capital fills fund void.
News Wrap News Wrap News Wrap News Wrap News Wrap


Lou Caruana

Deficits loom for next two years

Federal government modelling suggests that the bigger than expected fall in commodity export prices will produce a multibillion-dollar budget hole that could keep it in deficit over the next two years, according to the Australian Financial Review.

The Business Council of Australia yesterday called on Labor to spell out a medium-term strategy to get the budget firmly back into the black amid signals that the government is prepared to dump its promise to deliver a small surplus this year.

Federal Treasury modelling suggests this year’s projected $1.1 billion surplus could turn into a $4.5 billion deficit, while next year’s projected $2.8 billion surplus could end up $11 billion in the red if the latest unexpected slowdown in nominal gross domestic product growth persists.

China’s State Grid shows the way

Given the sensitivity around Chinese investment in Australia’s minerals and agricultural resources, a landmark deal due to be finalised this month has attracted surprisingly little political noise, according to the Australian Financial Review.

China’s State Grid, a company few Australians have heard of despite it being the world’s largest utility by assets, is buying a 41% stake in South Australian transmission network ElectraNet.

The deal, valued at around $500 million, is modest in size but significant – it marks the first investment by a Chinese firm in Australia’s electricity grid.

And if you look at the numbers, it won’t be the last.

The state-owned firm plans to spend $US50 billion outside of China by 2020 and Australia looks set to play a pivotal role in its global expansion plans.

Private capital fills fund void

Private capital investors are increasingly stepping in to fund mining ventures as traditional sources dry up for the junior end, forcing explorers to find new ways to secure financing, according to The Australian.

Preliminary analysis by Ernst and Young suggested that private capital investors accounted for 21% of mining deal activity globally in the nine months to September 30 this year, versus just 12% for the same period last year.