The global price of iron ore has slipped below $US100 a tonne for the first time since late 2009, with experts predicting future falls.THE Reserve Bank has hosed down claims the resource boom is over, saying mining investment will keep rising for up to two years and the economy would even benefit if some projects were scrapped.
As the price of Australia’s most lucrative export fell to a near three-year low, RBA governor Glenn Stevens said yesterday that miners had billions more to spend.
Despite BHP Billiton shelving its $20 billion Olympic Dam expansion this week, Mr Stevens stood by the Reserve’s forecasts for mining investment to keep climbing towards historic highs of about $145 billion a year, or 9 per cent of gross domestic product.
The prediction came as the global price of iron ore slipped below $US100 a tonne for the first time since late 2009, with experts predicting further falls.
”Looking ahead, the peak of the resource investment boom as share of GDP – the highest such peak in at least a century – will occur within the next year or two,” Mr Stevens said in Canberra.
He also said the economy would be better off if some potential projects did not go ahead. Mining companies already faced rising costs due to fierce competition for staff, he said, and these problems would intensify if too many projects proceeded.
”There are a vast number of [possible projects] which I think in truth really shouldn’t be done, because if they were all attempted, there’s already pressure on the cost side for resources companies,” he told a parliamentary committee. ”You probably just cannot do everything that people have postulated might be done.”
The comments came after Resources Minister Martin Ferguson said the resources boom had peaked. Other ministers sought to retract that claim, instead saying commodity prices had peaked.
This point was underlined by the recent plunge in iron ore. The mineral brought about $US135 a tonne for much of the year, but began slipping seven weeks ago on slowing construction in China and an oversupply of steel there.
On Thursday night it slumped by almost 5 per cent from $US104 to $US99 a tonne, sending chills through the Australian market.
Glyn Lawcock of UBS said he expected further falls. ”Now that it has broken through $US100 a tonne, traders I speak to think the price could get a 7 in front of it,” he said.
Despite this, Mr Stevens said the economy remained healthy and interest rates were unlikely to change barring a sharp deterioration.
He conceded that reports of job losses and the debt crisis in Europe were denting confidence. But he said: ”I begin to wonder whether we in Australia worry about the Greek economy more than the Greeks do.”
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