Boom could see unemployment hit 4.5%
AUSTRALIA'S unemployment rate could hit 4.5 per cent by next year if the mining boom continues its relentless growth, says former Treasury official Peter Downes.
The Australian Bureau of Statistics (ABS) has forecast the mining sector to reach a record level of growth, moving from 6 per cent of gross domestic product to some 9 per cent of GDP in the 2010-11 financial year.
Mr Downes, former Treasury official and now an Outlook Economics director, said recent economic modelling showed that the growth in the mining sector could see more people picking up jobs across the board.
"The forecast that the unemployment rate gets down to 4.5 per cent next year is contingent on the mining boom," he said.
"A lot of the coming investment, particularly in plant and equipment, has a fairly high leakage with a lot of that feeding back into the rest of the economy."
Mr Downes said the continued high demand from the sector had the potential to offset any fiscal consolidation coming out of the Federal Government's planned budget surplus.
"I don't think that whether the government brings the budget back to surplus in 2012-13 will have a huge effect on the inflations, but it does take something out of demand.
"Whatever they do, it probably doesn't make much difference on consumption, but where I expect the government to cut back the most is through means-testing of government programs."
Mr Downes said that the last big mining boom in the early 1980s took the resources industry from about 1 per cent of GDP to 2.5 per cent of GDP. He said the current boom was worth much more and was more extensive across the nation.
"If you look at those figures, an increase over a year or two of about 1.5 per cent, now we are looking at increases of 3 per cent a year.
"So our modelling has shown that there's only a few things that could stall that, and those could be a big fall in commodities prices, if major projects are delayed or cancelled, or if the situation in Europe deteriorates more.
"But you've got to remember the majority of these booms is focussed on the big LNG projects, especially in Queensland, and most of those projects are already under way, the investment is already there."
Mr Downes is a former Treasury official.