Govt told to plan for when mining goes bust

THE Government should plan a rearguard action to develop non-mining industries and secure a strong, post-resource construction boom economy, reports the ANZ Bank.
In its Quarterly Economic outlook released on Wednesday, the bank said such a plan will ensure that the transition from gas and mining investment-led growth to balanced non-resource growth is smooth.
“Further, it will ensure that the damage that happens when the benefits from the construction phase – in terms of jobs, materials and the multiplier on domestic expenditure – are reversed, is minimised,” the report said.
“The end of the investment boom will see the currency shift lower, as the inflows associated with construction fall.
“A lower kina will present opportunities for the country’s trade-exposed industries, both exporting- competing and import-competing.
“Industries such as agriculture, fishing, manufacturing and tourism will become competitive again.”
The bank said the country needs a roadmap for those industries, if it is to secure its long-term future.
It said mining has been an important part of the country’s economy and will contribute a large chunk of the country’s future growth.
“It will become increasingly important, however, mining booms come with a price,” the bank said.
“It is not costless. The larger the boom, the bigger the bust.
“PNG has been through the boom and busts before, but the next boom will probably be the largest in the nation’s short history.
“While it will be a ‘super cycle’, it will not run forever. All mining booms come to an end and the next one will not be any different. When it is over, mining construction will fall significantly. Nonetheless, gross domestic product (GDP) won’t fall by as much, as exports from increased capacity will provide an offset.
“However, there will be job losses, and mining production is not as labour intensive as construction.”
The bank said the government would be wise to recognise that the boom would not continue indefinitely and therefore it should not focus all its attention towards investment required to underwrite further mining projects.