Investors should take away two things from Thursday’s private capital spending numbers from Australia. First is that the brief row between miners and the government on the taxation of profits has had little, if any, effect on investment. In the year ending June 2012 miners plan to spend an aggregate $83bn on Australian projects, two-thirds more than the expected total for the current year, and well over double last year’s level.
Second, Australia as a whole looks a lot like a twin-track economy. On a narrow gauge is manufacturing, accounting for an ever-diminishing share of investment. On the broad gauge, barrelling out of the Pilbara, are the miners. Five years ago, about one in four Australian capex dollars was spent on mining structures, plants and machinery. Next year it may be closer to three in five.
Not that policymakers mind, particularly. While Canberra may recognise some symptoms of an unsustainable boom – trainee mine geologists in Perth now start on A$98,000 a year – it will be disinclined to correct it. The government’s plans to restore the budget to surplus by 2012/13 assume that miners keep investing; that the labour market stays tight; that the currency stays near its post-float record; and that the country’s terms of trade remain at a 130-year high.