Business View Australia

Business View Australia - April 2015 11

been felt in the Australian mining sector and there

has been a sharp reduction in the investment levels.

However, China is taking various steps to boost its

economy. The recent reduction in Required Reserve

Ratio (RRR) for the banks in the country by 1% is a

step in the right direction to raise demand. The RRR

signifies the level of deposits that banks must hold.

Reduction from a level of 19.5% to 18.5% will result

in an additional US$200-300 billion being available

to the banks to lend. While this is not the same as a

rate reduction, it will provide some positive impact.

Another development which will also help the coun-

try’s mining sector is the recent halt in the free fall

of the price of iron ore. While the downward trajec-

tory of prices continues, there has been a brief rally

in the current month and the common wisdom is

that prices will firm up.

The importance of the mining sector to the econo-

my cannot be overemphasised. In a recent speech

Brendan Pearson, Chief Executive, Minerals Council

of Australia, stated that over a period of time the

mining sector has raised household incomes by

13%, real wages by 6% and lowered unemployment

by 1.25%.

Discussing the prospects of this sector he went to

explain, “Let’s take a 5 year outlook for Australia’s

top 5 commodity exports – iron ore, coal, gold, cop-

per and alumina. In FY 2013-14, these 5 exports

generated $142 billion in export earnings. In 2018-

19, these commodities are expected to generate

$177 billion in export earnings. That’s a compound

annual growth rate of 4.5%.”