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Predicted end of mining boom has start-ups scrambling

Monday, 23 July 2012 | By Michelle Hammond

Start-ups looking to leverage the growth of the mining industry are being encouraged to act fast, with a report by Deloitte Access Economics insisting the boom will be over in less than two years.


In the June 2012 issue of the Deloitte Access Economics Business Outlook report, Australia is described as a “global standout”, despite the fact it failed to celebrate its 21st year recession-free.


“A striking investment boom is doing all the heavy lifting on our growth, and there’s more where that came from, with a deluge of dollars still to come,” the report said.


“Yet the peak of the project pipeline is already in sight, meaning the key prop to the faster part of Australia’s two-speed economy is looking less certain the further out you look.”


With regard to industries, the report said some sectors have been holding up better than expected, including the finance sector, recreational services and transport.


“At the same time, some sectors are still making a silk purse out of a sow’s ear, with the stupendous strength in engineering work keeping the wider construction sector afloat,” it said.


“And others still are just downright booming, with mining production growing at double digit rates.”


According to the report, there is “heaps to cheer about” in WA in particular, with growth “verging on great” as more projects get underway.


“Even if the global outlook were to worsen, activity in Western Australia would have the handy buffer of projects still being finished. That could help sustain growth for 18 months or even two years,” it said.


“However, as we emphasise elsewhere in this issue of Business Outlook, unlike diamonds, mining booms aren’t forever. And the current boom is of course already pretty long in the tooth.”


“More than a third of the spending in Western Australia at the moment is businesses putting their money where their mouth is, betting on Western Australia to grow and make profits for some time to come.”


“But the Gods of Growth are notoriously fickle. The outlook for China and other emerging economies is not as riskless as many commentators seem to have imagined.”


“This investment boom will crest and then ease beyond 2014 and 2015.”


However, this sobering forecast doesn’t appear to be dampening business’ spirits too much.


A report by RSM Bird Cameron, which surveyed 278 SME owners, shows 77% of SMEs expect to grow in the next 12 months, an increase from 76% in 2011 and 69% in 2010.


This is despite the fact that 10% less than in 2011 experienced business growth over the last two years (63.5% versus 73%).


Overall, SME owners believe their business is successful. However, optimism about their company’s medium-term prospects has dropped as ongoing tough economic conditions continue taking their toll.

“It is important to consider the increasing uncertainty SME owners face regarding their medium-term prospects,” says Andrew Graham, RSM Bird Cameron national head of business solutions.


“This uncertainty… has had a negative impact on the way many SME owners feel about running their business.”