The Australian economy ended 2016 on a high note, with a record trade surplus of $3.5 billion for December, buoyed by strong results in the mining sector.
Both mineral exports and commodity prices were up: Increases of 14% in coal and 10% in iron ore shipments drove the value of exports up 5% in December over November. Imports rose by only 1%, according to the Australian Bureau of Statistics. Coking coal shipments surged 46%, while the value of iron ore fines increased by 27% in December alone. Gold exports rose 23%.
Paul Bloxham, chief economist with HSBC, optimistically predicted that the bump in exports should considerably boost mining sector profits, dividend payments, share prices and wages – though as of this writing, year-end results from some of Australia’s top mining companies, including Rio Tinto, BHP Billiton, Newcrest Mining and South32, have yet to be reported.
Some hail the start of another mining boom, and certainly the year-end results are encouraging; yet a note of caution is warranted, both for the mining industry and the broader Australian economy. This was only the second monthly trade surplus in nearly three years. And as the economy continues to rely on commodities markets, it remains vulnerable to market volatility. December 2016’s robust figures starkly contrast with the record deficit of $4.3 billion just one year earlier, The Australian notes.
In its latest Tracking the Trends industry report, Deloitte observed that while companies are starting to focus on growth again, Australia’s mining industry is confronting challenges such as cybersecurity threats, technological disruption and environmental issues. Where to invest and how to position themselves in the coming years are among the key choices mining executives now face.
“Miners willing to engage in substantive change, by rethinking strategy and embracing the digital revolution to help unlock productivity and improve sustainability, will likely be best positioned to succeed”, said Nicki Ivory, national mining leader for Deloitte Australia. “But these companies will require strong leadership, greater collaboration and adoption of a long-term view to propel the industry forward.”
