Hand wringing about the collapse of Australian mining sector investment is premature

John Robertson

PortfolioDirect

Hand wringing about the collapse of Australian mining sector investment is premature. Spending on mining industry construction, equipment and exploration in Australia amounted to $101.0 billion in 2013, according to data from the ABS, only $882 million less than in 2012 but still $32.6 billion more than in 2011. Profits before tax of $55.9 billion in 2013 sounds to some like an industry ripe for a super profits tax until it dawns that this is a mere 10.6% pre tax return on the capital invested in the Australian industry over the past 15 years. Since 2008, the industry has invested an extra $358.4 billion without any increase in profits. We should be thankful for a slowdown in this debt fuelled investment binge when the returns are so low. The weak return on capital also highlights why a super profits tax gets such anaemic results.


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John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...

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