The West Australian (Perth) August 2, 2007 Thursday METRO...

The West Australian (Perth)

August 2, 2007 Thursday
METRO

GENERAL; Pg. 4

490 words


China?s boom to last 20 more years

SHANE WRIGHT


The Chinese economic boom, which has fuelled WAs unprecedented economic strength, will run for at least another 20 years and be unlike anything in world history, a report by leading Australian economist Ross Garnaut has found.

Professor Garnaut, who has been commissioned by the ALP to compile a report on the cost to the Australian economy of doing nothing to stop climate change, uses a special paper commissioned by mining giant Rio Tinto to claim the Chinese boom fuelling the surge in the WA economy is going to intensify.

His report puts him at odds with Opposition Leader Kevin Rudd, who said in Perth yesterday that the resources boom would eventually end, forcing Australia to look at other ways to develop its wealth.

But the new report shows Professor Garnaut expects demand for WA commodities such as iron ore and nickel to grow to extraordinary levels and that prices will remain high.

If correct, Professor Garnauts report has huge implications for WA economically and socially. Such a prolonged economic expansion would put more stress on already-stretched labour and housing markets.

He finds that once the average per capita income in a country hits $US2000, demand for metals and energy increases rapidly. Per capita income in China has just reached $US2001.

"China is entering a per capita income bracket where demand for metals and energy relative to population is likely to increase dramatically," Professor Garnaut and fellow report author Ligang Song said.

"If the expected relationship between income per capita and metal and energy demand is maintained over the next 20 years of Chinese growth, then the country is entering a period of resource-intensive demand unique in world history.

"In 20 years, assuming there is no dislocation to this growth process, China is likely to consume more energy and metals than all of the industrialised economies today."

Rio managing director Charlie Lenegan, in a preamble to the report, said the authors had found that the China boom, far from being about to end, might just be gathering pace.

"Chinas growth will be vastly more resource intensive," he said. "This implies that the pressure of Chinese demand on global resource markets is now only in its early and moderate stages. Minerals prices will remain, on average, much higher in real terms than has been the case in the last quarter of the 20th century."

The reports findings are in stark contrast to warnings from Mr Rudd this year that the resources boom is likely to come to a halt.

Campaigning with the ALP candidate for Stirling, Peter Tinley, yesterday, Mr Rudd said all booms had to end.

"You simply have to prepare for the day when the boom is finished," he said.

"And you know something, if you read economic history, you know that booms come and booms go.

"Do we want it to continue? Of course we do. But what we know from economic history is that its not infinite and therefore smart, long-term economic planning lies in this."

Kevin Rudd: A Labor report is at odds with his views on the economy.

August 2, 2007