Jim Chalmers optimistic about resources outlook despite $100 billion budget write-down

Treasurer Jim Chalmers continues to be optimistic about the future of Western Australia’s resources sector despite flagging a $100 billion write-down in forecast exports leading to an $8.5 billion drop in company taxes filling Commonwealth coffers over the next four years.

The Government is attributing the bulk of the fall to the slowdown in China’s economy, where demand for iron ore has eased as construction slows and it grapples with demographic and structural difficulties.

Dr Chalmers said the changing demand from China had a “substantial impact” on the Australian bottom line that he will unveil in Wednesday’s mid-year budget update.

“This is a particularly slow and soft period in the Chinese economy, and even with the very welcome announcements made by the administration about efforts to boost growth, we still expect growth in the Chinese economy to be quite weak and that’s played out in our expectations of mining exports, company taxes and the like,” he said on Monday.

While the drop in forecast exports reflected in part the bouncing iron ore price over the past year, it also reflected expectations that volumes were down too.

Nevertheless, Dr Chalmers said he was “not pessimistic” about the resources sector’s future.

“I’m an optimist about the future of Australian resources and the workers and investors and businesses that make up that key industry. I’m very optimistic,” he said.

“The people and industries of WA do so much of the heavy lifting in our national economy. I understand and appreciate that, and I’m optimistic about the future of the industries which have made WA successful in the past and will continue to make WA and Australia successful in the future.”

But Australia had been a big beneficiary of the “stunning transformation” of China’s economy and the Treasurer was confident this would continue even as it changed further.

“I think preferences from our major trade departments will evolve over time, of course, they will,” he said.

“If you think about the big transformations that we are dealing with and trying to maximise and manage, all of them in one way or another, involve a very productive and prosperous relationship with China.”