FINANCING THE DEVELOPMENT OF AUSTRALIA'S PETROLEUM AND MINERAL INDUSTRIES

Abstract

Recent collation by the Bank indicates a high level of development expenditure will be necessary over the next five years with peaks in the cycle in 1979 and 1980.

By an analysis of historical capital flows, overseas capital, borrowings in particular, will be necessary in increasing amounts. Whilst the traditional sources of capital will be used, direct borrowing from OPEC sources could be utilized, probably using the Australian banking system as the appropriate channel.

Whilst the resumption of a strong capital inflow will be necessary, excessive growth in the money supply from this source will be moderated by a rise in imports of capital goods for the mining industry. Original research by the National Bank of Australasia Ltd entitled the "Degree of Competitiveness Indices" shows, by an index of exchange rates and inflation rates of our major trading partners, how Australia stands in relation to world markets.

Devaluation and fiscal incentives should result in an upturn in the rate of capital formation in the mining industry in future years. This paper is in general agreement with the Government's policy towards foreign investment in Australia with one important qualification in that it is better to develop resources, even with overseas ownership, rather than leave them idle.