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Mining construction to soften: report

A private economic forecaster has contradicted federal Treasury predictions of the commonwealth budget returning to surplus within three years by casting doubt on the expected level of mining-driven engineering works.

BIS Shrapnel says activity in the mining and heavy industry construction sectors is expected to soften during the forthcoming financial year but will recover strongly in 2012/13 and 2013/14.

The weak outlook for 2010/11 contradicts Treasury's projections that a boom in mining-driven engineering works will help return the federal budget to surplus by the 2012/13 financial year.

BIS Shrapnel said that mining and heavy industry construction was expected to fall by three per cent in the forthcoming financial year.

The forecast is contained in a report entitled Mining and Heavy Industry Construction in Australia 2009/10 to 2023/24, released on Thursday,

The expected fall would come despite robust growth in oil and gas construction, led by Chevron's massive Gorgon liquefied natural gas project in Western Australia and the completion of major alumina refineries and iron ore and coal projects.

"Given its size, and importance to related segments such as ports and railways, the forecast decline in mining and heavy industry construction is expected to drive a broader fall in overall civil construction work in 2010/11," BIS Shrapnel said.

"This forecast flies in the face of Treasury's projections that a boom in mining-driven engineering works will help restore the commonwealth budget to surplus within three years."

Mining and heavy industry construction activity was expected to bounce back with double-digit growth in 2012/13 and 2013/14 following a mild recovery in 2011/12, the report said.

BIS Shrapnel infrastructure and mining unit senior manager Adrian Hart said recent decisions to delay or cancel mining projects were not solely driven by the federal government's proposed resources super profits tax.

"Nor do we believe that the tax, once finalised and implemented, will weaken overall mining investment in Australia," Mr Hart said.

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More about: BIS Shrapnel, Chevron

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