Sunday, 27 March 2011

Japan nuclear crisis no boost for local coal, gas

Courier Mail
16 March 2011, Page: 30

JAPAN'S crisis won't hurt the global economy's recovery this year and any step back from its nuclear program would mainly benefit oil producers rather than Australia's gas and coal sectors, a leading economic forecaster said. BIS Shrapnel chief economist Frank Gelber said even if the world's third largest economy fell back into recession, it would not upset global growth this year of about 4% as Japan was not a growth driver. He also questioned if Japan's nuclear plant crisis would result in increased sales of Australian coal and gas, given Australia's existing capacity constraints.

"We can't produce to meet demand anyway. Longer term, you might see a slight shift away from uranium in Japan but short term they're more likely to replace that with oil, which doesn't mean anything for us, and medium term it might be coal and gas but it's not going to make a huge difference to us", he said. 30% of Japan's electricity production comes from nuclear power. It has plans to expand this to 50% by 2030, reduce fossil fuel use and increase renewable energy as part of its efforts to slash greenhouse gases.

Gas producer Origin Energy's managing director Grant King yesterday said Japan's commitment to a nuclear fleet expansion might change given the partial meltdown at several plants after cooling systems were taken out by the tsunami. "There are (nuclear fleet) concerns being talked about,.. that may well lead to changes in targets that exist in the longterm fuel mix and that would clearly be advantageous to LNG", Mr King said.

Dr Gelber also said the Australian economy looked set for five strong years of growth, powered by the minerals and energy investment boom. But he said Australia will experience a "very distinct" two speed economy in that time. He warned that Australia's major medium term economic challenge was to ensure it could withstand the shock of a bust in minerals prices.

"The Australian economy is now all about satisfying minerals demand. We're not doing anything else. All other industry is running down. "Take Queensland agriculture's a mixed bag, tourism is stuffed, education services and non commodities related manufacturing are doing it very tough as we undergo a structural shift to make way for the minerals boom", Dr Gelber said. "Once we've changed our structure, we could be left high and dry if and when the minerals boom busts. I don't know when that is, but the shock to the economy will come not when minerals prices fall but when investment falls and (the lag effect) could be years.

"We should be thinking now about what to do, for example using (a minerals resource rent tax) to help set ourselves up to be as resilient as possible". BIS Shrapnel forecasts Australia's growth for the year to this June to be 2.6%, rising to 4.0% in 2012. It forecasts Queensland's economy to have strong growth this year and next, due largely to a construction sector boom that will be led by engineering construction related to the boom in investment in minerals and energy projects.