Laborers work at an iron and steel plant in Huaibei, China. The huge nation's surge in ore demand appears to have reignited the mining boom in Australia. Picture: AFP Source: AFP
THE mining boom is back, interest rates will remain stable, the Australian economy is in a "Goldilocks" zone and there may even be a Federal Budget surplus, all due to the surprise pick-up in the Chinese economy.
The China-led economic recovery is tipped to reignite the mining boom and exports in December expanded at the fastest rate in seven months.
Increased demand from Chinese steel makers has this week pushed iron-ore prices to a 15-month high of $US150 a tonne, up from a low of $US86 a tonne in September.
Iron ore is Australia's biggest export earner, generating $63 billion last year, but forecasters had dropped this to $53.15 billion for 2013 when prices fell last year.
This upbeat outlook, combined with the US economy's dodge of the so-called fiscal cliff, has also given the Federal Government a slim chance of delivering a budget surplus and many economists believe the economy is in a just-right "Goldilocks zone". .
Despite Treasurer Wayne Swan ruling out a budget surplus for 2013 before Christmas, there are glimmers of hope that the global economy may grow quicker than forecast and boost revenues.
Data released yesterday shows China's trade surplus surged 48.1 per cent to $US231.1 billion in 2012.
China posted a trade surplus of $US31.6 billion in December, well above the market expectation of $US20 billion, with exports jumping 14 per cent and imports up 6 per cent.
HSBC chief economist Paul Bloxham said China is set to add more to the global economy than ever before. with the growth to rise from a modest 7.8 per cent last year to 8.6 per cent in 2013.
"The outlook for Australia is increasingly positive after a weak second-half of 2012, with the Chinese pick-up signalling the mining boom is not over yet and low interest already starting to have an impact in the non-mining sectors such as construction and retail," he said.
Mr Bloxham is tipping the Reserve Bank's rate cutting cycle is over with mortgage rates already below their long-term averages.
Further rate cuts are, however, still expected in 2013.
But most economists are tipping the Reserve Bank - after cutting the official cash rate in December to a record low of 3 per cent - will "adopt a wait-and-see approach" at its first meeting for the year on February 5.
"The latest economic data suggests that interest rate settings are about right," CommSec chief economist Craig James said.
Investor sentiment has also rebounded, the ASX 200 climbing 18 per cent in the past six months.
The market closed yesterday at 4723 points, close to levels last consistently reached in May 2011.
And this more rosy global outlook pushed the Australian dollar back close to its six-month high of US105.5c.
The most recent monthly building approvals data released yesterday by the Australian Bureau of Statistics were up 13.2 per cent in the 12 months to November.
Overall residential approvals increased 2.9 per cent in November but the data was mixed with permits to build detached houses down 0.3 per cent in the month, while approvals for multi-unit residential properties - the most volatile category - soared 10.1 per cent.
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