The most significant issue for the Australian economy in 2011 will be how strong a boost it will get from the resumption of the mining boom, according to an economist.
AMP Capital Investors chief economist Shane Oliver said the mining boom would contribute potentially 2 per cent or more to economic growth in the year ahead.
"The near 60-year high in the terms of trade and prospects for a strong pick up in mining export volumes and mining investment suggest that the mining boom will contribute potentially 2 per cent or more to economic growth in the year ahead," Oliver told InvestorDaily.
"If this is the case, then more interest rate increases will likely be needed to ensure that consumer and housing demand remains subdued enough in order to stop the economy from overheating and inflation rising."
As a result, the multi-speed economy would become even more evident, he said.
"By contrast if contrary to our own, consensus and government expectations the mining boom turns out to be a lot weaker than expected or quickly peters out, maybe in response to an unexpected hard landing in the Chinese economy, then the big surprise for 2011 would turn out to be RBA (Reserve Bank of Australia) interest rate cuts in order to stimulate the non-mining part of the economy to fill the gap left by the mining boom," he said.
"Either way the mining sector will be a big focus in the year ahead."
