PERTH (miningweekly.com) – A new report by analyst Newport Consulting has suggested that business confidence in Australia’s resources sector was in a free-fall, with companies cutting capital expenditure and staff numbers.

Newport MD David Hand noted that, while the '2012 Mining Business Outlook' report had identified the mining boom’s imminent end, this year’s outlook represented a significant negative shift in market sentiment.

“This year, the situation has worsened and we’re now seeing the effects of the slowdown with a surge in the number of mining leaders who are not optimistic about their business prospects, a sharp increase in companies slashing capital spend and an increase in mine closures.”

Some 44% of the mining leaders interviewed said they were reducing capital investment in the sector, the first time in four years that companies have stated definitively that they would reduce, rather than increase, spend.

Hand noted that jobs were being cut across the industry, with New South Wales and Queensland reporting that some 9 000 mining jobs had been lost in the two states over the last 12 months.

“Just as in the boom years, a multiplier effect cascaded through the economy. We are now seeing the end of the boom follow that same path, affecting support industries, government revenues, terms of trade and jobs,” he added.

Newport stated that close to half of the 60 mining executives interviewed for the report stated that they were not optimistic about future prospects, an increase of 34% on the 2010 report, while the number of leaders who were optimistic had declined by 38% since 2011.

The miners cited tough and volatile market conditions as the main reason for the downbeat view, followed by falling demand and lower commodity prices.

Hand noted that the challenge for Australian mining leaders was to rethink their approach to operational excellence and mine operation management in order to deliver a return to shareholders and investors.

“As access to funding becomes more difficult and falling commodity prices wreak havoc with business plans and future projects, the opportunity is now to operate these assets very well and drive value through them for investors, employees and the country,” he added.

“Now is the time for mining companies to operate their assets at an optimum level. Delivering a return to investors will improve the lending environment and we should see investment flowing into the sector and other areas of the economy again.”

Along with a focus on lifting productivity levels, the resource sector was also urged to embrace new sources of growth through creativity, technology and innovation as a long-term strategy for productivity improvement and lower production costs.

Newport noted that advancements in the mining industry through innovation and new technologies have opened up opportunities for new suppliers, stimulating employment and growth in other industries.

“With relatively low levels of debt, Australia can afford to invest in research and innovation infrastructure, which will be necessary if we are to support a national productivity agenda.”