Mining profits soar as hospitality returns hit the skids

Booming commodity prices helped gross company profits jump by 7.1 per cent in the June quarter to $118bn.

Surging earnings by mining companies helped lift overall gross company profits over the quarter. Picture: Bloomberg

Booming commodity prices helped gross company profits jump by 7.1 per cent in the June quarter to $118bn, but “stalling” inventories growth pointed to weaker than anticipated growth in GDP over the three months.

Mining earnings surged 18.4 per cent to $55bn in the June quarter, the most since late 2016 and following two consecutive quarters of more than 14 per cent growth for resources firms.

The mining bonanza masked a 1.1 per cent drop in gross profits across other industries over the three months, seasonally adjusted figures from the Australian Bureau of Statistics data showed, which economists said reflected the end of JobKeeper support in March.

The end of the wage subsidy was most acutely felt in hospitality, where gross profits slumped by 20 per cent – the largest drop across sectors.

Despite the strong growth overall, growth in inventories, which will contribute most directly to Wednesday’s GDP figures, rose by a weak 0.2 per cent in the quarter, one-tenth of what had been anticipated by economists.

Westpac senior economist Andrew Hanlan said the restocking evident in the March quarter – when inventories climbed 2.4 per cent – had “stalled”, leaving inventory levels “well below” those pre-Covid. This was “possibly in part due to the lockdown disruptions associated with Covid,” he said.

CBA senior economist Kristina Clifton calculated that inventories would subtract a “large” 0.7 percentage points from second-quarter growth.

 

The ABS figures showed areas of strong growth, and economists highlighted the particularly high level of uncertainty around predictions for overall June quarter growth.

There was a 2 per cent lift in total wages paid over the quarter and small business income rebounded 2.3 per cent ahead of the September quarter lockdowns in Greater Sydney and Victoria.

Trade and government spending figures on Tuesday will provide further details ahead of the midweek release of the national accounts.

ABS gross company profits figures showed miners over the June quarter earned 40 per cent, or $15.6bn, more on a quarterly basis than before the pandemic.

Other major industries earning substantially more than before Covid were the construction, manufacturing, and professional and technical services industries, all up about $1.1bn, or 20 per cent, on December quarter 2019 levels.

In contrast, hospitality companies earned 21 per cent, or $390m, less, and transport 16 per cent, or $1.5bn, less. Gross company profits for the retail industry overall were 7.3 per cent higher than in the final three months of 2019.