Australia's two-speed economy has emerged as a ''three-speed'' economy with the iron ore sector leaving behind the rest of the mining sector, according to resources group Rio Tinto.
Reinforcing its message of Australia having become a harder place to do business, Rio chief executive, Tom Albanese, said most of the mining sector had been hard hit with fewer new mining projects being planned.
According to Rio, it would be unable to go ahead with all its growth and expansion projects, in the backdrop of soaring capital costs forcing mining companies to adopt a more ''selective'' approach.
Speaking at Rio's annual general meeting in Brisbane, Albanese said the two-speed economy of Australia had become an outdated concept. He said it was not just resources versus the rest of the economy, it was iron ore versus the rest of resources versus the rest of the economy.
Rio's Pilbara iron ore operations contribute three-quarters of the company's profits, and according to Albanese it was the best business in the world apart from Apple's production of iPads.
Rio is likely to go for a significant expansion of its Pilbara iron ore division later this year, despite iron ore prices being 20 per cent lower than in mid 2011. But Albanese said other commodity prices were ''coming off the boil'' as against their peak in 2010, and Rio's other divisions would find it difficult to get funding for new projects. (See: Rio Tinto to spend $3.4 billion on iron ore expansion)
He said Rio could not probably develop as many projects as it could have done a couple of years ago with the same amount of money, which meant it had to be more selective, to focus its investment efforts into just the best projects.