THE mining boom will help keep Australia’s economy from falling into a hole until at least 2013, a report suggests.

Economic forecaster BIS Shrapnel said record levels of mining investment together with a ramp-up in production will insulate the economy from recession for the next five years - even with commodity prices tipped to fall.

“We didn’t really do enough investment, with the benefit of hindsight, through the 1990s to gear ourselves up for maintaining strong growth in mineral output and what we’re trying to do now is catch up,” said Adrian Hart, senior manager of BIS Shrapnel’s mining unit.

“The next five years will all be about increasing production to meet demand from China and other emerging economies . . . and once that production comes on stream that will drive weaker prices for a lot of commodities.”

The trough in the price cycle is expected in either 2010 or 2011, with the largest price falls forecast to occur in nickel, zinc, lead and copper.

The price outlook for coal and iron ore is for further growth into 2009 before declining between 2010 and 2012.

However, Mr Hart said soaring production levels would offset a drop in commodity prices and keep prices well above long-term levels.

“What is surprising is just how strong production is expected to grow in the next five years and that will be a real boost at a time when the domestic side of the economy is struggling under these higher prices and interest rates.”

The report found energy and steel-hungry commodities such as oil, gas and iron have the brightest prospects.

“Strong growth in global demand for steel, driven by the industrialisation of China, is fuelling the boom in iron ore and coking coal investment particularly,” Mr Hart said.

However, the report noted Chinese growth was expected to ease from the hot pace of recent years given weaker global conditions and rising domestic inflation.

“China is slowing,” Mr Hart said. “We believe that it’s slowing from double-digit growth rates to growth rates in the order of 8 to 9 per cent, which is still quite strong, and will continue to support growing demand for metals and minerals.”

Meanwhile, the introduction of a carbon emissions trading scheme is also likely to impact on the outlook for Australian commodities.

“There is certainly an indication that energy prices will rise through the next five years and this will produce winners and losers,” Mr Hart said.

“While high energy prices are hurting consumers and industry at the bowser, they are also stimulating a tremendous boom in oil and gas investment, including exploration and the construction of new infrastructure including rigs and platforms, pipelines and onshore processing facilities.”