Over the last few years, the Australian mining market has been stuck in a nosedive. The g-forces have been felt by miners and investors alike and the downturn itself is not in dispute. What is up for debate is where it’s headed next. 

According to Bis Oxford Economics, we are just over halfway along a 74% fall in mining construction. While some sort of recovery period is expected by 2020, mining consultancy, Wood Mackenzie, have predicted the 2012-14 investment boom is the last of its kind we’ll see in mining. 

Wood Mackenzie analyst Saul Kavonic indicated the 2012-14 boom may actually be part of our current problem, with many projects going ahead in those years that shouldn’t have. "Australia appears to have received more investment than, in retrospect, it probably deserved."

While Liberal MPs have been pushing for a return to the old days of coal mining, the NAB has made dire predictions, estimating a continuation of the downturn with 50,000 jobs expected to be lost. Their projection has been the darkest, carrying with it a suggestion that mining investment will fall by 70% over the next three years. 

From the December 2016 Capital Expenditure Survey, David Bassanese, chief economist of BetaShares, theorised a decline of 25-30% in 2017 alone. “Applying historic realisation ratios between planned and actual investment, the survey continues to suggest mining investment will decline by 25-30% this financial year,” he said.

Amidst these dark predictions, there are a few beacons of light. The biggest comes from Reserve Bank Governor Philip Lowe, who says the nosedive in mining investment is inches away from pulling up. Why is the Reserve Bank so cheery and hopeful when everyone else is doubtful? 

The answer lies in 2016 research from the Federal Reserve Board which reveals a direct correlation between stock prices and the positivity of news reports. Using advanced text analysis, the board’s research team was able to accurately predict stock market returns by analyising over 900,000 news articles. The researchers noted “positive news affects stock prices within one week. However, negative news predicts low stock returns for up to one quarter.”

The analysis was conducted by artificial intelligence which follows specific algorithms to ascertain whether the sentiments expressed in an article are positive or negative. While there are some nuances that are difficult for AI to understand, it has proven to be a startlingly accurate predictor of investor preferences and future activity.

It stands to reason that the Reserve Bank, having discovered this secret ability to drive investment through news manipulation, would want to test their theory out in the real world. Framed this way, their lone-wolf comments about the mining market make a lot more sense. 

When the Reserve Bank says something so bold, it becomes news. And organisations like Industrial Info Resources have echoed the Reserve Bank Governor’s positive outlook. Lowe’s statements have been published on the ABC and Sky News, in the Sydney Morning Herald and the Australian, and on countless smaller newswires, investment blogs and websites. Time will tell if this tide of positivity will be enough to overcome the downturn and revive the mining market. 

This is not the only instance in which Lowe has used his news-manipulation tactic. Speaking of the Trump administration, he indicated America’s controversial new President could be of great benefit to the economy but only if we don’t pull out of our US investments. He warned "it could turn out very badly though if we do see the retreat from the open international order, the US economy would be weaker and the world economy would be weaker." 

To this warning, he added a strong positive spin: "Australia has benefited greatly from the open international trading system. Year after year, for more than two centuries now, capital from the rest of the world has helped build our country. As investors, Australians have also benefited from being able to diversify our portfolios." These are interesting words from a man who understands how far they will be spread through news services and the power that spread will have on the market.