BHP Billiton cautious on recovery 

Source: ReutersAustralian $20 notes

BHP Billiton Ltd chief executive Marius Kloppers says his company is cautious about the global economy and that restocking in developed nations has been lethargic.

"We remain cautious on the global economy in the short to medium term," Kloppers said on Wednesday.

Kloppers says there has been strong demand recovery in the resources sector, mainly driven by restocking in China, but this could be drawing to an end.

"As GPD (gross domestic product) growth picked up, the Chinese economy had to increase its working capital in order to support this increasing economic activity," Kloppers told a meeting at the Lowy Institute.

"The increase in working capital has a once-off impact on demand and we are now witnessing the end of that working capital build in China."

He said BHP Billiton had expected a similar restocking exercise would be required in Organisation for Economic Co-operation and Development (OECD) countries, but this has been slow so start.

"Restocking activity in the OECD has been somewhat slow to start and has actually been quite lethargic to date," Kloppers said.

"Some have argued that history has shown a post-financial crisis recovery to be more protracted than a post-manufacturing crisis recovery and perhaps this partly explains what we are witnessing," Kloppers said.

Kloppers said the economic transformation of China was immensely difficult and in many ways unprecedented and should not be taken for granted.

"We've seen that the economic rationale for continued growth is compelling, but there are other forces at work in this global economy."

He told those gathered that the balance of power was changing in the world, and that Asia needed to work out ways to maintain stability and harmony.

"It seems obvious this will require a strong, continuing US leadership role in Asia, a growing role for China as its power grows, and also an appropriate role for Japan which remains such an important country and economy," he said.

Kloppers said foreign investment in Australia's resources would always be a sensitive issue, and that was heightened when investors were linked to foreign governments.

But he said Australia needed to be open to foreign investment despite its immediate and strategic implications.

Kloppers said Australia had done well from resources exports and it could continue to do so.

"Australia's resources industry has had a great past and is looking forward to a great future," he said.

But he warned Australia would need to work hard to hold and expand its place in the resources market.

He said much depended on Asia's biggest nations growing strongly and that required a peaceful, stable region and efficient markets within a free-trade system.  

"No single country can make that happen, everyone must do their bit," he said.