Resource states continue to lose steam

Source: Deloitte - www2.deloitte.com 

29 January 2016

Deloitte: Lower world commodity prices are continuing to deliver an unwelcome income shock to the Australian economy. That is compounding the effects of the drop off in mining-related engineering project activity, and the expected growth in mining output is lower than expected.

Australian business investment continues to slide as projects reach the end of construction and as early-stage projects are cancelled or delayed. Total private construction work is down markedly on last year and the falls will worsen in the next year or two. Indeed, engineering construction has contracted in ten of the last eleven quarters, and Deloitte Access Economics is expecting this phase to continue until about 2017-18.

On the positive side, ‘dollar dependent’ and ‘interest rate sensitive’ sectors are improving. Tourism and international education are benefitting from the fall in the dollar. Low interest rates are boosting the finance sector, while housing construction and retail remain relatively strong, despite sentiment in the housing sector waning somewhat.

New South Wales, Victoria, and Tasmania are benefitting from low interest rates and a fall in the $A, while WA, Queensland, and NT are experiencing the effects of a dissipating resources boom. Many of Australia’s good news stories are currently centred in NSW. Over the last 12 months, the value of planned and definite projects in New South Wales has increased by almost 18%, while, in contrast, the value of projects in Queensland has fallen by more than 30%.

Overall, total recorded value of projects in the Investment Monitor database is $776.9 billion. This represents a 4.6% decrease from the previous quarter, and is 6.8% below the level recorded in December 2014.

The value of definite projects in the database (those under construction or committed) decreased by just over $27 billion over the quarter, equivalent to a 6.7% fall. This takes the value of definite projects to its lowest level in over four years.

The value of planned projects in the database (those under consideration or possible) contracted during the December quarter. The $10.3 billion decrease contributed towards the pipeline falling $37 billion below the value recorded this time last year.

 

Contact

Stephen Smith - Partner, Deloitte Access Economics

(02) 6263 7000 

 

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