The two-decade long mining boom in Australia could be coming to an end according to a recent report published by Deloitte Access Economics.
The report says Australian mining and resources investment is close to peaking, posing downside risks for what has become a key pillar of the nation’s economy.
The government regularly cites some A$450 billion or so in planned resources spending as a core strength in the economy, which has recorded 21 uninterrupted years of growth but where a widening gap exists between mining and weaker industries such as retail and manufacturing.
“The peak of the project pipeline is already in sight, meaning the key prop to the faster part of Australia’s two-speed economy is looking less certain the further out you look — though there’s still enough gas in the tank of huge resource projects to provide handy pipeline protection if Europe and China were to turn pear-shaped,” according to the Deloitte Access report.
Especially vulnerable is the state of South Australia, which is still waiting to hear whether BHP Billiton Ltd. will proceed with a planned A$50 billion mining expansion project, MarketWatch reported.
“South Australia has been losing market share within Australia, and hopes for limiting those losses rest on an upswing in resources spending on a scale big enough to make a difference,” the report said.
Outside of mining, areas such as transport and financial services are holding up better than widely anticipated, including the public sector — despite promises of steep spending cuts by both federal and state governments.
“At the same time, some sectors are still making a silk purse out of a sow’s ear, with the stupendous strength in engineering work keeping the wider construction sector afloat, and others still are just downright booming, with mining production and farm output growing at double digit rates,” the Deloitte report said.
“There is still plenty of pain to go around as well, however,” it adds. “Manufacturing growth only just has its head above water, and the utilities sector is also shrinking, in part due to the absence of any certainty on the future of carbon pricing.”