Mining projects encourage two-speed economy

Investment spend is Australia is heavily weighted towards mining projects, which may indicate a two-speed economy, noted a report by Deloitte Access Economics.

The Investment Monitor report suggested “the investment landscape is very much dominated by mining” with the March quarter seeing a 26 percent rise in mining investment for 24 new projects at a value of $16.6 billion. This was despite a drop in overall investment of $9.1 billion to $767.5 billion.

However investment in the services industry was restrained, said Deloitte Access Economics.

“The high value but relatively small number of new projects seen during the March quarter is once again reflective of recent trends—very supportive for the resources sector where the capital value of projects tends to be high, but subdued for the service-oriented sectors of the Australian economy, which remain on the ‘slow track’.”

Investment into high value resources projects including liquefied natural gas (LNG) and iron ore were prevalent, and Queensland accounted for almost a quarter of all investment due to the combination of resources projects and flood and cyclone recovery efforts.

The Federal Government has already indicated that it would try to temper the mining boom to ensure it does not adversely affect the Australian economy in the future. Treasurer Wayne Swan said the government looked “to get the policy settings right to convert this investment boom into an opportunity boom for all Australians”.

Deloitte Access Economics said the resources sector would support strong growth in the Australian economy but also bring “skills shortages, rising prices and upward pressures on interest rates”.

Almost half of the value of projects came from mining and more than a quarter from economic infrastructure such as transport, utilities and communications projects.