Investment Monitor June 2012 – Resources sector propping up pipelineDOWNLOAD
30 July 2012: The June 2012 issue of Investment Monitor saw the total value of projects in the database hold steady. The value of projects fell by a modest $694 million, or 0.1%, in the June quarter but has still increased by 10.7% over the past year.
Major projects in the resources sector continue to push through to the construction phase. The June quarter saw construction begin on the $31 billion Ichthys gas field development and on the $12 billion Prelude LNG project in Western Australia’s Browse Basin, the world’s first floating LNG platform.
As has been the trend of late, there was strong growth in the value of projects under construction. The value of work underway rose 7.7% in the June quarter and 45.1% over the past year.
As a consequence, the value of committed projects saw a sharp decline. On the whole, the value of definite projects (projects classified as under construction or committed) was down slightly compared to the March quarter.
The value of projects in planning has increased solidly in the last three months, supported by a number of new projects from recent government budgets. The value of projects in planning in the June quarter was $475.6 billion, a $4.6 billion rise compared to the March quarter.
The strength of investment in the resources sector has been an important windfall for the Australian economy. There is clearly a substantial base of investment in the sector (though the value of resources projects in planning has softened over the past year). The value of resources projects as a share of all planned projects has fallen from more than 56% in June 2011 to less than 40% in June 2012.
However, it is the relative lack of investment across other sectors, and particularly in Australia’s urban infrastructure, that is of concern, and a greater stock of non-mining infrastructure will be needed to lift the economy’s productive capacity.
While governments at all levels have increased infrastructure spending in recent years, the size of the infrastructure deficit in Australia is too large to be satisfied by the public sector alone and a more balanced investment agenda will be needed to support the health of the economy over the longer term.
The sustained strength in mining investment means that the industry now accounts for more than half the value of all projects currently listed as under construction in the Investment Monitor database. The investment performance of other industries is less impressive. The value of definite manufacturing, utilities and office projects is now weaker compared to a year earlier, while the retail and tourism sectors continue to struggle to attract investment.
Economic infrastructure (covering transport, ports, energy, water and telecommunications projects) has a notable investment agenda underway, including the roll-out of the NBN and major energy, transport and port projects.
Non-residential building activity continues to be comprehensively outpaced by work in the engineering sector.
Western Australia and Queensland continue to lead the way in terms of the value of projects in the Investment Monitor database. Together the two States account for some 50% of projects, including some 53% of the value of projects currently under construction.