Investment Monitor March 2011: Two speedsDOWNLOAD
The March 2011 issue of the Deloitte Access Economics-Arup Investment Monitor sees the overall value of investment projects underway or in planning decreasing by $9.1 billion or 1% over the past quarter to $767.5 billion. Nevertheless, it remains at a very high level.
Overall, it is a two speed pace of business investment spending in Australia as well, with Investment Monitor suggesting the investment landscape is very much dominated by mining.
Investment Monitor shows that the mining sector accounts for 46% of the value of projects recorded in the database. Economic infrastructure (transport, utilities and communications) accounts for a further 27% of projects in the database. By contrast, manufacturing accounts for less than 5% of projects, and the bulk of that comes from the resource related metal products element of manufacturing.
At the start of the last decade manufacturing investment had a clear lead over mining, with close to double its amount of investment. By 2005 mining had just edged in front of manufacturing, and people were already starting to talk about a resources boom. Five years on and there is daylight between the respective sectors.
Exposed to both parts of the Australian economy (those sectors on the fast track and those on the slow track), is economic infrastructure (covering transport, ports, energy, water and telecommunications projects). Government spending on economic infrastructure projects remains significant, and is also ramping up to deal with the aftermath of flood damage, primarily in Queensland.
The investment outlook for non-residential building is modest. Consumers are saving rather than spending, and increasingly heading on line, reducing the appetite for bricks and mortar retail investment, while the high $A is cruelling interest in tourist accommodation. For office developments a cyclical slowdown has been underway over the past two years, reinforced by the GFC. However the backdrop is now more supportive – white-collar jobs growth is strong and office vacancy rates are declining.
With resources sector investment the dominant force at present, Western Australia and Queensland are well and truly leading the investment charge. Recent months have seen several major projects reaching or nearing completion in WA, including the Pluto LNG project with first gas delivered in March. However, other projects are moving through (including stage 6 of BHP Billiton’s Rapid growth iron ore project), sustaining the investment agenda in WA at a very healthy level. Across the continent the investment agenda in Queensland is picking up speed, led by Santos’ $16 billion LNG facility. On top of this will be a very significant infrastructure rebuild after flood and cyclone devastation.
While WA and Queensland are the real deal at present, South Australia and the NT are the resource sector wannabes. Both are relying on the go-ahead for a major project (the $21 billion Olympic Dam expansion in SA and the $25 billion Inpex Alpha LNG plant in Darwin), with investment schedules otherwise modest for now. New South Wales and Victoria retain solid investment agendas, with new State governments in these States promising a focus on infrastructure. For now, the high $A and relatively tight finance form something of a constraint in these States. Public sector projects are dominating Tasmanian and ACT investment for now.