Australia’s five-year mining investment slump is almost over, and that means the resources sector will soon start adding to growth again instead of dragging on the economy.
The good news is delivered in the Mining in Australia 2017 to 2032 report from forecasters at BIS Oxford Economics.
The forecaster’s associate director for mining, Adrian Hart, said mining production is likely to grow 5.5 per cent in the current financial year, with maintenance spending also on the rise and the investment decline winding down.
“For the first time in several years we can say that the outlook for mining is positive, rather than negative,” he said.
“We can start talking about mining being positive for the economy, not just in production terms but in investment terms as well.”
Mining exploration spending fell to its lowest level in a decade last financial year, at $2.9 billion, but BIS Oxford Economics expects that to recover to $4 billion per annum over the next five years.
“We’re seeing higher prices across the board and that’s already stimulating that exploration work, and we expect it to really strengthen over the next few years,” he said.
Mr Hart said increased exploration is already starting to lead to rising investment in new projects, at least outside of the LNG export sector.
“When you look outside of oil and gas, mining investment is actually starting to rise,” he said.
“You’re starting to see the next round of mining operations start to get developed, whether it be in coal, in iron ore, in copper, in gold, in other metals, we’re seeing the investment starting to come through.”
However, it will take longer for Australia to overcome the drag from hundreds of billions of dollars spent on LNG export facilities over the past decade.
From a peak of $95.9 billion in 2012-13, the report predicts investment in resource sector projects will bottom at $28.4 billion next financial year, before rising back to $38.4 billion over the next few years.
However, Adrian Hart said the broader Australian economic impact of the remaining investment decline is likely to be small.
“The downturn in LNG investment is probably still going to take another 12 to 18 months, and that’s going to make total mining investment continue to fall,” he said.
“It is highly import intensive and we believe that actually the impact on the Australian economy from that perspective will be negligible.”
The BIS Oxford Economics forecast do not factor in the possibility of Adani’s Carmichael coal mine, as the analysts do not believe the project is likely to go ahead.