Report shows mining industry no longer capable of “bailing out” Australia’s economy

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Image credit: flickr.com User: sanmang610

Deloitte Access Economics has published its quarterly Business Outlook which shows that Australia’s economic flows will grow at a slower pace and the unemployment rate will rise in the next two years.

Image credit: flickr.com User:  sanmang610
Image credit: flickr.com User: sanmang610

According to the news article on the Sydney Morning Herald, the country’s mining construction boom is about to experience a slow-down in investments and become a “notable problem” for its economy.

”Not many in the business world have yet grasped the huge turnaround in major capital projects that is already under way,” the report warns.

The report is showing that the dominating economic event in Australia is the so-called “baton change” from the “construction phase” of the mining boom to its “production and export phase,” and states that the financial implications will depend on the way the economy handles the transition.

”There’s no denying the ‘construction cliff’ is at the heart of the debate as to Australia’s short term growth prospects,” the report says.

Adertisement

”Recent years saw a deluge of development dollars go into the resources sector. But those dollars have already peaked, and the key question is just how fast or slowly the bonanza of recent years unwinds.”

The report also shows that the growth of the country’s economy is primarily down to the growth of the exports.

On a brighter note, the report predicts that the record-low interest rates and the recent substantial fall in the value of the dollar will benefit parts of the economy that have been in a bad financial state, including the manufacturing, retail, tourism and utility industries.

It is also expected that Victoria and NSW will be the biggest beneficiaries of the fall in the value of the dollar, with low interest rates expected to boost housing construction figures too, particularly in NSW.

”[So] we don’t see the slowdown already under way in the domestic economy as being as sharp as it was during the global financial crisis, or the slowdown that followed the introduction of the GST,” the report says.

According to Chris Richardson, a director at Deloitte Access Economics, the Australian economy is in a relatively good shape, despite the slow-down in the mining industry which has propelled the growth of the county’s economy.

“When you consider that we’ve never attempted a transition of this size in the modern era, it’s going okay,” Mr Richardson said.

”To say economic growth is a bit below trend and that unemployment is creeping up, it could be far worse than that.”