The slowdown in mining investment is nowhere near done taking its toll on the Australian economy, according to a dramatic new report from NAB Group Economics.
NAB’s report, titled The Mining ‘Cliff’ – How far have we come, suggests the transition of the Australian economy from mining to non-mining activity to date has been smoothed by a low Australian dollar and low interest rates.
But the full toll on the economy is yet to really take place, it suggests.
“Following the peak and subsequent decline of commodity prices and Australia’s terms of trade, mining investment has followed suit, steadily declining after peaking 2012/13,” the report states.
“The question remains how much further does the mining investment downturn have to run, and what have been the broader consequences for the economy?
“Our analysis suggests that, given the existing pipeline of mining projects scheduled for completion, the investment downturn is a little over half complete in level terms.”
Future pain is set to be felt most heavily in the employment sector, NAB expects.
“So far, the winding down of the mining investment boom has largely unfolded as many had predicted, although the associated fall in direct mining employment has been more muted to-date,” NAB reports.
“We believe that mining investment is currently more than half-way through the cycle, while employment is slightly below the half-way mark – with the difference likely to be related to the significantly higher labour intensity of LNG projects in the (near) completion stage of the construction phase.”