End of the mining investment downturn in sight: Westpac's Andrew Hanlan

End of the mining investment downturn in sight: Westpac's Andrew Hanlan
End of the mining investment downturn in sight: Westpac's Andrew Hanlan

GUEST OBSERVER 

The end of the mining investment downturn, which remains the dominant dynamic shaping Australia’s investment project pipeline, is in sight.

The 5 remaining mega gas projects under construction, with a combined value of $172bn, are due to be completed by end 2017.

This will see the value of definite mining projects (those under construction or committed) fall sharply, down from $201bn currently.
 
End of the mining investment downturn in sight: Westpac's Andrew Hanlan

The other key dynamic, albeit less powerful, is the upswing in public transport projects.

Definite public transport projects are now valued at $100bn. This represents a sharp increase on a year ago, up $45.4bn, including a $5.3bn rise in June 
State by state, there is a stark divide. The mining investment downturn is being felt in Qld, WA and the NT.
 
End of the mining investment downturn in sight: Westpac's Andrew Hanlan
 
While it is the state governments in NSW and Victoria, which are benefitting most from the housing boom, that are leading the way on public investment. 
 
Australia’s investment project pipeline was $812.8bn in September 2016, as reported by Deloitte Access Economics in their Investment Monitor. The database includes 1,102 investment projects valued at $20mn or more.
 
End of the mining investment downturn in sight: Westpac's Andrew Hanlan

This is $9.7bn lower than three months ago. Projects completions were worth $6.8bn in the quarter, while project deletions were $18.1bn, including the cancelling of the ‘possible’ $12bn Port Hastings development in Victoria.

44 new projects were added to the database, with a value of $6.3bn.
 
 
End of the mining investment downturn in sight: Westpac's Andrew Hanlan

Cost revisions added $8.9bn, including WestConnex, which increased to $16.8bn from $11.5bn following an updated strategic business case.

The value of definite projects (under construction or committed) increased to $434.7bn in September, +$3.6bn on June and $28.2bn above a year ago.
Note, the Wheatstone LNG project, valued at $29bn in the database, has reportedly experienced a cost blowout of $6.6bn.

Note: the database includes the full value of a project until it is completed or deleted. This differs from the ABS notion of the ‘work pipeline’, which is the value of work yet to be done on projects currently under construction. 
 
End of the mining investment downturn in sight: Westpac's Andrew Hanlan

Non mining: Publis transport leads the way

The transport & storage sector has re-emerged as a driver of the investment pipeline as state governments, particularly in NSW and Victoria, commit to new public transport initiatives.
 
End of the mining investment downturn in sight: Westpac's Andrew Hanlan

Total non-mining projects are valued at $432.2bn. Of that, $233.8bn are at the definite stage, which is $4.6bn higher than in June and $43.5bn above the level of a year ago.
 
End of the mining investment downturn in sight: Westpac's Andrew Hanlan

Definite public transport projects are now valued at $100bn. This represents a sharp increase on a year ago, up $45.4bn, including a $5.3bn rise in June.

NSW leads the way in public transport projects, with $37bn worth under construction and a further $18.5bn at the committed stage.
 
End of the mining investment downturn in sight: Westpac's Andrew Hanlan

Victoria has $22.1bn in definite public transport projects, although $13.3bn of these are at the committed stage (the $11bn Metro project starts in 2018).
For services (retail, finance & business services, accommodation, community services) the definite project pipeline is $64bn, up from a 2010 low of $39bn but flat over the past two years. Projects at the planning stage total $46bn, including a number in the tourism sector, which is a potential bright spot. 
 
End of the mining investment downturn in sight: Westpac's Andrew Hanlan

Investment pipeline: State by state

The investment project pipeline on a state by state basis is heavily influenced by the mining investment downturn (WA, Qld & NT) and by the public transport upswing (NSW & Vic).
 
End of the mining investment downturn in sight: Westpac's Andrew Hanlan

In the mining state of WA, definite projects total $124bn, a figure that will fall sharply as $102bn in gas projects are completed by the end of 2017.

In Qld, definite projects are at $70bn, including the $25bn Origin LNG project, due to be completed by late 2016. Key will be whether tourism projects, still at the planning stage, eventually proceed.

In NSW, the pipeline of definite projects has climbed to $81bn, up from $56bn a year ago, with the prospect of additional transport projects to progress from the planning stage.
 
 
End of the mining investment downturn in sight: Westpac's Andrew Hanlan

In Victoria, projects under construction is relatively stable at $27bn, although the projects at the committed stage now stands at $15bn.
 
End of the mining investment downturn in sight: Westpac's Andrew Hanlan

In South Australia, the value of definite projects has risen to $13bn, up from $8bn a year ago, boosted by public works. 

Andrew Hanlan is senior economist for Westpac and can be contacted here

Andrew Hanlan

Andrew Hanlan

Andrew has been with Westpac since 2002. After starting his career in the public sector, Andrew worked at the Commonwealth Treasury in Canberra, before enjoying a stint at Parliament House, where he worked as an adviser to the Finance Minister. His main focus is analysing the Australian macro economy.

Tags: 
Mining Investment

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