Resources boom to drive residential building recovery in NT, Queensland and NSW: BIS Shrapnel
Residential building activity is forecast to pick up in the Northern Territory, Queensland and NSW later this year driven by “minerals-related investment”, according to 2012 economic forecasts by BIS Shrapnel.
The report highlights the overall positive outlook for the Australian economy, but notes that “large disparities will persist, both regionally and between industries”.
The biggest beneficiary of the mining boom will continue to be Western Australia, while Victoria is forecast to remain stuck in the slow lane of the two-speed economy, with growth slowing in 2012.
“Some of this [slowdown in Victoria] reflects the impact of the high Australian dollar on the manufacturing, finance and business services sectors, as well as the winding down after a strong period of dwelling building activity over the past couple of years,” says BIS Shrapnel senior economist Tim Hampton.
“South Australia is doing it tough due to the high Australian dollar, but activity will be supported by a number of very large construction projects over the next few years, including the Olympic Dam expansion.
“Tasmania will continue to struggle due to the high Australian dollar weighing on its manufacturing and tourism industries.
“The Australian Capital Territory is likely to experience low growth as government departments rein in spending,” says Hampton.
According to Hampton the rapid expansion of minerals-related investment is proving the most beneficial to the engineering construction industry as well as some areas of manufacturing, transport, wholesale trade, accommodation, and professional and business services.
However, the “flip side” of the minerals boom is that record high commodity prices and the rise of the Australian dollar to near-record levels in real terms is having a detrimental effect on tourism, international education industries and many parts of the manufacturing industry.
“Other industries are also suffering due to the high Australian dollar, including retail trade as Australian households spend more of their money offshore. Many firms in professional and business services are also under pressure because the high Australian dollar is encouraging firms to take these activities offshore,” Hampton says.
“The completion of the government’s construction stimulus package is weighing heavily on non-residential building activity throughout the country,” he says.
The report also notes the continued deleveraging of households, which begun following the onset of the GFC, and the “negative news coming out of Europe and the United States”, which has “weighed heavily on consumer and business confidence” and encouraged creditors to tighten lending standards.
“As a result, the household saving rate has increased to its highest level since the 1980s, housing credit growth has fallen to its lowest annual rate on record, and the level of business credit remains nearly 10% below its late 2008 peak.”
BIS Shrapnel is forecasting annual average GDP growth just above 3% for the year to June 2012 and 3.5% for the year to June 2013, which should be sufficient to keep the unemployment rate around its current level just above 5% for the next six months, before it starts trending down to around 4.5% in the middle of next year.