Mining investment has peaked in WA, but still rising in Queensland: ANZ

The latest ABS construction data indicates the peak in resources investment in Western Australia appears to have passed, says ANZ economist Justin Fabo.

But he says mining-related activity is still rising in Queensland "consistent with our expectation based on ANZ’s major projects pipeline".

Morgan Stanley is forecasting a doubling in the vacancy rate in Perth and Brisbane  over the next three years on the back of an expected 40% drop in leasing demand from tenants related to the resources investment cycle.

Fabo’s comments follow the release of ABS March quarter construction work done data, with estimates of a 2% slump over the March quarter with the value of engineering work done down 2.5%.

“The peak in mining investment in Western Australia appears to have passed, with engineering construction in that state noticeably lower over the past two quarters, albeit still at a high level.

“In contrast, mining investment appears to still be rising in Queensland which is consistent with our expectation based on ANZ’s major projects pipeline,” he said.

Fabo says aggregate private engineering construction had risen very strongly largely due to the mining investment boom but appears to have peaked last year.

“At the same time, the recoveries in private residential and non-residential building remain very gradual to date, with falls recorded in the first quarter,” he says.