End of mining investment downswing may be nearing: NAB

End of mining investment downswing may be nearing: NAB
End of mining investment downswing may be nearing: NAB

The latest state economic handbook by National Australia Bank predicts the end of the mining investment downswing may be nearing in mining states Western Australia and Queensland.

Riki Polygenis, NAB Head of Australian economics said the report said some indicators are stabilising.

“What we can see in today’s update is that Victoria and NSW will continue to benefit from buoyant population growth, strong services activity and infrastructure expenditure," she said.

"Non-mining business investment in these states has also started to strengthen and will gradually pick up speed. 

“Mining states like Western Australia and Queensland are currently receiving an income boost from higher bulk commodity prices, which are flowing through to corporate profits and state government revenue, although the flow on effects to investment and employment are expected to be limited given the temporary nature of the commodity price surge.

"Looking forward, Victoria and New South Wales will remain ahead of other states, while Queensland will experience the strongest growth overall thanks to resource exports. 

State breakout


Solid consumption growth, combined with private and public investment has helped NSW retain its mantle as the fastest growing state in the country. Final demand growth rose 4.1 percent in the last quarter of 2016, well above the national aggregate.

“While some of the timely economic partials are now painting a mixed picture, we remain generally optimistic about NSW’s prospects,’’ said Ms Polygenis.

“Overall, Gross State Product (GSP) growth is expected to moderate to around 23⁄4 percent in 2016-17 and then pick up slightly to 2.9 percent in 2017-18 (from 31⁄2 percent in 2015-16), but remain a standout (together with Victoria) in terms of state final demand.”

“We expect the all-important housing market to shift down a gear going forward, as the residential construction boom approaches its peak and price gains slow – reflecting greater supply, credit constraints and affordability constraints,’’ said Ms Polygenis.

“While a severe property price correction is not expected, growth in Sydney housing prices is expected to slow after four consecutive years of double digit growth.’’


Victoria will also remain a standout across the states despite some moderation expected, with growth neck and neck with NSW. Employment and population growth (particularly from overseas and interstate migration) is expected to continue, while infrastructure spending, services activity and exports and a gradually recovery in non-mining investment will be key pillars of growth. Residential building approvals have peaked, and dwelling construction is not expected to add as significantly to growth going forward.

“House price growth in Victoria is also forecast to ease through 2017, while apartment prices are expected to decline modestly as extra supply comes on line. However current strong momentum in the housing market, and measures to reduce stamp-duty for some first home buyers do suggest some upside risk,” said Ms Polygenis.


The Tasmanian economy has slowed into 2016-17 despite strength in tourism, agricultural and fisheries industries, although should improve moderately into 2017-18.

“A depreciating AUD would also be supportive of export-oriented industries in Tasmania. However an ageing population, low levels of educational attainment and a concentrated industry structure remain headwinds,” said Ms Polygenis


The ACT economy continues to improve post the earlier Federal public sector job cuts and has recorded stronger state final demand growth over the past two years.

“We expect the ACT economy to continue to recover, with higher population growth, stronger household consumption and increased dwelling investment underpinning its GSP growth. However with Federal Budget repair still very much on the radar, downside risks remain,’’ said Ms Polygenis.

We expect GSP (Gross State Product) growth to pick up modestly to 21⁄4 percent and 21⁄2 per cent in 2016-17 and 2017-18. The ACT unemployment rate is expected to remain below the national average at 4.3 percent in 2016-17 and 2017-18.


Since construction on the Ichthys LNG terminal peaked last year, project employment has begun to slide, with significant knock-on effects for the NT economy.

Business investment is currently strong, but will slow down sharply once the Icthys LNG project is complete, while volatility in the housing market makes 2017 tricky to predict.

“Tourism statistics for the NT continue to present mixed picture, although we note that domestic tourism is booming with interstate visitors up 22 percent to 361,000 in the year ended September 2016,” said Ms Polygenis.


In 2015-16, SA net exports (in real terms) grew significantly on the back of a depreciated AUD, with services exports rising by a record rate of 12 eprcent in the year, while merchandise exports expanded by the fastest rate since 2010-11 at 11 percent.

“South Australia will experience moderate growth, with infrastructure spending and shipbuilding to provide some offset to the impact of auto manufacturing closures this year. The state has some long-term challenges, including an ageing population and negative interstate migration, but employment and consumer spending are holding up for now,” said Ms Polygenis.


“The Queensland economy’s transition post the mining boom continues to gain traction and the state will experience the strongest rate of economic growth in 2016-17 owing to a surge in LNG exports and strength in tourism and education,” said Ms Polygenis.

However, business and labour market conditions remain subdued as the state economy continues to transition post the mining investment boom.

Regional Queensland (especially north Queensland), faced with variable commodity prices and drought conditions, is still struggling with depressed business activity, subdued house price growth and elevated unemployment.


“Economic indicators are still extremely weak in WA, with the weakness relatively broad-based across the economy as the mining cycle continues to dominate economic trends. However there is some sign of stabilisation in business conditions, indicating a reduced pace of decline. The current surge in iron ore prices is unlikely to spur additional investment or employment, but is having a positive impact on government finances,” said Ms Polygenis.

Overall, we expect very weak real GSP growth in 2016-17 and a moderate rebound in 2017-18 as LNG exports add to growth.

Despite signs that the property market may soon stabilise, property prices are expected to underperform again in 2017, while the unemployment rate expected to stay around current levels before seeing only a gradual improvement. 

Economy Mining Investment

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