“While we navigate this structural change and major cyclical shifts, we’ll also have to cope with any fall-out from President-elect Donald Trump’s more outlandish policies – should his campaign rhetoric be translated into actual policies. But we’re optimistic that little of the more dangerous policies will be enacted, and that the world economy will continue to limp along,” said Richard Robinson, report author and senior economist at BIS Shrapnel.
As outlined in BIS Shrapnel’s latest Economic Outlook bulletin, there’s still more hardships to come for the previously robust mining states.
“This is a major reversal in interstate relativities from just four years ago,” Robinson observed. “For most of the decade to 2012, the mining investment boom saw Western Australia, Queensland and, more recently, the Northern Territory, record by far the strongest economic growth.”
“Now, with the resources investment boom well into a substantial decline – and with more to come – they have been overtaken by NSW and Victoria. The pendulum is swinging away from the mining boom regions and states, and towards the states now being boosted by the lower dollar and their non-mining tradeables and services sectors.”
The peak in the mining boom and the subsequent falls in both resource investments and commodity prices coincided with the 30% decline in the Australian dollar (against the US dollar) to US72 cents in the March quarter of 2016, although the dollar has since risen to US76 cents.
NSW is expected to have the strongest economy among the states over the next two years, with non-mining investments picking up. Moreover, public investment, as well as private non-dwelling building and private civil construction, will keep growth strong. Growth in these sectors will offset the projected decline in residential construction a year from now.
Victoria was the strongest performing state in 2015, and while the lower Australian dollar will continue to boost growth, the decline in residential investment due to oversupply and the car manufacturing shutdown of 2017 will cause growth to slow.
The formerly robust mining states have experienced outright declines in State Final Demand (SFD), as resources investment has plummeted. “The mining states will be at the mercy of further falls in resources investment. For Western Australia and the Northern Territory, the worst is not yet over and further large declines in mining investment are expected over the next two years, although SFD in the Northern Territory will be strong this year before collapsing in 2017/18.”
Queensland has experienced the worst declines in mining investment. While its more diversified economy is slowly beginning to recover, the looming residential downturn will keep growth constrained.
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