Media Watch: Economy ‘could be heading for boom’

Decisions on business investment projects over the next six months will be the key to whether the country heads for another investment boom, an independent forecaster says.

The economy benefitted from strong investment spending prior to the global recession, buoyed by businesses funneling profits from the resources boom back into capital and infrastructure spending.

The latest Access Economics-Arup Investment Monitor released on Wednesday shows there are 145 projects worth about $161 billion outstanding, with a decision on whether to go ahead expected to be made during 2010.

Access Economics director David Rumbens says a bulk of these projects were scheduled to commence in 2010, so decisions are likely to be made in the next six months.
"The decisions on those projects will mark the difference between investment stabilising at a high level and a further move up to an all-out investment boom over the next couple of years," he said when releasing the report.

However, he said, it would be a "patchwork boom" rather than an even-handed one.
About two-thirds of the value of these proposed projects are in the mining sector, while a high Australian dollar and relatively weak global demand is still "wreaking havoc" in the non-resource manufacturing sector. "International tourism is still fraught while `wait and see' may still hold for a while yet when it comes to new office blocks and shopping malls," Mr Rumbens said.

At the end of December 2009, the Investment Monitor recorded about $278.2 billion of definite projects - those under construction or committed to start soon - a $4.9 billion increase over the previous quarter. Compared with a year earlier, the value of definite projects jumped by $69.1 billion.

Mr Rumbens said this was largely thanks to the Gorgon LNG project in Western Australia, and state and federal government infrastructure spending decisions during 2009.
"Overall, the quantum of total project investment has weathered the storm well through 2009 and now has the opportunity to expand again with a more favourable economy in 2010."
He said this was the case particularly in the resources sector as commodity prices have gained a lot of ground over recent months due to a strong economic recovery out of Asia.
Business and consumer confidence was also strong in Australia.

WA remains the centre of the action for investment growth with $108 billion worth of projects under construction, more than double the value of definite projects under way in its nearest rival, Queensland.

This is despite the Queensland government doing everything it can to support infrastructure with a very significant building program.

Mr Rumbens said the investment program in Victoria looks a "touch more solid" than in NSW, although both are weighed down by modest pipelines of retail and office activity.

Office activity is also waning in the ACT, although there is a reasonable pipeline of engineering work, while South Australia's investment remains reasonable with plenty of potential in mining.

"Tasmania has a modest investment program, while the Northern Territory sees investment on the rise with potential for much more as part of a renewed mining boom," he said.

Ninemsn article dated 3/02/2010

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