Home > Little chance of reprieve for fading resources sector

Little chance of reprieve for fading resources sector

article image

Softer commodity prices and rising construction costs are driving down project investment levels in Australia’s resources sector.

Releasing its latest Investment Monitor report today, Deloitte Access Economics found almost $25 billion was wiped off the value of definite projects in the final three months of 2013.

This drop is the largest quarterly fall since the 2008 December quarter, at the height of the GFC, and according to the economist with declining investment in Australia’s resources sector set to continue there are few signs of a turnaround.

“The impending peak in resource-related investment spending has been well documented, and there were few signs of any reprieve in recent months,” Deloitte stated.

Dropping resources investment will place pressure on other areas of Australia’s economy, and Deloitte said it’s unlikely non-resources sectors are strong enough to fill the gaping investment hole just yet.

“While low interest rates appear to be helping residential building activity and retail sales, Investment Monitor data continues to point to a soft profile for non-resources investment,” the report stated.

December’s fall has deflated the value of definite projects by 1.2 per cent over the last year.

The findings are in line with the Bureau of Resources and Energy Economics’ most recent biannual report, released in November, which flagged the transition from a period of high capital investment into a production phase as new projects come online.

BREE stated dropping commodity prices and rising costs are creating challenging investment conditions, resulting in the decline in the number of projects moving through the investment pipeline.

Over the last ten years Australia has experienced rapid escalation in investment in resources and energy projects on the back of higher commodity prices.

Newsletter sign-up

The latest products and news delivered to your inbox