Mining investment in Australia could continue to fall if current data trends continue, says BetaShares.
While the consensus view is that the decline in mining investment will begin to ease, this is “hard to reconcile” with mining investment intentions for the 2017-18 financial year contained in the ABS’ December quarter Capital Expenditure Survey, BetaShares chief economist David Bassanese said.
“Applying historic realisation ratios between planned and actual investment, the survey continues to suggest mining investment will decline by 25-30 per cent this financial year (in year-average terms),” he said.
“The first glimpse of investment intentions for 2017-18 implies a further 20 to 30 per cent fall in investment (in year-average terms), which would require further sizeable declines in investment over the coming quarters.”
Mr Bassanese noted that mining investment on a national accounts basis has declined from a peak of 9 per cent of GDP in the 2012-13 financial year to 4.6 per cent in the 2015-16 financial year, and could continue to contract.
“Based on trends in the quarterly mining investment contained in the capital expenditure survey, national accounts based mining investment should decline to around 3 per cent of GDP in 2016-17 and then to 2 per cent of GDP in 2017-18,” he said.