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15 Feb 2018

Transport spending surpasses mining in Australia

According to the Deloitte Access Economics Investment Monitor, engineering and commercial construction activity increased by 12% in 2017. The improvement is partly due to the fact that the overhang of engineering work that commenced construction during the mining boom has finally passed, Deloitte's Stephen Smith explained. But it also reflects a greater willingness from businesses to once again spend money on expanding capacity and maintaining existing capacity. The outlook for mining and non-mining sectors is varied, although commodity prices and exploration expenditure have improved over the past year and a half. Miners appear focused on controlling costs, and so recent strong profit results are more likely to be returned as dividends than laid out on new investments, said Smith. Meanwhile, non-mining investment has turned a corner. Profits are up, interest rates remain low, measures of capacity utilisation are tightening, and the economy continues to strengthen. This combination of factors has supported a lift in business confidence and provides a solid backdrop for investment prospects. Mining investment plummeted in the past 5 years from three-fifths to just below one-third for all project activity. Modest gains in private business investment are expected over the next five years, says Smith. Business investment is forecast to settle at around 13% of the economy, well above the 8% average prior to the mining boom. 1,148 Australian investment projects, totalling up to over $20 million, can be found in the Investment Monitor database. $743.8 billion is recorded in the database, which totals up to a 0.8% decrease from the last quarter and 5% below the year before. The value of definite projects, in progress or completed, fell by $3.1 billion to the lowest level since March 2011, mainly caused by the termination of multiple LNG projects in Queensland and Western Australia. The value of planned projects fell roughly by $2.8 billion. Planned work also dropped 2.2% compared to December 2016. Although the report doesn't specify the source of the investment, it is clear that both NSW and Victorian governments have embarked on massive infrastructure programs in recent years.
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