Outlook positive but challenges ahead

By webmaster

The outlook for the Australian economy, and the housing market, remains positive on the back of minerals-related investment, according to BIS Shrapnel’s Economic Outlook Bulletin 2012.

The quick growth of minerals-related investment is a boon to the Australian economy, but large disparities can be expected in different areas and the Government should prepare for challenges ahead, according to BIS Shrapnel senior economist Tim Hampton.

“The engineering construction industry is benefiting most from this activity, but sections of other industries are as well, including some areas of manufacturing, transport, wholesale trade, accommodation, and professional and business services,” said Mr Hampton.

Western Australia will benefit most from the minerals boom, while the Northern Territory, Queensland and New South Wales will see a “significant lift in activity” in the building activity sector, the Economic Outlook said.

However, Victoria's growth is still slowing, as a result of the high Australian dollar’s impact on the manufacturing, finance and business services sector and a drop in dwelling building after recent strong activity.

South Australia will also suffer under the strong Australian dollar, but will have growth stimulated by the Olympic Dam, while Tasmania and ACT will continue to struggle.

“The minerals boom is clearly a huge benefit for the Australian economy. However, it will come to an end, and much of the structural change is irreversible. It might be in five years, maybe 10, maybe more. Before the boom ends, the Government needs to have in place the policy settings that ensure Australia remains a strong and resilient economy.

“The steps include investing in infrastructure and skills, making the tax system more efficient, reducing red tape, and ensuring that the industrial relations system is non-combative.”

The Economic Outlook Bulletin also reported an increase in household attempts to deleverage, with the household saving rate jumping to the highest level since the ‘80s.

Largely, the negative news from Europe and the US has affected consumer confidence, and encouraged the tightening of lending practices, resulting in lower levels of private dwelling building activity.

BIS Shrapnel forecasts that this under-investment in building activity has created a “pent up” demand, and will drive activity later this year provided consumer confidence does not take another hit and funds remain available.

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