Source: ABS, Deloitte Access Economics
As shown in Chart 5.1, the projected rise in total investment is largely driven by private business investment. Private business investment is expected to increase to around 20% of GDP by the middle of this decade. A slight decline in public investment’s share of GDP is expected, while housing investment is expected to maintain a share of around 5-6% of GDP. Note that the forecasts shown in Chart 5.1 are based on analysis of the overall macroeconomy, rather than a review of the likelihood of projects proceeding on an individual basis. The view that investment in Australia sustains a high level for some years to come is certainly consistent with the large number of investment projects underway and in planning at present. However, as has historically been the case, not all projects in planning will actually occur, and for some projects which do occur, there will likely be significant delays in implementation.
If Australia were not to achieve these indicative high rates of investment it would mean a constraint on the economy over time. An alternate scenario is that mining and infrastructure investment is held constant at 2009-10 shares of GDP over the next decade (which in itself is still an improvement on earlier years). Relative to the investment projections shown in this report, there would be some substantial losses:
• There would be a lot less construction activity.
• Investment as a share of GDP would be lower over the decade.
• GDP would also be lower over the decade
• On top of that it would mean a lower capital stock to work with and so the potential productive capacity of the economy would be notably lower than otherwise.
0% 5% 10% 15% 20% 25% 30% 35% 1990-91 1993-94 1996-97 1999-00 2002-03 2005-06 2008-09 2011-12 2014-15 Dwelling investment Private business investment Public investment Per cent of GDP Forecast
• The resources and infrastructure capital stocks would be lower
• The economy’s potential productive capacity would also be reduced In short, failing to achieve the expected path for investment over time would:
• curtail short term activity at a time when business investment is the key driver of activity in the Australian economy (and so potentially place the Australian economy in a significant pothole in the short term); and
• reduce the long term productive capacity of the Australian economy.
A key challenge for the Australian economy then is to ensure that impediments to a lift in major project investment over the next few years are minimised.
References
ABN-AMRO Equities Australia Limited 2008, ‘Australia Strategy’, 2 May 2008, cited in Infrastructure Partnerships Australia 2009, Financing Infrastructure in the Global Financial Crisis, http://www.infrastructure.org.au/DisplayFile.aspx?FileID=207, accessed 15 April 2011.
ACIL Tasman 2009, The Australian Minerals Industry’s Infrastructure Path to Prosperity, prepared for the Minerals Council of Australia.
AECOM Australia Pty Ltd (with GRIMSHAW Architects, KPMG and SKM) 2011, High Speed Rail Study – Phase 1, prepared for the Department of Infrastructure and Transport. Citigroup 2008, ‘Australia’s Infrastructure Supercycle’, 20 June 2008, cited in Infrastructure
Partnerships Australia 2009, Financing Infrastructure in the Global Financial Crisis, http://www.infrastructure.org.au/DisplayFile.aspx?FileID=207, accessed 15 April 2011.
Clements, KW and Si, J 2010, ‘The Investment Project Pipeline: Cost Escalation, Lead Time, Success, Failure and Speed’ Economics Discussion Paper 10-25, Business School, The University of Western Australia.
Connolly, E and Glenn, J 2009, ‘Indicators of Business Investment’, RBA Bulletin, December, pp 18-27.
Connolly, E and Orsmond, D 2011, ‘The mining industry: from bust to boom’, RBA Conference, Australia in the 2000s, August 2011
Government of Western Australia, Department of State Development, Department of Commerce 2011, Local Content Report, May 2011,
http://www.commerce.wa.gov.au/scienceinnovation/PDF/Publications/ISI_LocalCont entRepo.pdf, accessed 11 August 2011.
Henry K 2010, ‘To Build, Or Not To Build: Infrastructure Challenges in the Years Ahead and the Role of Governments’, address to the Conference on the Economics of
Infrastructure in a Globalised World: Issues, Lessons and Future Challenges, 18 March 2010,
http://www.treasury.gov.au/documents/1763/HTML/docshell.asp?URL=Infrastructur e_Conference.htm, accessed 20 April 2011.
Infrastructure Australia 2011, Communicating the imperative for action: A report to the Council of Australian Governments, June 2011, accessed 23 August 2011.
Infrastructure Partnerships Australia 2009, Financing Infrastructure in the Global Financial Crisis, http://www.infrastructure.org.au/DisplayFile.aspx?FileID=207, accessed 15 April 2011.
New, R, Ball, A, Copeland, A et al. 2011, ‘Minerals and energy, major development projects – April 2011 listing’, BREE, Canberra.
Page, B 2009, ‘A low emission energy sector – the requisite policy settings’, Presentation to All Energy Conference, October 2009
Reserve Bank of Australia 2011, Statement on Monetary Policy, August 2011, pp 48-50. United Nations 2010, World urbanization prospects, the 2009 revision, New York.
Victorian Department of Industry, Innovation and Regional Development 2010, Victorian Industry Participation Policy Annual Report 2009-10,
http://www.dbi.vic.gov.au/__data/assets/pdf_file/0020/214157/VIPP-Annual- Report-2009-10.PDF, accessed 18 August 2011.
Appendix A: Investment Monitor project list
Table 5.2: Top 20 resource and infrastructure projects, Deloitte Access Economics’ Investment Monitor, March 2012
Company Total cost $m Project Status State Major industry Sub-industry
Commonwealth Govt 61000 High-speed rail network linking Brisbane, Sydney and Melbourne Possible UN Transport & Storage Rail PIB Consortium 45000 Project Iron Boomerang: 3370km railway from Port Hedland to the Bowen Basin coalfields
(includes two iron smelters) Possible UN
Transport &
Storage Rail Gorgon joint venture
(Chevron Australia (47%) / Shell (25%) / Mobil (25%) / Osaka Gas (1.25%) / Tokyo Gas (1%) Chubu Electric Power (0.417%))
43000 Gorgon LNG project (15 mtpa) (three liquefaction trains) , Barrow Island Under construction WA Mining Oil & Gas extraction
Dept of Communications, Information Technology and
the Arts 36000
New open access, high-speed, fibre-based broadband network to 90 per cent of Australian homes, schools and businesses
Under
construction UN Communication Telecommunications Inpex Alpha Pty Ltd (76%) /
Total E&P Australia (24%) 30840 Development of the Ichthys gas field, Browse Basin, and LNG facility in Darwin Committed NT Mining Oil & Gas extraction Woodside (50%) / BP
(16.7%)/ ChevronTexaco (16.7%) / Shell (8.3%) BHP (8.3%)
30000 North West Shelf LNG Project "Kimberly Gas Hub": Two LNG trains, Brecknock & Scott Reef gas field, James Price Point, Broome
Under
consideration WA Mining Oil & Gas extraction Chevron Australia (73%) /
Apach (13%) / Kuwait Foreign Petroleum Exploration Company (7%) /Shell (6.4%)
29000 Wheatstone LNG project, based on gas in the Carnarvon basin and processing at Ashburton North
Under
Company Total cost $m Project Status State Major industry Sub-industry
BHP Billiton 20000 Olympic Dam expansion to mine uranium and copper (1.4 mtpa) Under consideration SA Mining Metal ores Origin Energy Ltd / Conoco
Phillips / Sinopec 19580
'Australia Pacific LNG' - New CSG to LNG facility, includes a 450-kilometre transmission line, Curtis Island at Gladstone
Under
construction QLD Mining Oil & Gas extraction Santos (30%) / Petronas
(27.5%) / Total (27.5%) /
KOGAS (15%) 16200
New LNG facility (GLNG), Gladstone, based on
Coal Seam Methane reserves Under construction QLD Mining Oil & Gas extraction Queensland Gas Company /
BG Group 15000
Curtis LNG project - construction of an LNG plant and a 540km pipeline to pipe gas from the Surat
Basin Under construction QLD Mining Oil & Gas extraction Woodside Petroleum 14900 Pluto 2 LNG project Possible WA Mining Oil & Gas extraction Qantas 11000 50 Boeing 787 Dreamliner aircraft as part of major fleet expansion Under construction UN Transport & Storage Air & Space
Port of Hastings
Development Authority 9400 Port of Hastings development: second container port Possible VIC Transport & Storage Water
Shell 8900 Prelude LNG project - floating LNG platform, Browse Basin Committed WA Mining Oil & Gas extraction Waratah Coal 8300 Galilee Basin coal project - includes two surface and four underground mines Under consideration QLD Mining Coal
Qld Dept of Transport 8200 Brisbane underground rail project Possible QLD Transport & Storage Rail Hancock Prospecting (21%) /
GVK (79%) 7500
Alpha Coal Project: thermal coal mining project - includes 490km train line, port construction and equipment and infrastructure construction,
Galilee Basin Under consideration QLD Mining Coal
Central Petroleum Limited/
Allied Resource Partners 7500 Coal production plant/ clean fuel production plant Possible UN Mining Coal Hancock Prospecting 7200 Roy Hill 1 iron ore project: includes 300km rail line to Port Hedland and new berths Committed WA Mining Metal ores
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