Australasian Mining Review
Issue link: http://ebook.aprs.com.au/i/26056
18 NSW vs Qld business investment This is one signal as to how the mining boom is set to shape growth over the coming years. Capital is flowing into the sunshine state at a never-before- [seen] pace with the probability of an economic lift greater than that in NSW, or indeed the rest of Australia – barring Western Australia, home of iron ore. Ratio of Qld to NSW investment According to those who believe that the commodities boom has decades to run this would be just the beginning of the story. If investment is the main determinant of long-term growth then the outlook for Queensland looks very promising indeed. Private investment is kicking in just as public expenditure is winding down. That said there is the risk that the spill over from the boom could be less than expected for non-mining industries and States, creating a narrowing in the industry base and an increase in interstate migration. This is more likely if the central bank relies heavily on monetary policy to limit cost pressures due to increased competition for labour and capital. The government is currently debating a more discerning policy response in the mining tax – although this carries the risk of discouraging investment in mining once super profits return to normal profits. It is also unlikely to deter the current wave of new projects. Commodity booms represent an upward shock for an economy, providing additional employment, incomes and investment. In Australia’s case it has protected the economy from a greater downturn during the global crisis. Mining as a share of total investment These shocks can also change spending decisions by households, businesses and government. In the case of Australian households, debt to disposable income is continuing to rise, when debt in other countries is coming down because of the GFC. It is possible Australians are feeling a false sense of security and as a result have no barrier against a sudden reversal of fortune. It is interesting to note current correlations between commodity and housing prices. The Federal Government’s promise that the budget will return to surplus is also riding on a continuation of rising commodity prices via a new mining tax.