Resources are a vital part of the Australian economy, accounting for approximately 60% of its exports. It has poured billions of dollars into the country’s coffers, which has enjoyed over two decades of continuous growth.
But the gravy train is coming to a halt, at least according to a recently published report by Deloitte Access Economics, picked up by the Wall Street Journal’s Market Watch.
The report states “the peak of the project pipeline is already in sight”. This means “the key prop to the faster part of Australia's two-speed economy is looking less certain the further out you look”, according to the report’s authors.
But the report goes on to note that there is “still enough gas in the tank of huge resource projects to provide handy pipeline protection if Europe and China were to turn pear-shaped.”
One of the red flags economists have been waving for a while now as it relates to the mining boom is that it has spawned a two-speed economy; that is, a gap between mining and weaker industries like retail and manufacturing.
The argument goes that if the resources market collapses, it could cause a ripple effect that would be felt across the entire economy. In spite of this, some experts argue that the end of the resources boom is nowhere in sight.
Paul Bloxham, HSBC Bank Australia Ltd's chief economist, stated recently that while it’s true that commodity prices have peaked, there is still a substantial investment to be completed. His comments were reported in the Australian, via Dow Jones Newswires.
As proof, Bloxham — and others — regularly point out that the Government has planned to pour some A$450 billion into resources spending in the coming years.
Image source: Australian Mining