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15 Feb 2018

Transport spending surpasses mining in Australia

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.