Areas set for growth beyond the mining boom

Areas set for growth beyond the mining boom

Posted on Thursday, March 08 2012 at 1:39 PM

The cities and towns most likely to offer sustainable house prices beyond the mining boom are those geographically close to significant areas of population, according to BIS Shrapnel’s managing director Robert Mellor.

In some regions and cities, the dramatically expanded population from the mining boom could widen the permanent population base, increase foreign attention and create new industries and services to prop up jobs, said Mellor.

Perth is the most likely mining hub to see sustainable growth as a capital city while Gladstone stands a better chance of remaining more sustainable than other more remote mining towns, he said.

At one or more points throughout the mining boom property prices in these mining-related areas will take a hit as “nothing’s impregnable”, said Mellor. Though the distance from Perth to the east coast could always remain its disadvantage, he said.

Australia’s honeymoon period in mining job growth might be five years, maybe 10, maybe more, said BIS Shrapnel senior economist Tim Hampton. “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.”

Some experts would disagree with Hampton and the use of the term ‘boom’ which insinuates that the growth ahead is a short-lived boost rather than the continued and growing demand for Australia’s natural resources. Property analyst and adviser Simon Pressley of 6-Point Property is one of these critics.

Pressley preferred to describe the mining ‘boom’ as a mining ‘revolution’ that will continue to grow on par with Asia’s rise, particularly China, India, South Korea, Vietnam and Indonesia.

He said Australia needs to stop focusing on the US and Europe and concentrate on the growth story of Asia.

Hampton agreed with the principle that the rise of Asian demand for Australia’s natural resources will continue to support prices and keep infrastructure investment at a high level into the next decade, “however once the construction stops so will the growth of jobs; it doesn’t take as many workers to operate the mines as it does to build them”.

Before the mining boom is over the Federal Government’s policies need to be decidedly strengthened to ensure Australia’s economic growth remains resilient, said Hampton. “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. Businesses also have a role to play, including investing in efficiency-enhancing technologies. The ageing population makes these steps even more pressing.”

While economic growth in Europe and the US is shrinking and Asia is the emerging economic epicentre, disparity exists on the home front with parts of Australia emerging from hibernation while other parts remain in a slumber, according to BIS Shrapnel’s latest Long-term Forecast Update to be presented at conferences in the five major capital cities from next week.

In the update, BIS Shrapnel has forecasted Australian unemployment levels to peak at five per cent for another six months before trending down to 4.5 per cent by the middle of next year, fuelled by the nation’s gross domestic product (GDP) increasing from just above three per cent for the year to June 2012 to 3.5 per cent for year to June 2013.

While the national unemployment rate is forecasted to shift down comfortably next year, it’s not so evenly spread. Some states and territories are expected to perform significantly better than others, said Hampton.

He said states, territories and regions with strong demand for mining-related employment – Western Australia, Queensland, Northern Territory and New South Wales – will obviously take the charge with economic growth and housing activity, while those regions heavily dependent on non-mining related manufacturing, tourism, retail, finance and business services will continue to tread through a rough patch.

Victoria’s growth is slowing, said Hampton, partly the result of “winding down after a strong period of dwelling building activity over the past couple of years”.

“South Australia is doing it tough due to the high Australian dollar, but activity will be supported by a number of very large construction projects over the next few years, including the Olympic Dam expansion,” he said.

However, Mellor said that everyone keeps talking about the Olympic Dam expansion at Roxby Downs but he couldn’t see this project having the same impact on Adelaide as what other projects are having on other mining towns and capitals. “It might lead to a pick up over the next 18 months though.”

Hampton said Tasmania would continue to struggle due to the high Australian dollar weighing on its manufacturing and tourism industries. “The Australian Capital Territory is likely to experience low growth as government departments reign in spending.”

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