PERTH (miningweekly.com) – Around half of the capital investments made in the Australian resources sector were sourced from outside the country, data from the Reserve Bank of Australia (RBA) showed on Friday.
The RBA noted that it was expected that investment in the resources sector would peak at a little over 8% of the country’s total gross domestic product (GDP) in 2012/13, compared with its average 2% of GDP over the past half century.
“The effect of this surge in investment of GDP is lessened by the fact that a significant share of this investment is imported,” the RBA said on Friday.
“In aggregate, it appears that around half of the value of these resource investment projects is imported, although this varies somewhat, depending on the nature of the project.”
The RBA reported that the net capital stock for the resources sector was estimated to have increased by more than 150% in real terms since 2003/4, and was expected to grow rapidly over the next few years, particularly in the liquefied natural gas (LNG) sector.
The growth in investment into the resources sector has largely been largely driven by the increase in commodity prices, which are, in turn, driven by a high demand from the Asian economies, with iron-ore, coal and LNG being the front-runners for investment in Australia.
The RBA said the response of mining production and exports to the increase in commodity prices followed with some delay, reflecting the time needed to plan, gain approval for, and reallocate scarce productive inputs to enable the construction of new infrastructure.
For some resource commodities, there had been a significant pick-up in output and exports. The bank noted that, since the onset of the terms of trade boom, the volume of iron-ore extracted and exported had risen at a yearly rate of 11.25%.
LNG extraction had also risen strongly, while coal production had expanded, but at a broadly similar pace to its pre-terms of trade boom average, in part reflecting a sluggish recovery in coal production after the floods in early 2011.
The RBA said that, given the significant expansions in capacity in the resources sector over recent years, and the traditional lag between investment and the corresponding expected output increase, the production phase of the resources boom was expected to gather momentum over the next couple of years.
Quoting projections from the Bureau of Resources and Energy Economics, the RBA said it anticipated strong growth in iron-ore and coal exports over the next half decade, of around 9.75% a year.
“Growth in exports of LNG is expected to be even stronger, and this could see Australia emerge as the second-largest global supplier of LNG in coming years. With the terms of trade forecast to decline gradually over time, it is likely that the growth in the value of resource exports will be less than the growth in the volumes.”