The mining boom is moving into its third phase: production. The boom to date has been driven by surging demand for Australia’s commodities - particularly from China, where rapid urbanisation and industrialisation have substantially raised the consumption of steel making and energy producing commodities.
The first phase of the boom was characterised by sharply rising commodity prices, including iron ore and coal (the bulk commodities), which drove a sharp lift in Australia’s terms of trade. The second phase, the investment phase, saw an enormous expansion in production capacity of these commodities, as well as in LNG.
The third phase is just beginning. The extra capacity from the $450 billion investment boom will substantially boost the production and exports of Australia’s key commodities over the next three to five years.
Over the next three years, Australia’s export volumes will rise by around 6.5 per cent each year, driven mainly by bulk commodities. Resources exports will contribute approximately 1 percentage point to Australian GDP growth each year for the next three years.
At ANZ, we expect mining investment to fall 14 per cent in 2014, 22 per cent in 2015 and a further 22 per cent in 2016. This will subtract 1 percentage point in 2014, 1.25 percentage points in 2015 and 1 percentage point in 2016. Adjusting for lower imports, however, suggests the net impact will only be around half of this.
Mining investment, exports and non-mining