Data for ANZ Research’s major project pipeline continue to point to a sharp decline in capital expenditure in Australia with investment forecast to decline to $A32 billion in 2017 from $A88 billion in 2014 and $A104 billion in 2013.
"The weakness will largely be driven by the resources sector as large-scale LNG projects are completed and mining investment continues to wind down."
Dylan Eades and Justin Fabo, ANZ Research
Sharply lower oil prices also suggest brownfield LNG expansion and floating LNG (FLNG) projects currently in the pipeline are unlikely to proceed for the foreseeable future. Prolonged weakness in oil prices could also result in significant write-downs on LNG projects under construction – one such large write-down has already occurred. Compared with a year ago, we now expect export earnings from bulk commodities and LNG to be roughly $A110 billion, or 13 per cent, lower between 2014 and 2018. Weaker earnings will intensify pressure on resource companies to reduce costs and boost productivity, which will result in further job shedding by resources companies.
The outlook for public-sector backed infrastructure projects remains patchy due to uncertainty about the timing and magnitude of the construction upswing. This is because of the combination of long lead times on projects and an unsettled political landscape following the change of governments in Victoria and Queensland.