Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Wednesday, 29 March 2017

Mining cliff nears its dénouement!

Declines set to slow

Some 4½ years after the heady 2012 peak it looks as though the drop in resources construction will at long last be drawing to an end. 

Private sector engineering fell further in the fourth quarter of calendar year 2016, to be a thumping 29 per cent lower over the year. 

Thankfully, there was a 9 per cent uplift in public sector construction, helping to offset the decline somewhat. 

Construction activity in Western Australia continued to tumble from $12.6 billion in the June 2015 quarter to under $5 billion over the last quarter of 2016, but elsewhere activity has long since already flattened. 

Western Australia doesn't have too much further to decline, which is one plus point. 

But the real reason we should expect the end of the decline to be soon upon is that there is now more work getting underway, as highways and infrastructure are built, and as the reserves of existing resources projects are depleted, thereby requiring further investment. 

2017 should therefore see the last of the declines in engineering construction.

Mathematically, this is hugely important for the economy, for once mining construction is no longer acting as a drag on growth, we should find that the remainder of the economy is growing at a reasonable pace. 

Although there have been many challenges along the way, that Australia has avoided a technical recession over more than 25 years through the boom and bust is quite a testimony to the self-correcting forces in the economy.