Industry Focus

INDUSTRY ECONOMICS GOLD STANDARD: In Western Australia, home to the country's largest openpit gold mine, The Superpit, there are $119 billion of definite resources projects in the pipeline. The resources boom is transitioning from the investment phase to the production phase, a trend that has become more apparent over the past year. Even so, a great deal of construction work on resource projects is underway at present. Here we discuss the investment project pipeline, drawing on both the 'Investment Monitor' from Deloitte Access Economics and on the half-yearly round-up of major projects from the Bureau of Resources and Energy Economics (BREE). 'Investment Monitor' estimated that the investment pipeline of definite projects and projects under consideration stood at $627 billion in June. The project pipeline swelled from $250 billion in mid-2005 to $630 billion in mid-2011 and has flat-lined since then. The resource sector dominates Australia's investment pipeline with some $347 billion of projects in mid-2013. That is down from a peak of $380 billion at the end of 2012, after the pipeline expanded from about $50 billion in mid-2005 to $340 billion in mid-2011 (a figure inflated to some extent by project cost escalations). The remaining $280 billion of projects in the pipeline is split between: the $44 billion National Broadband Network; $114 billion of transport and storage projects, including about $18 billion of resource-related projects; and some $122 billion of projects spread across other industries. The resource investment pipeline became less certain from 2012. The sector felt the squeeze from lower commodity prices as the world economy lost momentum and from rising construction costs as the sector strained under capacity constraints. During 2012 there were notable project deletions and from this time there has been a greater degree of uncertainty surrounding projects that remained under consideration. The oil and gas industry dominates the current resource investment boom with $229 billion worth of projects, down from $272 billion at the end of 2012. The key is that there is a lack of potential projects to Natural Resources • Issue 1 13

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