Industry Focus

INDUSTRY ECONOMICS BREE publishes a listing of major projects in the resources and energy sectors twice yearly. In the latest update in May, it presented a forward projection of the stock of committed capital expenditures of the investment pipeline. (This is based on an assessment of the probability that a project at the publicly announced or feasibility stage will progress to committed within five years. The projections make no allowance for possible cost overruns.) Under the 'likely scenario', committed investment has peaked. The projects expected to progress to the committed stage are insufficient to maintain the current stock of investment as of April 2013. The stock of committed investment is projected to drop over the next four years in this scenario, from a peak of $268 billion in 2012 to about $25 billion in 2018. In 2014 the stock of committed investment is expected to decrease by $8 billion, and then by a further $63 billion in 2015. From 2017 onwards, the stock of committed investment in the mining sector is projected to revert back to levels comparable to 2007. BREE expects that this would lead to a substantial decrease in the flow of annual capital expenditure, as measured by the Australian Bureau of Statistics. In the 'possible scenario'—if all projects assessed as possible progress to the committed stage—committed investment could peak at about $310 billion in 2014 before declining to about $138 billion in 2018. Market factors, particularly commodity prices and especially costs of construction, will play a key role in determining the future of many projects assessed as possible. Committed investment could peak at about $310 billion in 2014 before declining to about $138 billion in 2018. Committed project investment scenarios 350 Possible 300 Likely Current 250 200 150 100 50 0 2012 2013 2014 2015 2016 2017 2018 Sources: BREE, Westpac Economics Natural Resources • Issue 1 15

• Cover