Australian Data Overstated Nation’s Mining Boom, RBA Paper Says

Australian government statistics on business investment plans have overestimated the extent of the nation’s mining boom since 2010, a central bank research paper showed.

“Forecasts derived from the capital expenditure survey must be interpreted with a fair degree of caution,” economists Natasha Cassidy, Emma Doherty and Troy Gill wrote in a report published today in the Reserve Bank of Australia’s quarterly bulletin. They were referring to the quarterly survey data released by the Australian Bureau of Statistics.

“If used on their own, the cap-ex expectations data have tended to overpredict the upswing in mining investment over the past two years,” the authors wrote. “This may be because the mining projects under way are large and complex in nature -- particularly the projects in the Liquefied Natural Gas sector -- and there have been unanticipated delays in work on these projects.”

Central bank Governor Glenn Stevens last month predicted the resource boom has at least another year to run before it begins to ease. While a pipeline of projects to meet demand for energy and resources from China has fueled Australia’s economy in recent years, falling commodity prices this quarter and an elevated currency have prompted the deferral of some projects.

Business investment accounted for about 17 percent of Australia’s gross domestic product in the first half this year and is forecast to increase further in the next year, driven by mining projects, according to the RBA paper.

Investment Plans

Australian companies forecast investment of A$181.5 billion ($190 billion) in the year ending June 30, which was 4.7 percent higher than their estimate three months earlier, second-quarter business investment data released Aug. 30 showed.

Mining investment was estimated at A$119 billion, little changed from A$119.3 billion three months earlier.

A separate paper released in the quarterly bulletin said Australia is “well placed” to retain its position as the largest iron-ore supplier to China in coming years, mainly because of the relatively low cost of extraction in the country.

China’s “residential construction is projected to remain at a high level for the next couple of decades,” RBA economists Leon Berkelmans and Hao Wang wrote. “Steel consumption in this sector is expected to be boosted further by demand for higher quality buildings.”

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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