Australia’s business investment rose in the first quarter, led by liquefied natural gas projects in Western Australia and Darwin as concerns about cost inflation increase, a Deloitte Access Economics report showed.
Projects valued at A$450.2 billion ($465 billion) were committed or in progress as of March 31, up A$34.8 billion from the previous three months, the Canberra-based research company said in a report released today.
“Resource-rich Western Australia and Queensland are well ahead of the other states so far as Australia’s pipeline of major investment projects is concerned,” the report showed. Still, the approval of Inpex Corp. and Total SA’s $34 billion LNG project “will soon see the Northern Territory experiencing a mining investment boom of its own,” Deloitte Access said.
Mining accounts for 45 percent of all investment projects under construction or committed, according to Deloitte Access, which was founded by two former Treasury economists.
Woodside Petroleum Ltd., Australia’s second-biggest oil producer, started producing liquefied natural gas at its A$14.9 billion Pluto project after a delay of more than a year. Woodside last year increased Pluto’s estimated cost for the third time in 19 months and delayed the target for exports by six additional months to March 2012.
“The smooth delivery of Australia’s massive pipeline of investment projects is not guaranteed,” the report showed. “Cost inflation is a key issue for the mining sector, both globally and in Australia. Over the past year engineering construction price growth in Australia was still relatively subdued, but it is now trending up. Australia’s experience over the past decade is that cost growth here over time can be substantial.”
The Reserve Bank of Australia yesterday lowered the nation’s benchmark interest rate a half percentage point to 3.75 percent, double the size of the cut most economists surveyed by Bloomberg News had projected. The RBA cited output growth that was “somewhat below trend over the past year” and slower inflation.