Residential and non-mining business investment have continued to decline but BIS Shrapnel says it is these two components that will drive the next stage of economic growth.
Mining investment will continue to grow but at a more moderate pace over the next two years, while private engineering construction is expected to grow by 16 percent over the next year and 8 percent the following year, according to BIS Shrapnel.
BIS Shrapnel’s Long term forecasts 2012 – 2027 report says public sector investment is falling as post-GFC stimulus packages are wound down.
Tim Hampton, BIS Shrapnel senior economist, says residential investment triggered by interest rate falls is expected to grow from late 2012, given the supply shortage.
“Non-mining business investment, currently below levels required to underwrite even moderate demand, will recover as interest rate reductions over the past year support demand and capacity constraints emerge,” Hampton says.
However, non-mining trade-exposed industries will continue to suffer under the weight of the high Australian dollar and an uncertain global economy, according to BIS Shrapnel.
The report says that over the next five years the biggest risks are Europe, under investment in non-mining industries and a collapse in minerals prices and investment as the cycle turns down.
BIS Shrapnel expects GDP growth to remain at just above 3 percent for the next five years.