The Reserve Bank of Australia (RBA) believes the economic outlook for Australia’s major mining states – Western Australia and Queensland – is improving.
Speaking at the Australian Business Economists Conference Dinner last night, RBA assistant governor Christopher Kent detailed how the large decline in mining investment and commodity prices had contributed to the weaker economic conditions in these states.
“But those forces are waning; indeed, the terms of trade have even risen of late,” Kent said.
“Hence, there are reasonable prospects for stronger growth of nominal demand in the mining states and, by extension, for the (Australian) economy overall.”
According to Kent’s speech, the RBA expects mining investment to fall a bit further than where it is currently. However, it also estimates that about 80 per cent of the adjustment is now behind Australia.
When comparing Australia’s leading mining states, Kent said Queensland’s economy was performing better than WA’s in recent times.
“In part, because the fall in mining investment has been more advanced in Queensland,” Kent said. “In addition, Queensland has had the advantage of its sizeable exposure to the education and tourism industries.”
Despite a recent lift in commodity prices, Kent added the improvement would likely not lead to a “noticeable pick-up in mining investment” in the near term.