For years, the resources boom has been the gift that keeps on giving, driving the Australian economy forward through the post Global Financial Crisis period, helped in no small measure by the huge surge in mining-related capital expenditures (capex).
The impact of the mining boom on the Australian economy is illustrated by the below chart, which plots the growth in real state final demand in the key mining strongholds of Western Australia and the Northern Territory against the eastern states plus South Australia:
As you can see, growth in the key mining strongholds has been spectacular, with final demand growing at more than twice the national average in the decade to March 2013.
Times are changing, however, with combined growth in these regions faltering over the March quarter as mining-realted capex declined (see next chart).
A similar, albeit less extreme, situation is on display if Queensland is included in the mining strongholds group (see next chart).
Clearly, the unwinding of the mining capex boom will have a profound impact on Australia’s mining regions, which will act to drag down the overall Australian economy in the process.
