Westpac has provided s useful summary of the Dec QTR Deloitte Access Economics “Investment Monitor”:
• The Deloitte Access Economics “Investment Monitor” provides a detailed snapshot of Australia’s investment project pipeline. The database contains details on 996 projects valued at $20mn or more, as at December 2014. Here we provide an update of the key results.
• In the December quarter, the Investment Monitor estimates that the total project pipeline declined by $81bn to $833bn.
• Project deletions, of $62.7bn, and completions, of $25.8bn, were central to this 9% reduction in the pipeline.
• The detail indicates that the shift is less dramatic than the headline suggests. More than half of the reduction is due to the deletion of the $45bn “Iron Boomerang” project. This “possible” project proposed stretching a rail line across the top end, from the west coast to the east coast.
• In Victoria, the change of state government has put an end to the $14bn EastWest road Link in Melbourne, which was a commitment of the outgoing government.
• The value of definite projects fell by $22bn in the quarter, with those “under construction” down $18bn and those “committed” $4bn lower.
• The value of potential projects declined by $59bn, with those “under consideration” down by almost $13bn and “possible” projects dropping by $47bn.
• In terms of project progression, the $11bn WestConnex road project in NSW advanced from “under consideration” to “committed”, with work commencing in 2015 Q1.
• New projects in the December quarter were relatively small in scale, with 71 added at a value of $9.9bn. Of these, 51 were private projects valued at $6.7bn.
• The unfolding downturn in mining investment is being compounded by the recent sharp sell-off in commodity prices. At these lower prices a number of potential mining projects will be shelved or delayed. Notably, in recent days it was announced that Arrow’s greenfield LNG project at Curtis Island in Qld is “off the table”.
• In our previous two quarterly updates we have highlighted that the “Project flow is changing course” on (1) a wave of public transport initiatives and (2) greater investor interest in the tourism sector. The sharply lower AUD in recent months will add to investor interest in the tourism sector. However, the scale and timing of public transport projects is less certain than it was.
• Note that the December Investment Monitor was finalised ahead of Qld’s dramatic state election.
Ignore the eye-catching headline number. Any list that contains the “iron boomerang” and Arrow LNG is built on fantasy not “possible” outcomes.
The charts that matters are the last two. Massive mining cliff ahead with entirely inadequate offsets.