The mining downturn is not over yet, with the National Australia Bank predicting 50,000 more jobs are likely to be shed.
The NAB Group Economics report, The Mining ‘Cliff’ – How far have we come, suggests the investment downturn is a little over half complete in level terms, due to the existing pipeline of mining projects scheduled for completion.
“…the ongoing unwinding of Australia’s once-in-a-100-year mining investment boom presents significant challenges to a number of industry sectors and skill groups in the economy,” the report said.
“We believe that mining investment is currently more than half-way through the cycle, while employment is slightly below the halfway mark – with the difference likely to be related to the significantly higher labour intensity of LNG projects in the (near) completion stage of the construction phase.
“As a percentage of GDP, mining capex has fallen from 8 per cent GDP at its peak to around 4.5 per cent currently and expected to fall to 1.5 per cent of GDP by late 2018.
“We estimate that 46,000 mining jobs were shed between the peak in 2012-13 and 2014-15 and around 50,000 more will be cut going forward.”
NAB head of Australian Economics Riki Polygenis told ABC News the job losses are expected to “bottom out in the next two-and-a-half years”.
“Our models suggest that mining investment is likely to fall by around 70 per cent from its current level over the next three years — implying that we are currently just over halfway down the mining investment ‘cliff’,” Ms Polygenis said.
The majority of the job losses are likely to come from Western Australia, according to the report.
“WA’s mining investment and employment cycles are currently less progressed than Queensland, WA accounts for a larger share of total investment and employment in the country, and the labour intensity of commodity projects in their operational phase in WA is lower than in Queensland,” the report explained.
“This will cause significant headwinds, especially in geographically affected regions and in certain specialised skill groups.
“However, it is not unmanageable at the national level with offsetting job creation elsewhere (particularly in services sectors) – we are forecasting 18,000 additional jobs to be created per month over the next few years, with the unemployment rate to track down towards 5.5 per cent by mid-2017 before inching up thereafter.”