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Posted on 18 December, 2011
Cary Rossetti
Managing Director at HirePulse

Cary has over 25 years of experience in the mining and construction industries where she has performed roles in para-legal, commercial negotiation and management, and departmental management. She has held a position as General Manager Commercial for two ASX20 Companies. Cary has also been directly involved with promoting, developing and managing businesses related to recruitment, business services and marketing since 2004.

Positive Economic Outlook for 2012

Overall Economic Outlook

According to the RBA the overall outlook for Australia is positive. There is an expected trend for non-mining company business activity value (currently represents 85% of the economy) to grow at an average 1.5% expected over the next two years. Compared to the mining sector, which is expected to grow at 15%, this seems small. However, collectively this all represents an expected growth of above 4.5% by Q2 in 2012 with an overall expected increase of above 3.75% over the next two years. When comparing this against the world trend this is very good news indeed!

Looking back and including the Global Financial Crisis (GFC), mining growth in Australia still accounted for an average 6.25% per annum over the last 6 years, with non-mining lagging behind at 2.25% per annum. We have all read the news about a two speed economy and the lack of consumer sentiment. The question begs: is Australia’s mining sector robust enough to withstand the current negativity in the global markets and continue to grow? Short of a major adjustment (as we saw in the GFC where commodity prices feel significantly (15%) over six months), the outlook is positive. However, one thing to consider is that most of the mining spend is already committed, with many projects already under-way, but there are those just starting with at least another 2 spend years left to run.

According to the RBA, the current investment in resources and the export boom is expected to see the Australian Mining sector grow steadily over 2012 and 2013. This growth naturally increases the overall GDP trend. Comparatively, the non-mining sector growth is expected to be weak. One statistic worth noting is that the mining investment spend is currently stronger than at any time in the past 150 years of Australian history.

Questions and Issues for the Non-Mining Sector

Looking past the noise, we have to pick out some leading indicators to see the true impact of the current lack of confidence in the Australian Market. One such indicator is the housing construction numbers. The value of residential construction approvals has significantly weakened. Non-residential approvals are at recessionary lows. Added to this are the retail statistics which continue to show a decline and a lack of confidence.

Continued from above...

Business Outlook in the Context of the World Uncertainty

Markets worldwide remain hopeful that the European leaders will agree a plan to move Europe forward, but it is not good news that some of the signs are indicating China is joining a global slowdown trend. However, the stronger performing Australian economy contrasts with the difficult global outlook.

According to the Australian Bureau of Statistics, the quarterly business heath check statistics released on the 5th December 2011 indicate that company profits (both mining and non-mining sectors) are expected to increase in the next quarter (See 5676.0 Business Indicators, Australia Sep 2011). This continues to build on the results in Q2 which recorded a growth of 6.7%. Mining profits still lead the charge. Profitability in the non-mining sectors is mixed, with some patchy seasonal sales expected to distort the numbers. However, the overall statistics are impressive. Mining profits were up 5% and non-mining profits up 4.5%. Part of this result can be explained by the fact that businesses have elected to use inventory to cover demand v’s maintaining stock levels i.e. maintaining their production levels.

Unemployment in October fell from 5.3% to approximately 5.2% (in rounded terms), which means that the employment rate is largely stable.

Collectively, this news means that the Australian economy was fairly stable overall during the 3rd Quarter.

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