Mine investment to slump: RBA
Mining investment will fall "considerably" over the next few years, Reserve Bank governor Glenn Stevens has warned in a clear risk to the fate of the WA economy.
Giving his opening address to the House of Representatives' economics committee, Mr Stevens said it would be up to the non-mining construction parts of the economy that would have to do the heavy lifting over coming years.
"Looking ahead, resource sector investment will decline - gradually at first but more quickly thereafter," he said.
"It will most likely fall considerably over the next few years. There is therefore scope for other forms of private demand to grow more quickly, the more so as government spending is scheduled to be subdued."
Mr Stevens said the economy was likely to grow at a below trend rate, of less than three per cent, for "a bit longer yet".
But he said there were reasons for optimism longer term.
"Eventually more capital spending will be required in some of those sectors where it is very low at present," he said.
"The corporate sector in aggregate has high reserves of cash, financial intermediaries and capital markets are willing to lend, and interest rates are low.
"If the nascent improvement in 'confidence' we have seen can be sustained, that will help to achieve better growth.
"In fact, we could aspire to a period during which growth could be a bit above trend for a while, since spare capacity in the economy has increased a bit over the past eighteen months or so."
Mr Stevens said the bank was keeping an open mind on whether to lower interest rates, currently at equal 54-year lows, even further.
However, he added there were few "serious claims" that the cost of borrowing was holding back the economy.
"On the contrary, monetary policy is supporting higher spending by altering incentives as between spending and saving, and working to create an environment in asset and credit markets that eases the restraints on some sorts of activity," he said.
"In the end, though, firms and individuals have to have the confidence to take advantage of that situation.
"They have to be willing to take a risk - on a new project, a new product, a new market, a new worker.
"Monetary policy can't force spending to occur."
