Australia's impressive economy strengthened by LNG future

Paul Bloxham, chief economist (Australia and New Zealand) at HSBC at the 21st SEAAOC in Darwin.

Paul Bloxham, chief economist (Australia and New Zealand) at HSBC at the 21st SEAAOC in Darwin.

Australia is on track to enter its 25th year of consecutive GDP expansion beyond the September quarter.

No other developed economy in the world has sustained continuous expansion over the same, challenging 25-year period and is second only to the Netherlands as the longest running economic expansion for any developed economy, ever.

“Now that is impressive,” Paul Bloxham, chief economist (Australia and New Zealand) at HSBC said during his opening speech at the 21st SEAAOC in Darwin last week.

“There is no other developed economy in the world that has managed to grow over that same 25 year period continuously. They (other economies) were hit by the GFC, or hit by the IT boom, or the Asian financial crisis. Meanwhile, Australia has managed to get through this challenging period with continuous expansion.”

While other economists foresee “doom and gloom”, Mr Bloxham said there were opportunities for Australia’s gas firms.

“The LNG expansion is just about to happen,” he said.

“There is a lot more of a pickup in LNG exports yet to come and the contribution you are likely to see to Australian GDP from LNG projects is going to be very large in this financial year and even larger in 2016 and 2017.”

Mr Bloxham added that subsequent maintenance industries will be born from the LNG export boom and will add to the industry’s contribution to the Australian economy over the medium term.

He admitted, however, that a “challenging rebalancing” of reliable growth sources is going to occur as Australia’s hard commodities and resources industries flatten out.

“For the resources sector the challenge is twofold: One - Chinese growth has shifted from being led by investment and infrastructure renewal, to being led by consumption… For the resources sector, that means slower growth in demand,” Mr Bloxham said.

“Secondly, a lot of the capacity we have already built is now starting to come online. And as a consequence of the slowing demand and the ramp up in supply, we are going to see commodity prices come down and you are likely to see not as many new projects get started.

“So Australia does need to shift in terms of its growth sources.”

Eddie Morton is the associate editor of Gas Today: emorton@gs-press.com.au

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