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  • by: Amy Wilson-Chapman
  • From: PerthNow
  • July 24, 2012 2:00AM

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UNDER-INVESTMENT in non-mining sectors and infrastructure could pose a greater risk to Australia than the ongoing economic turmoil in Europe.

That’s the ‘enduring’ warning from Tim Hampton, an economist at BIS Shrapnel, which released its long-term forecasts today .

The “significant under-investment” in non-mining industries could gradually erode the medium-term growth potential of the economy leaving Australia “increasingly sensitive” to large fluctuations in world commodity prices by not diversifying investment, Mr Hampton said.

The organisation forecast “pretty big growth” in the mining industry over the next two years.

And after that, despite reports yesterday the country’s mining boom would be over by 2014, it would plateau at that high level.

“We think commodity prices, even if they fall back a bit, are going to be high enough to kick start the next round of investment projects and that will keep investment at that high level.

“You won’t see more investment, but it will keep investment at that high level,” he said.

As the country’s projects move from construction into production, the nation – particularly WA – would enjoy significant export growth, he said.

That would keep gross domestic product just above 3 per cent for the next five years.

Though the move from construction to production would mean employment growth in the industry might suffer, other industries would flourish.

Mr Hampton said he expected domestically-focused industries such as residential construction to increase – especially with the Reserve Bank of Australia’s recent cuts to the official cash rate.

“When you build a house you employ accountants and lawyers and property managers,” he said, “those industries have really stagnated over a number of years – we’re looking for the growing investment to start picking up late this year.”

The flow on affect of those industries expanding would result in more commercial building as well, he said, helping to provide employment in the construction industry.

And for those industries suffering under a high Australian dollar, such as manufacturing and retail, analysts have more bad news with the currency set to remain a safe haven for investors by remaining strong.

“We’re not looking for the Australian dollar to rise any further,” he said.

Read more: http://www.news.com.au/business/companies/non-mining-investment-critical-for-economic-health/story-fnda1bsz-1226433138441#ixzz21UxYCyvN

2:22 PM, 18 May 2012 Last update 2:22 PM, 18 May 2012

Prime Minister Julia Gillard says people can have confidence in the Australian economy, as other countries fight high levels of unemployment.

Ms Gillard attended a ground-breaking ceremony in Darwin on Friday for the start of a $34 billion LNG project by Japan’s Inpex, saying it was a “fantastic” opportunity for the Northern Territory and part of the resources boom that is changing the economy.

 “We can be confident about the Australian economy because there are so many investments like this one in the pipeline – more than $450 billion of investments,” she told reporters.

She said Australia came out of the global financial crisis strong, and continues to grow with low unemployment and low inflation. Her comments came as the local share market plunged around two per cent amid a global rout as investors panicked over the growing crisis in Europe after reports of a run on Spanish banks.

She understood that many Australians would be concerned by the news from Greece, and the high levels of unemployment in places like Spain – 25 per cent – and even the United States at more than eight per cent.

She conceded there were also “stresses and strains” from a high Australian dollar that is having an impact on manufacturer and tourism. “But even in manufacturing and tourism we are seeing companies compete and hold their heads up in the world, and continue to make good profits an keep people in jobs,” she said.

http://www.businessspectator.com.au/bs.nsf/Article/Gillard-talks-up-Australian-economy-UE6SP?OpenDocument&src=pm&utm_source=exact&utm_medium=email&utm_content=42138&utm_campaign=pm&modapt=news