How much of every dollar spent on Capex do you think remains in Australia?
Capex spending on new mines does not have anywhere near the multiplier effect that building new homes does. Much of Capex spending goes to big US multinational project management companies and on equipment sourced overseas. Then there is the fact that many Australian construction companies actually lost money on these projects. I would be very very surprised if any of these projects show any kind of positive multiplier effect. The effect is much more likely to be negative.
Whereas it is well documented that new home building creates about $3 in new business in the economy for every 1$ spent, this is what is known as a multiplier effect. The truth is that any multiplier effect comes AFTER the new mines are built for the extra export income/tax revenues etc that come from the added capacity.
You do not need to worry about a housing crash in Perth due to the movement from an investment boom to a revenue boom, quite the opposite in fact.
Cool, so all those FIFO workers can lose their jobs and that will have no effect on demand in the economy.
Jesus, some slow learners around this place.
There will be plenty of work in their home states for trades and engineers. The truth is these workers might start to spend some of the huge savings that have built up over the past few years due to fear of the GFC, which, as it turned out, was an unnecessary fear.
Capex spending helped during the downturn by providing work for those who would more normally work in home construction etc and as you know there was a complete downturn in home building, there is now a lot of pent up demand. There is a lot of money out there in the economy and people are regaining the confidence to spend some.
During the massive boom in Capex spending house prices sank in WA, so we do not have the situation where Capex inflated prices (YET) so we do not need to worry that a downturn in Capex spending will adversely effect the nascent recovey of house prices and construction in the State.
A young renter like yourself should be far more concerned about house prices beginning to boom in WA, this is much much more likely than any further falls. Things could get seriously crazy if iron ore holds above $130 and tempts the big companies to expand during the, already on the cards, mini house building boom that is booked in for the next couple of years.
You are betting on your financial future make sure you understand the odds you are dealing with.
Definition of a doom and gloomer from 1993 The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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