Australia is likely to make a soft landing as the mining investment boom ends, with a long period of low interest rates prompting consumer spending and home building to fill the gap, according to influential economic think tank Deloitte Access Economics.
Deloitte, which works closely with the mining industry, predicts mining investment will keep rising longer than the Reserve Bank forecasts. It says the boom is unlikely to peak before Christmas, and mining investment will slow next year rather than fall off a cliff.
But the company's director, Chris Richardson, conceded that a mining bust could not be ruled out - and if other mining companies followed the lead of Woodside, which was scrapping its $43 billion Browse Basin project, "a pretty big pothole could loom from the middle of 2014 onwards".
It forecasts that West Australia will be hit hardest, even in a benign scenario. In 2013-14 Queensland will replace it as Australia's engine of growth, and by 2015-16 it expects even Tasmania to be outgrowing WA. NSW and Victoria are forecast to continue growing about half a percentage point slower than the national growth rate, but the only state or territory it believes is in danger of recession is the ACT, which it predicts will be hit hard by post-election spending cuts.
The latest Access Business Outlook, released on Tuesday, forecasts growth to remain a bit below trend until 2015-16 before rising.
Job growth would also remain subdued, with a net 40,000 manufacturing jobs to go in the next three years, but unemployment would remain about the same as older workers retire rather than joining the dole queues.
It warns that workforce participation might have peaked for all time in 2010, when 65.9 per cent of adults either had a job or were looking for one. That would have serious implications for potential growth rates. Access warns that "demographic destiny" is against us. "An ageing workforce remains a key to understanding what's going on in the job markets."
Australia has now passed "the key inflection point" where the negative effects of an ageing population outweigh the positive impact of increasing participation, it says.
With the economy hitting "increasing headwinds", men in particular are dropping out of the workforce, it said. "Chances are, we'll look back on 2010 as the highwater mark for the willingness to work in Australia. It was a time when the economy was healthy, and even more importantly, there were heaps of boomers working."