If demand declines then prices will fall, but, if it grows, then prices are likely to rise again. Following the significant addition to productive capacity from these large projects over the past decade, there has been a notable lack of exploration spending in recent years. This means there is not much prospect of any material increase in investment spending in the period ahead.
As a result, our expectation is that investment spending in the resources sector will bottom out just above 2 per cent of GDP and stay at roughly that level for quite a while. That is, companies will primarily just be undertaking replacement spending to maintain existing production capacity.