Around half of the capital investments made in the Australian resources sector are sourced from outside the country, according to data from the Reserve Bank of Australia (RBA).

The RBA notes that investment in the resources sector is expected to peak at a little over 8% of the country’s total gross domestic product (GDP) in 2012/13, compared with its average 2% of GDP over the past half century.

“The effect of this surge in investment of GDP is lessened by the fact that a significant share of this investment is imported,” the RBA says.

“In aggregate, it appears that around half of the value of these resource investment projects is imported, although this varies somewhat, depending on the nature of the project.”

The RBA reports that the net capital stock for the resources sector is estimated to have increased by more than 150% in real terms since 2003/4, and is expected to grow rapidly over the next few years, particularly in the liquefied natural gas (LNG) sector.

The growth in investment into the resources sector has largely been driven by the increase in commodity prices, which are, in turn, driven by a high demand from the Asian economies, with iron-ore, coal and LNG being the frontrunners for investment in Australia.

The RBA says the response of mining production and exports to the increase in commodity prices followed with some delay, reflecting the time needed to plan, gain approval for, and reallocate scarce productive inputs to enable the construction of new infra-structure.

For some resource commodities, there has been a significant pick-up in output and exports. The bank notes that, since the onset of the terms of the trade boom, the volume of iron-ore extracted and exported has risen at a yearly rate of 11.25%.

LNG extraction has also risen strongly, while coal production has expanded, but at a broadly similar pace to its pre-terms of trade boom average, in part reflecting a sluggish recovery in coal production after the floods in early 2011.

The RBA says that, given the significant expansions in capacity in the resources sector over recent years, and the traditional lag between investment and the corresponding expected output increase, the production phase of the resources boom is expected to gather momentum over the next couple of years.

Quoting projections from the Bureau of Resources and Energy Economics, the RBA says it expects strong growth in iron-ore and coal exports over the next half decade, of around 9.75% a year.

“Growth in exports of LNG is expected to be even stronger, and this could see Australia emerge as the second-largest global supplier of LNG in the coming years. “With the terms of trade forecast to decline gradually over time, it is likely that the growth in the value of resource exports will be less than the growth in the volumes.”