DECADE-HIGH unemployment rates and faltering demand for natural resources are the dark clouds hanging over the region's economic skyline but according to the Hunter Research Foundation's latest economic indicators, there are signs of growth on the horizon.
Unemployment has hovered around 8 per cent for months and almost doubled since late 2013 due to the mining sector downturn.
While Hunter Research Foundation chief economist Dr Alan Rai doesn't expect coal or iron ore markets to pick up in the next two years - based on the economic deterioration of Australia's international trading partners - neither does he expect the Hunter's woes to deepen.
"We've had 12 to 18 months of feeling the effects of the mining downturn and there are limits to how long that can play out," Dr Rai said.
"At the end of the day, there is a baseline demand for our natural resources and that base is not zero, so there is a limit to how deep the downturn can get."
While the short-term forecast was still overshadowed there were several growth-inducing factors in the broader picture - including the recently signed free trade agreements with Japan, Korea and China, a falling Australian dollar and low interest rates.
"The Australian dollar has come down a little bit and that is usually one of the channels that an economy recovers from a big setback like a mining downturn," Dr Rai said.
The bright spot in the economy was investment in residential property, fuelled by low interest rates and a regional population increase of six to seven thousand per year.
The growing number of residential housing approvals identified in the foundation's July economic report had begun to translate into employment in the construction sector, Dr Rai said.
The good news for home owners was that interest rates on mortgages were unlikely to rise until as least late 2015, the report said.
While investment in non-residential buildings - an indicator of overall business investment - had been in decline since 2010, the combination of low interest rates, low Australian dollar and competition had historically driven business investment, Dr Rai said.
"The flip side of the free-trade agreements is increasing competition for regions importing competing industries and that could drive investment in innovation."
