For the fourth-quarter seasonally adjusted investment in equipment, plant and machinery for mining rose just 0.2 per cent while selected industries, which include everything from transport and retail to information media and telecommunications and finance, rose 2 per cent. Manufacturing however fell 0.9 per cent.
Investment in buildings and structures rose 3.2 per cent in the December quarter 2018 driven by an 8.3 per cent gain in sectors outside mining and manufacturing, which fell 3.2 per cent and 4.9 per cent respectively in seasonally adjusted terms.
NAB expects that even though overall mining investment declined again in the fourth quarter, the outlook for mining has brightened given reports of activity picking up “such as increased job ads and greater activity on mining flight routes”.
Westpac senior economist Andrew Hanlon said mining investment would likely move higher in the 2020 financial year, led by iron ore projects and spending on equipment maintenance.
In the current reporting season evidence of higher capital expenditure plans has come through, with companies such as Santos estimating $1.1 billion in expenditure in 2019 – up from $759 million in 2018. Mineral Resources upgraded its financial year 2019 capex guidance from $490 million to $751 million with the increase attributable to current mines, higher spend on exploration and mine planning and costs relating to future projects.
Other mining-related companies such as Monadelphous, which reported a $30 million profit this reporting season, lifted its capex to $12.5 million – much higher than expected by analysts.
Figures released by the Reserve Bank of Australia on Thursday showed that while business lending has been slipping over the last six months, it is still the strongest it has been in annual terms since 2016.
Investment spending plans for the current financial year have now risen to $118 billion, up 3.6 per cent since businesses first estimated their investments this time last year and 4 per cent higher than what was estimated in the last quarter.
At Woolworths, capital expenditure for the first half rose to $825 million, up from $770 million, with property development doubling from $100 million to $200 million. Chief executive Brad Banducci defended Australia’s largest retailer’s heavy capex spending, saying Woolworths needed to invest in stores, supply chains and IT systems.
At The Star Entertainment Group, chief executive Matt Bekier said: “We are not changing our strategy, or cutting back on the sales teams, or cutting back on capex plans.”
Firms’ investment plans for next financial year 2019-20, which were expected to point to modest growth in capex, have come in at $92.1 billion – up 11 per cent.
Healthcare groups such as Estia Health have forecast plans for a further $140 million to $160 million capex in fiscal 2020.
However economists said caution should be applied to the big increase in forecast spending in the ABS figures because early estimates of such spending can be revised significantly.
Wesfarmers’ gross capital expenditure decreased $49 million to $955 million in its first half of this financial year after higher capital expenditure in Coles was offset by a decrease in Kmart Group.
Figures released also showed costs had risen. Investment goods rose by 2.6 per cent – the fastest growth in three years – while the cost of buildings rose by 3.1 per cent, the fastest in eight years.
The cost of investment equipment rose by 2.2 per cent – the strongest annual growth rate in almost three years.