Capex investment up, outlook robust


Business investment in the December quarter beat expectations with companies boosting spending plans for the coming year another positive sign for Australia’s economy.

Investment rose 2.0 per cent to $30.09 billion for the quarter, according to the Australian Bureau of Statistics on Thursday, far outpacing expectations for a 0.5 per cent increase.

The previous quarter was also revised higher to show no change to investment from a fall of 0.5 per cent reported initially.

Importantly, spending on equipment, plant and machinery grew 0.7 per cent and will prove a small boost to economic growth in the final quarter of 2018.

Figures due next week are likely to show Australia’s $1.8 trillion gross domestic product expanded anywhere between 0.4 and 0.6 per cent in the quarter.

Analysts were closely watching the spending outlook, which showed firms were more optimistic about the coming year.

The first estimate for 2019/20 came in at $92.1 billion, 11 per cent higher than the first estimate for 2018/19 with mining the biggest contributor to the increase.

The latest estimate for 2018/19 came in at $118.4 billion, about 4.0 per cent higher than the previous estimate and at the top-end of analysts’ expectations of around $115 to $119 billion.

Business investment turned a corner in 2017 after years of decline caused by the end of a once-in-a-generation mining boom.

As Australia tries to meet the needs of its ballooning population, public investment is in a strong upswing, with flow-through effects on the non-mining sector.

The revival has boosted policymakers’ optimism about the A$1.8 trillion economy, with the Reserve Bank of Australia forecasting above trend growth of around 3 percent this year.



Source link Finance News Australia

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