After the March report, Australia’s capital expenditure (capex) slump appeared to have come to an end. Mining investment had increased as a proportion of GDP for the first time since June 2014 and total investment had grown at an annual pace above 4% for a second consecutive quarter. June figures then created some doubt regarding the sustainability of such a recovery when they recorded a fall for the quarter.
According to the latest ABS figures, seasonally-adjusted private sector capex in the September quarter contracted by 0.5%, an improvement on the revised 0.9% fall recorded in the June quarter but lower than the 1.0% increase which was expected. On a year-on-year basis, the growth rate dropped to -0.6% after recording +1.7% in the June quarter after revisions.
Local financial markets reacted in a mixed fashion. By the end of the Australian trading day, 3-year and 10-year Treasury bond yields were both 2bps lower at 2.09% and 2.61% respectively. The Aussie dollar drifted lower after the report but it was largely unaffected and actually ended the afternoon session about 0.2 US cents higher at 73.20 US cents.