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 the second quarter. However, figures just released have created some doubt regarding the sustainability of such a recovery.
According to the latest ABS figures, seasonally-adjusted capex in the June quarter shrank by 2.5%, down from the 1.2% rate recorded in the March quarter and lower than the 0.6% increase which was expected. On a year-on-year basis, the rate of capex growth dropped to +0.4% after recording +4.3% in the March quarter.
Westpac senior economist Andrew Hanlon summarised the report in the following way. “In terms of the broad themes, mining investment is set to move lower in 2018/19, while non-mining investment is in an uptrend.”