Fourth quarter private capital expenditure figures have been released by the ABS and the 0.8% quarter-on-quarter figure was better than the 3.0% fall expected by economists, although it is still 16.4% lower than the corresponding period a year ago. Capex figures have been easing off since 2013/2014 but the decline has accelerated in recent quarters (see below chart), which has provided some impetus to calls for a lower cash rate to stimulate investment in other sectors of the economy.
10 year bond yields fell from 2.43% to 2.39% before recovering a little in the afternoon. The AUD was immediately sold off against the greenback from USD$0.7190 to USD$0.7160, before it recovered to USD$0.7170.
CBA’s chief economist Michael Blythe said, “It’s better than expected in terms of the GDP numbers next week, but otherwise looking ahead it’s more of the same story, with further declines in mining Capex as you would expect as those big projects wind down. The non-mining side that we’re all hoping will start to pick up is still looking fairly soft overall.” RBC Capital Markets senior economist Su-Lin Ong said, “It is consistent with the RBA’s easing bias. We have pushed back our forecast of a rate cut to Q3. We have another easing in Q4.”
Estimate 5 for 2015/16 Capex plans is now $124.0 billion, 0.6% higher than November’s Estimate 4 of $120.4 billion but 18.8% lower on the previous year’s Estimate 5 of $150.8 billion. The Capex forecasts are updated in sequence and from the chart above, it becomes clear how the estimates change over time.