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Business Investment Advances In September Quarter

Private business investment is well on its way to reporting an annual rise for the first time in at least three years, judging by another rise in expected capex spending for the 2017-18 financial year, according to figures released yesterday by the Australian Bureau of Statistics.

On top of this figures released yesterday by the Bureau showed a solid rise in new home building approvals to an 8-month high.

Business investment spending plans for the current financial year have been upgraded for a third straight quarter led by a higher levels of optimism among non-mining sectors of the economy.

That was after a 1% rise in actual spending in the three months to September to more than $29.3 billion.

Spending in the quarter was also more than 2% higher than in the same quarter of 2016-17, pointing to the continuing expansion of spending plans by businesses across the economy.

In fact the rise could be more significant - the Reserve Bank believes the Bureau of Statistics figures doesn’t go anywhere near in capturing total investment across the economy and is especially weak picking up spending in education and healthcare, as well as parts of small business.

Reserve Bank deputy governor, Guy Debelle said in speech earlier this month about investment:

"The services sector does not have good coverage in the ABS capital expenditure survey, particularly health and education. The capital expenditure survey covers only around half of investment spending in the non-mining sectors. So it is not a particularly comprehensive guide to either the current level or outlook for aggregate non-mining investment.

"The other area of investment that has been robust of late has been in those parts of the economy associated with infrastructure spending. There has been a pick-up in growth of public investment in recent years.

"A share of these projects have been completed by the private sector on behalf of the public sector, some of which have been recorded as private investment in the national accounts as the work occurs. This has boosted investment growth, both as a direct consequence of the infrastructure spending and, increasingly, in spillovers to other parts of the economy,” Dr Debelle said.

Thanks to higher investment plans from manufacturing and an assorted other industries, the full year figure is now within $6 billion of the $114 billion spent in the year to June 30 this year.

The ABS said that the 4th estimate for total capital expenditure for 2017-18 is $US108.922 billion at September 30, up 1.6% on the same estimate in 2016-17 and a solid 5.6% above the third estimate released three months ago.

The main contributors to the increase is Other Selected Industries where spending is forecast to be up more than 13% at $66.51 billion, with most of the increase going on new plant and machinery (up 11%) followed by a 6% rise in building expenditure.

Investment spending in manufacturing for 2017-18 is forecast to be more than $8.9 billion - up 7.5% higher than Estimate 4 fa year ago and nearly 7% above the third estimate for this financial year.

And supporting the Reserve Bank’s belief that the mining investment slump is over, a small rise in investment is forecast in estimate four. The ABS said miners expect to spend around $33.433 billion in 2017-18, down 16.7% from a year ago, but half a per cent higher than estimate three for the current financial year.

Meanwhile the ABS reported that approvals to build new homes climbed to the strongest in eight months.

Approvals to build new homes rose 0.9% in October, instead of the market forecast fall of 1.8%. Approvals were up 18.4% on October last year, with apartments up over 37%.

View More Articles By Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.



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