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Private Capex Outlook Remains Positive

The steady recovery in non-mining investment in 2016-17 is continuing half way through 2017-18 and is now spilling over into 2018-19 according to the Australian Bureau of Statistics’s December quarter data on private capex issued on Thursday.

While total spending on new buildings, plant and machinery dipped 0.2% in the December quarter (seasonally adjusted) - against market forecasts for a rise of around 1%, investment rose 4% over 2017, the first full calendar year rise since 2012.

Forecast investment spending plans for the 2017-18 financial year have been lifted by 4.9% from three months earlier to $115 billion, the bureau said (They started at $80.6 billion a year ago).

And future spending plans were sharply upgraded for 2018-19 to $84 billion, which is up 3.5% than the same initial forecast for 2017-18 published a year ago and the highest first estimate for a new financial yer for three years.

It’s the first time since 2012-13 there has been an increase on the prior year in the first estimate and provides further confirmation of Reserve Bank forecasts for higher investment spending to continue, as the minutes of the bank’s February meeting said:

"Private non-mining business investment had increased by more than expected in the September quarter, to be nearly 10 per cent higher over the preceding year. Members noted that the prospects for private non-mining investment were more positive than they had been for some time,” the RBA minutes read.

December quarter spending on buildings and structures fell 2.1% from the previous three months, led by a 9.7 %slide in mining work, which was not unexpected. Manufacturing, by contrast, saw a 12.3%, and other non-mining industries rose 4.2%.

Equipment investment rose 2.2% in the quarter, with mining surging 21.9% (there’s still life in the boom), while manufacturing and other industries were slightly down.

Mining however again trimmed its spending outlook by 5.3% (the smallest first estimate fall since 2012-13), manufacturing and non-mining investment companies are raising expectations.

Manufacturers say they plan to spend $6.9 billion in 2018-19, which is 7.1% more than they first predicted for the current financial year 12 months ago.

So-called “other selected industries”, which accounts for a significant, but not exhaustive, range of non-mining industries such as telcos, health. private education, real estate (but not housing) and education, predict spending in 2018-19 of $51 billion, which is not only 8.1% more than the forecast for this year 12 months ago, it is the biggest initial prediction on record, according to the ABS data.

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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