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Capital Spending Falls More than Predicted: ABS

Capital Spending Falls More than Predicted: ABS
May 28, 2015

Data released by the Australian Bureau of Statistics (ABS) on Thursday noted a sharper than expected fall in capital spending. New private capital expenditure seasonally adjusted fell by 4.4 per cent to $35.90bn in the March quarter. These figures involve investments into capital goods, including buildings and construction materials. Analysts had predicted a fall of 2.2 per cent for the quarter, but the true figures showed capex spending falling twice as fast as predicted.

The total new capital expenditure has now fallen 5.3 per cent in the year ending in March. Forward projections had estimated business investment for the 2014-15 financial year to be 8.1 per cent lower than the previous corresponding year at $150bn. Figures are now showing the projections were off by an additional 0.6 per cent. The revised projection for capex in the 2015-16 financial year has fallen sharply again, down 24.6 per cent to $104.03bn. The RBA and other institutions have warned that the Australian economy needs to shift away from the former mining boom and move into other more lucrative non-mining investments. Failure to do so will result in slower economic growth across the board.

A significant fall in buildings and structures influenced the disappointing data. Spending in these sectors fell 6.5 per cent to a seasonally adjusted $23.1bn. Capex for equipment, plant and machinery fell 0.5 per cent over the same period. The data is inline with other reports showing a marked decline in the Australian construction sector, which also fell faster than projections. Construction work in the March quarter fell 2.4 per cent, leading to a seasonally adjusted 8.8 per cent fall over the year. Much of the headwinds facing the machinery, construction and equipment industries come from the major decline in the Australian mining and metals industry.

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