Dr Shane Oliver, Head of Investment Strategy & Chief Economist at AMP, discusses capital expenditure across private firms.Key points:- Australian capital expenditure (or business investment) across private firms rose by a stronger than expected 2.8% in the June quarter (in volume terms), with the previous quarter revised up to 3.7%qoq (from 2.4%). This leaves it 10.8% higher than a year ago.
- Building and structures investment rose by 3.5%qoq, with plant and equipment investment up 1.9%qoq. Mining investment rose 0.9%qoq and non-mining investment rose 3.5%qoq, with construction investment the strongest at +30.5%qoq after large falls.
The stronger than expected rise in investment partly appears to partly reflect the easing of supply disruptions, particularly for vehicles, and the bring forward of some investment reflecting tax incentives ending on 30 June. This appears to have particularly impacted construction spending.
The stronger than expected rebound in investment offsets weaker than expected construction data and so we retain our expectation for June quarter GDP growth of 0.4%qoq, which will see annual growth fall further to just 1.8%yoy.
The capital expenditure release also contains forward-looking projections for business investment, with firms surveyed about their outlook for spending in the current and/or next financial year. In this release, firms third estimate for 2023-24 capital spending is up 7.1% from the same estimate made a year ago for 2022-23. While stronger than the 5.2% rise in the March quarter survey it nevertheless points to weaker growth in business investment this financial year after a 15.9% rise in 2022-23. This is also in nominal terms so after adjusting for inflation it will be much weaker.
Source: ABS, AMP
July credit growth remained moderate with a 0.3%mom rise or 5.3%yoy.
Housing credit growth remained modest at 0.3%mom, and like housing finance commitments, is yet to show the sort of upswing that would normally come with the rebound in home prices that we have been seeing since February.
Source: ABS, AMP
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