AUSTRALIAN ECONOMIC DEVELOPMENTS
The outlook for private sector capital expenditure (CAPEX) and the estimate for CAPEX in the September quarter (Q3) of 2018 was the most significant piece of new information released this week. The ABS estimate private sector CAPEX in Q3 of 2018 fell by 0.5% q/q to $29.3 billion. Mining investment was lower in Q3 but was partially offset by higher manufacturing CAPEX, while ‘other selected industries’ (mainly services and construction) was broadly stable.
Looking ahead, the data released by the ABS indicated that Australian businesses plan to invest $116.8bn in 2018-19, a reduction from $119.4bn in 2017-18 (after applying realisation ratios). Encouragingly, the outlook is more positive for non-mining CAPEX with the investment plans suggesting an increase in 2018-19 of 8.9% in nominal dollars.
Continued support for non-mining investment is expected to flow from key fundamentals including population growth, declining spare capacity and the positive flow-on effects from strong public infrastructure investment. This is consistent with the details of the separately released ABS construction work done estimates showing continued strength in public sector engineering construction work (largely transport infrastructure) which was at a near-record highs of $9.8 billion in Q32018 (inflation-adjusted, seasonally adjusted). Public infrastructure work is set to remain elevated, particularly in New South Wales and Victoria,supported by sustained high levels of government investment.
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