* Q2 CAPEX falls 5.4 pct q/q, but equipment spending bounces
* Firms upgrade spending plans for 2016/17 in promising sign
* Retail sales surprisingly soft at 0.0 pct m/m in July
By Swati Pandey
SYDNEY, Sept 1 (Reuters) - Australian business investment tumbled again last quarter as miners continued to cut back following their decade-long boom, but an upgrade in spending plans for this year provided early signs of a long-awaited recovery elsewhere.
The lift in planned investment will give some comfort to the Reserve Bank of Australia (RBA) which is counting on a stronger pick up in the broader economy after cutting its cash rates twice this year to a record low 1.5 percent.
Thursday's data from the Australian Bureau of Statistics (ABS) reported investment fell 5.4 percent to A$28.71 billion ($21.59 billion) in the second quarter.
Yet spending on equipment, plant and machinery rose 2.8 percent, with the non-mining sector driving the growth. New investment in manufacturing climbed 13 percent even as mining dived 16 percent.
"There are gradual signs of the rotation that the RBA is looking for," said JP Morgan economist Ben Jarman.
"I think particularly today's capex data will give the RBA a little bit of heart that there's still some transmission from what they've done already. That's supporting the non-mining economy to some extent."
Spending plans for 2015/16 came in at A$105.17 billion, 15.2 percent higher than the previous estimate for the year and above the A$97 billion analysts had looked for.
Resource-rich Australia has been struggling with a global slump in commodity prices which has kept economic growth to below-par levels for going on four years.
A slump in business investment subtracted no less than 1.9 percentage points from gross domestic product (GDP) in the year to March. Without that drag, Australia's A$1.6 trillion economy would have expanded at a breakneck pace of 5 percent.
Figures due next week are generally expected to show the economy grew around 0.4 percent last quarter, from the first quarter when it rose a surprisingly brisk 1.1 percent.
The economy is also likely to get some support from planned infrastructure investments by Australia's state governments, helping fill the chasm left by the mining sector. recovery in investment would be welcome, given continued weakness in the country's retail sector.
Data out on Thursday showed retail sales were flat in July although analysts had hoped for a rise of around 0.3 percent. The main culprit was department stores where sales dived an unusually steep 6.2 percent. ($1 = 1.3298 Australian dollars)