Australian private capital expenditure rises strongly in Q4 2018

Private capital expenditure rises strongly in Australia in the fourth quarter of 2018, driven by equipment and construction. Capex rose strongly by 2 percent sequentially in the December quarter, as machinery & equipment spending rose modestly by 0.7 percent and private non-residential construction rose solidly by 3.2 percent.

Meanwhile, the outlook continues to be solid. Non-mining companies now intend to increase investment by 8.5 percent in the current financial year, a little stronger than the 6.7 percent anticipated in the third quarter release. For 2019-2020 non-mining companies intend to increase investment another 6.6 percent. While these estimates are quite rubbery at this early stage of the cycle, the positive tone implies that businesses continue to be comparatively upbeat about the outlook, said ANZ in a research report.

The mining sector also continues to be positive. While plans for 2019-2020 were downgraded, mining companies expected to increase spending in 2019-2020 by a solid 21 percent. Gas and oil investment dropped further by 6 percent in the fourth quarter, possibly driven by the fall in work on the Ichthys and Prelude LNG projects. Mining investment might no longer be the drag on GDP that is has been since 2012.

“The RBA is likely to be relieved with the upgrade to investment plans. It is particularly important given the barrage of negative news over recent months, and suggests that despite the increase in downside risks for the economy, businesses remain relatively upbeat about the future”, added ANZ.

At 12:00 GMT the FxWirePro's Hourly Strength Index of Australian Dollar was slightly bearish at -63.6758, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -63.5224 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex