Australia’s total capital expenditure for the first quarter slumped 5%, as compared with consensus expectations of a decline of 3.5%. Sharp slump in non-residential construction of 8% led the overall decline. Equipment investment declined by around 1% that will have an insignificant effect on the GDP. The softness in capital expenditure was mainly driven by mining investment in Q1. It dropped 12% quarter-on-quarter and is 50% below the peak of June 2012.
“We estimate that on a GDP-consistent basis it has fallen from a record peak of 8% of GDP to about 3% in Q1”, said ANZ in a research report.
Investment plans of non-mining companies for 2016-2017 were lowered a bit. Non-mining investment is expected to slump around 6% y/y in 2016/2017, lower than the decline of 4.5% y/y projection suggested by previous quarter’s survey, added ANZ. The projection was surprisingly lowered in spite of strong business conditions, profitability and confidence.
Investment in mining declined at a faster rate as work on the remaining major projects is nearing an end. According to miners, spending is likely to slump 30% y/y in 2016-2017 after a similar decline in 2015-2016. This is consistent with projections, given that there are no new upcoming projects. In the first quarter, non-mining investment was flat. It saw little change as investment in manufacturing slumped 10%, whereas services capital expenditure rose 2%.
