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Australia's private investment spending drags on growth
[SYDNEY] Australian business investment fell last quarter, severely dragged by the battered mining sector, but a modest upgrade to overall spending plans helped take the sting out of a disappointing report.
Figures from the Australian Bureau of Statistics on Thursday showed total private new investment fell 5.2 per cent in the first quarter to an inflation-adjusted A$30.6 billion (S$30.4 billion), although analysts had forecast a smaller 3 per cent drop.
"Overall, these figures support our view that investment is going to remain the weak spot of the Australian economy for some time yet," said Paul Dales, Australia & New Zealand economist at Capital Economics.
Mining investment suffered a 12 per cent drop as the boost from a once-in-a-lifetime mining boom continued to unwind. Manufacturing fared no better, falling 10.3 per cent.
Promisingly, investment by "other selected industries" including services rose 1.8 per cent.
Analysts were also pleased to see a slight upgrade to overall spending plans for the year ending June 2017 to A$89.2 billion, from A$84.0 billion initially, thanks again to the"other selected industries" category.
"The emergence of a sustained upswing in investment by the service sectors is a key element in the economy's successful transition from growth led by mining investment to strength across the broader economy," said Andrew Hanlan, senior economist at Westpac.
"Investment intentions of the service sectors will be of particular interest to policymakers, including the RBA."
While the survey does not cover a large chunk of the services sector, such as education and healthcare, it does provide a general guide to business spending plans.
There was little reaction to the mixed report with the Australian dollar dipping to US$0.7162, from US$0.7180.
A decade of madcap expansion saw mining investment quadruple to reach 8 per cent of Australia's A$1.6 trillion annual gross domestic product (GDP). Now, it's heading rapidly back to around 3 per cent.
GDP figures due next week are generally expected to show the economy grew a modest 0.6 per cent last quarter, the same pace as the fourth quarter.