Australia first-quarter business investment hits 7-year high, outlook solid

AUSTRALIAN business investment rose to a seven-year high in the first quarter, helped by a jump in spending on mining, manufacturing and transport, while firms affirmed plans for solid spending in the year ahead.

Data from the Australian Bureau of Statistics on Thursday showed private capital spending climbed a real 2.4 per cent in the first quarter from the previous quarter, compared with forecasts ranging from a rise of 1 per cent to 1.9 per cent from big Australian banks.

The A$36.1 billion (S$33.1 billion) invested was the highest level since 2015’s December quarter.

Firms also boosted their combined spending plans for the year to June 2024 to A$137.6 billion, up 6.4 per cent from an earlier estimate.

“Business investment may yet prove to be a bright spot in what looks set to be a gloomy Q1 GDP print,” said Sean Langcake, head of macroeconomic forecasting for Oxford Economics Australia.

“Although expectations for growth have generally weakened over the past three months, firms’ expectations for capex spending in FY24 remain healthy. However, this may be an acceptance of higher cost inflation, rather than an intention to make larger additions to the capital stock.”

First-quarter investment by Australia’s huge mining sector climbed 1.7 per cent, accelerating from a rise of 0.7 per cent in the previous quarter. Spending on new equipment and machinery rose 3.7 per cent, marking the largest quarterly growth in two years.

The capital spending figures will feed into data on gross domestic product (GDP) due next week. Growth is expected to slow due to slowing consumer spending and high levels of imports.

Construction work done came in better-than-expected, although residential building remained soft, likely making a flat contribution to Q1 GDP growth.

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