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Catherine Birch, senior economist at ANZ, notes that Australian Capex fell 0.5% q/q in Q2 following an upward-revised 1.3% q/q decrease in Q1.

Key Quotes

“Buildings and structures investment dropped by 3.3%, on top of the 1.9% fall in Q1, while machinery and equipment spending rebounded to 2.5% from -0.5%.”

“This put annual growth at -1.0% although non-mining capex was positive at +1.4% y/y.”

“Mining recorded its strongest quarterly capex growth in five years of 1.7% q/q and manufacturing bounced back from two quarters of decline, posting an 8.5% rise.”

“For 2019-20, capex plans were upgraded to AUD113bn in Q2 from AUD99bn in Q1. Part of this reflects the fact that businesses almost always upgrade their intentions at this time as the current financial year is underway. However, the upgrade was larger than we expected in the current environment of below-average business conditions and elevated geopolitical uncertainty.”

“Both non-mining (+6%) and mining firms (+20%) are planning stronger investment during 2019-20. Coal and iron ore investment continues to build while oil and gas capex is expected to bottom out soon.”