Andrew Hanlan, Research Analyst at Westpac, suggests that the ABS survey of private business investment plans, the CAPEX survey, will provide some further guidance on the Australian growth prospects.
Key Quotes
“The June quarter update will be released on August 30, including the 7th estimate of capex plans for 2017/18 (i.e. the actual outcome for the year) and the 3rd estimate of plans for 2018/19, as well as actual capex spending for Q2 2018.”
“Historically, capex plans become more reliable when the outcome for the preceding year is known, that is from Est 3 on. Hence, the initial two estimates need to be viewed with a degree of caution.”
“The June quarter survey was conducted during July and August. Private business surveys report that business conditions are elevated (albeit less so than earlier in the year), at a time of supportive world growth, and business confidence is at around average levels.”
“Business investment has turned the corner, advancing in 2017, after four years of decline. The drag from the mining investment wind-down is greatly diminished (but not quite complete) and an upswing in non-mining investment is underway, to meet the needs of a growing population.”
“However, a question mark remains around the strength of consumer spending. The household sector remains under pressure with persistent weak wages growth, high debt levels and now declining house prices. The absence of above trend consumer spending growth is a headwind for business equipment spending.”
“Scenarios: Est 3 for 2018/19
Scenario 1 “broadly neutral”: Est 3 of $102bn,
This implies a 2% fall in capex in 2018/19, based on avg RRs, in line with the -2% implied by Est 2. (Note, Est 3 on Est 3 is -1%.)
Scenario 2 “softer”: Est 3 of $97bn,
implying a 7% fall in capex, based on avg RRs.
(Est 3 on Es 3 is -6%)
Scenario 3 “stronger”: Est 3 of $107bn,
implying a 3% rise in capex, based on avg RRs.
(Est 3 on Est 3 is +4%)”
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