A bigger than expected rise in business investment shows the moderation in the mining sector won’t hit the overall economy, an economist says.
Australian business investment rose by 3.6 per cent in the September quarter, official figures show.
Commonwealth Bank economist Diana Mousina said the increase, following expectations of a 1.2 per cent fall in the quarter, showed the economy was still in good shape.
“We think that it’s saying that overall we’re seeing this peak in mining investment but the peak is not kind of falling off the cliff as some had been anticipating,” she said.
“It’s really showing that this peak in mining investment is more of a plateau and that really means you’re going to have more time for the non-mining economy to make a stronger contribution to growth.”
The closely-watched figures from the Australian Bureau of Statistics cover investment in capital goods which includes things like buildings and equipment.
The fourth estimate for capital expenditure in 2013/14 is $166.832 billion, which is two per cent lower than investment in 2012/13.
Estimates are gathered in a series of seven quarterly surveys, the first in January and February before the start of the financial year in July, and the seventh immediately after the financial year ends.
“For the mining sector, manufacturing and the services sector things were probably as good as you could hope and maybe a little bit stronger than three months ago,” Macquarie Bank senior economist Brian Redican said.
“We have seen an improvement in business confidence and that seems to have underpinned the investment outlook.”
Mr Redican said the figures would not add to the case for a Reserve Bank of Australia interest rate cut early in 2014.
“The Reserve Bank did downgrade its investment outlook in November, so after these numbers they won’t be further downgrading the numbers,” he said.
“The key test for the Reserve Bank will come in February when we get the first estimate for planned (business) spending for 2014/15, I think that will be far more influential in terms of the interest rate outlook.”
