Capital expenditure fell in the last three months of 2011, but it is expected to make a comeback in 2012 as the mining boom continues.
New private capital expenditure (capex) fell 0.3 per cent in real terms, seasonally adjusted, in the December quarter, the Australian Bureau of Statistics (ABS) said on Thursday.
Commsec economist Savanth Sebastian said the small fall in the December quarter was understandable because it followed on a 14.6 per cent rise in the September quarter, which was the biggest in 15 years.
“I think it’s nothing to get overly worried about, if you look at the moment, capex is clearly going to be the driver for growth over the coming year,” he said.
“If you look at corporate Australia, the balance sheets are relatively strong, they’re cashed up, investment plans are being brought back to the table as the (global) recovery gains traction, Mr Sebastian said.
“I think you’ll see a lot more of those dollars being put to work.”
Mr Savanth said he doesn’t expect the Reserve Bank of Australia to be concerned about the weak December quarter economic data and said the RBA won’t cut the cash rate again until at least May.
The ABS figures also showed that mining investment is set to rise from $47.3 billion in 2010/11, to $83.9 billion in 2011/12 and $136.6 billion in 2012/13.
RBC economist Michael Turner said the story of huge investment flows into resource sector is continuing.
“The fourth quarter capex report underscores the amount of resource sector investment in train,” he said.
“The investment boom is exceptionally large, well underway, and set to grow at an impressive rate.”
Mr Turner said there are doubts about the resource sector’s ability to achieve this level of expansion, one problem being a lack of potential staff.
He said with residential construction struggling to main solid growth some of the spare labour capacity in that sector could be moved in to the resource sector.
“But even conservative estimates involve double-digit growth in business investment for the next few years,” Mr Turner said.
Macquarie Group senior economist Brian Redican said the capital expenditure data indicated growth in the mining sector was now being offset by weakness in the rest of the economy.
“We’ve had this arm-wrestle between the strong mining sector and the weaker non-mining sector and at the end of 2011 it looked like the weaker parts were gaining the ascendancy,” Mr Redican said.
However, he said the weak data was unlikely to cause the RBA to cut interest rates in March, noting that the data indicated further investment growth for the rest of this financial year and 2012/13.
“I think they will see the underlying weakness in the December quarter as a temporary hiccup.
“It’s upwards and onwards for the mining sector. “But (capital expenditure growth) is totally reliant on mining for now, with other parts of the economy and the service sector looking to spend as little on investment as they have done since 2007/2008.”
