The ABS data released today shows the continued fall in mining expenditure, and no counterbalancing movement in other sectors. Total new capital expenditure trend estimate was $37,693 m, down 3.9% YOY.
It does not bode well. Business confidence remains low, and given that household debt is still high, we do not expect housing, and households to fill the gap. We are effectively running out of runway as mining investment trails off. So, housing is the only game in town. Given the data now, it is much more likely we will see interest rates lower for longer than previously anticipated. However, the continued reliance on unproductive lending for housing in not a recipe to drive business investment. We need some new thinking on how to stimulate business investment. Our surveys suggest that it is not interest rates which is the problem, so cutting further wont help much. APRA needs to step up here, turn to tap down on housing lending, and make business lending more likely. The details of the ABS data are summarised below.
- The trend volume estimate for total new capital expenditure fell 0.8% in the December quarter 2014 while the seasonally adjusted estimate fell 2.2%.
- The trend volume estimate for buildings and structures fell 1.5% in the December quarter 2014 while the seasonally adjusted estimate fell 2.6%.
- The trend volume estimate for equipment, plant and machinery rose 0.9% in the December quarter 2014 while the seasonally adjusted estimate fell 1.3%.
- This issue includes the fifth estimate (Estimate 5) for 2014-15 and the first estimate (Estimate 1) for 2015-16.
- Estimate 5 for 2014-15 is $152,656m. This is 8.6% lower than Estimate 5 for 2013-14. Estimate 5 is 0.4% higher than Estimate 4 for 2014-15.
- Estimate 1 for 2015-16 is $109,799m. This is 12.4% lower than Estimate 1 for 2014-15.
