Australia Markets open in 1 hr 47 mins

Business investment expected to rise

Prashant Mehra

Businesses are on track to lift their investment in the year ahead despite a fall in spending in the final quarter of 2017.

Spending on capital goods fell 0.2 per cent in the December quarter to $29.6 billion, figures from the Australian Bureau of Statistics showed, missing market expectations of an increase of one per cent.

A sharp fall in mining investment drove the December quarter weakness, reflected in a 2.1 per cent decline in non-residential construction spending.

JP Morgan economist Tom Kennedy said the details of the capital expenditure numbers proved more positive.

"The mix of spending was better than the headline numbers suggested, with plant and equipment rising 2.2 per cent," he said.

"Plant and equipment spending maps through quite closely to the equivalent concept in the national accounts."

Economists were also encouraged by the upbeat outlook for spending in the current financial year, and the next.

Businesses collectively expect to spend $114.6 billion in the 2017/18 financial year, a 2.5 per cent increase from the estimate provided at same time last year, and 4.9 per cent higher from three months ago.

Firms also expect to spend $84.04 billion in 2018/19, according to the first survey for that year.

The estimate is a 3.5 per cent improvement on expectations a year ago for 2017/18, and is the first positive comparison for this early estimate since 2012/13.

CBA economist Kristina Clifton said the main focus will now turn to non-mining investment, with the mining investment boom and bust now largely over.

" The outlook for non-mining capex looks good, with actual capex rising and spending intentions solid for both this financial year and next," she said.

"The background conditions for stronger spending are in place. Global growth has picked up, business conditions and confidence have been elevated for some time now and employment growth is strong."

Already lower against a rising US dollar, the Australian dollar fell further after the release of the capex numbers.

The local currency hit a low of two month low of 77.17 US cents in early afternoon trade, from its level of 77.54 US cents just ahead of the data release.