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Business spending set to aid GDP growth

Prashant Mehra
AAP

Business investment has lifted for the third straight quarter, confirming economists' view it will contribute positively to GDP growth in the September quarter.

Investment in capital goods rose 1.0 per cent to $29.4 billion in the September quarter, matching market expectations, figures from the Australian Bureau of Statistics showed on Thursday.

That follows a revised 1.1 per cent increase in the June quarter, and a 1.2 per cent rise in the preceding quarter.

The September quarter's gain in capital expenditure was boosted by a 1.2 per cent increase in spending on building and structures, while plant & equipment spending improved by 0.7 per cent.

Non-mining sectors of the economy accounted for the increase, as services continued its strong run from recent quarters, rising 2.1 per cent, but manufacturing fell back 2.7 per cent.

Mining investment remained steady after several negative quarters, indicating that the mining capex downturn is drawing to a close, Westpac economist Andrew Hanlan said.

"The drag from the mining investment wind-down is greatly diminished, contributing to the improvement in conditions during 2017 in the mining states," he said.

"We still some downside to mining infrastructure work in 2018 as the remaining gas projects under construction are completed - but the drag is greatly reduced."

Economists broadly expect the latest investment data, which does not include the agriculture, health and education sectors, to contribute positively to third quarter gross domestic product growth when national accounts are released next week.

Businesses now expect to invest $108.9 billion during the 2017/18 financial year, which is 1.6 per cent higher than the corresponding estimate last year, and 5.6 per cent higher than the estimate from three months ago.

The upgrade in spending intentions of businesses, particularly those in the non-mining sector, is likely to please policy makers, CBA economist Kristina Clifton said.

"The background conditions for business investment remain favourable, with interest rates low and a synchronised global upswing underway. Low wages growth is also a windfall for businesses," she said.

She expects the data to give the Reserve Bank more confidence in the outlook for growth and inflation, but said it would have no immediate monetary policy implications.

The Australian dollar briefly dipped after the release of the capex figures and data on building approvals but has since climbed higher.

The local currency was trading at 75.87 US cents at 1610 AEDT.