So where’s the evidence of the capital strike from the Rudd Government’s troubled resource rent tax brawl earlier this year, or the investment crowded out by the high federal deficit and debt?
Or the impact of six rate rises on curtailing business confidence and investment plans?
Breathless commentators, the miners, bankers, investors, opposition politicians and anyone with an axe to grind claimed there was now "sovereign risk" about Australia as an area to invest, and that this would see a capital strike.
This commentary spread overseas and became accepted wisdom, but some of those companies, while warning of the risk of higher risk, kept on planning new investment.
And it wasn’t just miners, but other sectors kept planning new investment, ignoring the talk of strike and the brawl over tax, so we now have an investment boom that is not just confined to the resources sector.
Yesterday’s Australian Bureau of Statistics showed a fall in the June quarter and in 2010, but that’s history that the statisticians are interested in for next week’s 4th quarter and 2010 GDP numbers.
The real story is the capex expectations for the coming year and at the moment they are enormous.
Overall, the ABS said estimate for total private sector capital expenditure for the current 2010-11 is a record $123.3 billion, up 17.5% on the March quarter estimate, 24% higher than the equivalent estimate for the June 30 year just finished and 16% more than capex for last financial year of around $107 billion.
The figures shows miners in the June quarter were expecting to invest a massive $54.8 billion this financial year, up 29% on their actual 2009-10 capex and a huge 48% above their corresponding expectations survey for 2010 this time a year ago.
That surge was missed in headlines which concentrated about the June quarter fall.
The ABS said private new capital spending on buildings and equipment fell 4% to $26.19 billion in the second quarter, from $27.27 billion. The market had been looking for a 2% rise.
The reports completely missed the point that while the statistician is interested in the outcome , the RBA is more interested in those projections of a boom.
And, what’s more impressive is the fact that there was a 12% rise in capex expectations for the 2011 financial year from the previous estimate for the March quarter.
And it’s just not the mining and or resources industry that is going to invest more.
Manufacturing is looking at a 12% lift to $14.1 billion which in former times that would have gladdened the hearts of unions, bankers, economists and governments of all stripes.
The “other selected industries” group in the ABS survey said spending would rise 25% to more than $54 billion by June 30 next year.
That’s a 25% rise from their estimate in the March quarter survey, which means those surveys showing weakening business confidence haven’t translated to cuts in investment.
Intended spending on buildings and structures is up 30% in just three months while equipment, plant and machinery spending plans are up 21%.
Among industry groups, the rental, hiring and real estate services and the transport, postal and warehousing sectors both forecast rises in spending of 34%.
Incidentally, this confidence is despite six interest rate rises from the RBA and no sign of any impact from the increase in the federal government’s deficit or debt over the last year.
The RBA has been forecasting this boom to happen, and it has; but now that it is more broad-based than before, raising questions about the adequacy of labour and resources.
In other words, inflation could be re-ignited if there’s competition from expansion plans in various sectors in coming months, which is what the Reserve Bank has been warning about in recent statements, most recently from RBA Deputy Governor Ric Battellino.
He told a lunch in Brisbane on the eve of the August 21 Federal election:
"Most importantly, however, we think that economic growth will be driven by strong business investment. This will be concentrated in the mining and gas industries.
"Mining investment typically runs at about 1.75% of GDP, and in past mining booms it has reached up to 3% of GDP.
"In the current boom, it has already risen to 4.5% and, even on conservative assumptions, is expected to rise significantly in the years ahead.
"That will provide a major impetus to growth. Even outside mining, investment is likely to rise, given that capacity constraints exist in many parts of the economy.
"One issue is whether the strength of the economy will have implications for inflation. At present, underlying inflation has fallen back into the top half of the target range after rising noticeably over the second half of 2007 and 2008.
"We expect that it will stay around its current rate for the next year or so but, after that, upward pressure on inflation is again likely to emerge with a strongly growing economy.
"History tells us that inflation can be a problem during resources booms, and while there are grounds for thinking it will be less of a problem this time than in the past, we need to remain alert to the risks."
And it’s just not investment: ne
