Yes, the December quarter capex figures from the Australian Bureau of Statistics yesterday were important for the 4th quarter growth figures to be released next Wednesday and for confirming that the resource boom is still alive and slowly taking shape.
New private capital expenditure rose 1.3% in real terms, seasonally adjusted, in the December quarter, down from the market forecast of 2.2% (Too optimistic).
But the real news was the first capex estimate for the 2011-12 financial year: $132.716 billion, up a massive 30.3% on the first estimate for this year of $101.4 billion. That in turn was up 15.3% on the first estimate for 2009-10.
Since 2008, capex estimates have soared 62.5%, from nearly $80 billion to the latest one of more than $132 billion.
That’s the resources boom at work, as we have seen from the flood of good results from companies large and small in the sector, as well as many suppliers and service groups.
The first estimate for next financial year is $4 billion more than the current fifth estimate of expenditure for the year to June 30 of $128.9 billion (which is 16.2% higher than the fifth estimate for 2009/10, i.e. a year ago).
But the 5th estimate for the current year of almost $129 billion is actually $28 billion (or around 28%) above the initial estimate given in February of last year with the capex figures for the December 2009 quarter.
If the increase is any guide, then eventual capex in the 2012 financial year could end up close to $150 billion.
The first estimate is around 9.5% of expected GDP, a higher figure would put it above 10%, which is the highest proportion ever recorded in modern times.
This is why the Reserve Bank Governor has been going on about the impact of the boom, the surge in our terms of trade and our national income and how we should handle it. His speech this week is worth reading on the issue.
Mr Stevens observed in his speech that "At the risk of sounding like a broken record, the rise in Australia’s terms of trade over the past five years is the biggest such event in a very long time.
"It reflects powerful forces at work in the global economy to which our country is more favourably exposed than most. It presents opportunities and challenges.
"With a large boost to income, we need to think about the balance between saving and spending, because we do not know the permanent level of the terms of trade.
"I argue for erring on the side of saving for the time being, and I think this is by and large what is happening so far.
"With a large change in relative prices, we should also expect to see a good deal of structural change in the economy."
That boom in our terms of trade has in turn helped finance and drive the investment boom now well underway and reaching new levels, according to yesterday’s estimates from the ABS.
(These estimates are gathered by the ABS in a series of seven quarterly surveys, the first in January and February before the start of the financial year in July, and the seventh immediately after the financial year ends)
The estimate for mining investment for the 2011-12 year was up a huge 54.8% and that’s the major driver.
In fact the increased forecast for manufacturing and selected other industries is small in comparison, which underlines the singular nature of our investment boom.
The ABS said that in the two main areas of spending, the first estimate for 2011-12 for buildings and structures is $91,107 million.
"This is 43.4% higher than Estimate 1 for 2010–11. The main contributors to this increase were Mining (58.6%) and Rental, Hiring and Real Estate Services (72.4%)," the ABS said.
Plant and machinery is the other area and the ABS said, "Estimate 1 for equipment, plant and machinery for 2011–12 is $41,609 million.
"This is 8.7% higher than Estimate 1 for 2010–11. The main contributor to this increase was Mining (37.8%)."
For the major industries, the ABS said, "Estimate 1 for Mining for 2011–12 is $75,989 million.
"This is 54.8% higher than the corresponding estimate for 2010–11. Buildings and structures is 58.6% higher and equipment, plant and machinery is 37.8% higher.
"Estimate 1 for Manufacturing for 2011–12 is $11,519 million.
"This is 6.5% higher than the corresponding estimate for 2010–11. Buildings and structures is 5.5% higher and equipment, plant and machinery is 7.3% higher.
"Estimate 1 for Other Selected Industries for 2011–12 is $45,209 million.
"This is 7.9% higher than the corresponding estimate for 2010–11. The main contributor to this increase was Transport and Storage (27.3%). Buildings and structures is 20.8% higher and equipment, plant and machinery is 2.4% lower," the ABS said.
The 1.3% seasonally adjusted rise in capex in the December quarter was made up of a fall of 2.8% in the seasonally adjusted estimate for buildings and structures, with mining down 6.4%. Manufacturing rose 13.6% and Other selected industries fell 0.4%.
The ABS said its capex data presented the first significant economic impact of flooding in Queensland that started in late December 2010.<
