Federal government investment incentives such as instant investment write-offs and the HomeBuilder subsidy drove strong growth in March quarter capital expenditure and construction spending, according to figures from the Australian Bureau of Statistics.
Private investment data from the ABS showed a 6.3% rise in total investment to $31.49 billion in the three months to March, but that was only 0.8% higher than the figure for the March 2020 quarter of $31.247 billion.
However it was substantially higher than the $25.85 billion in the three months to September, 2020 and the $26.13 billion in the June quarter of last year.
So rather than the 6.3% quarter on quarter rise and the weak 0.8% annual rise, the 20% plus rebound from the depths of the Covid-driven slump in the middle of last year, is a better guide of the recovering pace of business investment.
But the pace of spending is merely regaining that of a year ago, and not yet showing signs of growing at a much faster rate with new spending showing upon new projects.
These rises in the data appear to be companies re-committing themselves to previous spending plans or re-starting spending that was halted on new projects in the lockdowns.
That is supported by the second estimate for 2021-22 showing a 7.9% rise to more than $113 billion from the first estimate three months ago.
But investment isn’t surging, it’s just in a state of recovery from the loss of confidence midway through 2020 in the wake of the pandemic and lockdowns.
The ABS said that the March quarter did see solid recoveries in spending on things like buildings and plant and machinery.
Spending on buildings and structures rose by 3.8% in the quarter and by 9.1% on equipment, plant and machinery. But again the rises were stronger looking from the lows of April through September last year.
Meanwhile ABS figures in the value of construction work done in the March quarter showed home building kept the sector alive with a 5.1% rise in the quarter to nearly $19 billion to be up 4,2% over the year to March.
The value of construction work done in the three months to March was up 2.4% as a result of the splurge on home building (which building approvals and finance data confirm).
Just over $52 billion worth of construction work was done in the March quarter, more than the final quarter of 2020, however still 1.1% on the march, 2020 quarter.
Non-residential building was down 10.4%, year on year seasonally adjusted. Engineering work rose 2.2% quarter on quarter, but still down 0.3% over the year to March.
Victoria and the ACT saw the largest year on year falls in construction work, but Western Australia saw a big increase because of spending on existing and new resources projects.
But the capex data saw a huge, 47% slump in investment in the NT in the March quarter and nearly 42% over the year. WA saw a rise of 10.9% quarter on quarter and 10.3% year on year.
South Australia, NSW and Tasmania also saw solid quarter-on-quarter and annual rises.
…………
A final point, with the ending of JobKeeper the 7-day lockdown in Victoria could damage retail sales, investment spending and jobs growth to the point where growth this quarter slows and forces the RBA to think again about its April 2024 end to the current low interest rate regime.
