Now that was a surprise set of capex figures from the Bureau of Statistics yesterday – they showed a slightly better investment performance in the December quarter (instead of the widely predicted fall), a glum outlook for the rest of the year and the new 2016-17 financial year.
But the good news was there are more signs of a stirring in investment intentions from the non-mining parts of the economy.
Overall investment rose by a seasonally adjusted 0.8% for the December quarter to $31.94 billion, according to the Australian Bureau of Statistics, instead of a fall of 3%, which is quite a miss by the forecasters.
That follows a revised 8.4 % drop (previously a 9.2% fall as originally reported) which was the largest fall since 1987, and the December quarter rise ended a year long slide in investment which was the longest slump since the recessionary years of 1990 to 1992.
All up private investment fell a nasty 14% in 2015, which was driven by the collapse in our terms of trade as commodity prices continued to fall. And there is more to come this year and in 2016-17.
The ABS figures yesterday contained the estimate of investment intentions for 2015-16 financial year of $123.96 billion.
That’s 17.8% under the fifth estimate for the 2014-15 financial year, but just 0.6% under the 4th estimate for the current year (which was a small glimmer of good news).
The December quarter saw falls in spending on buildings and structures (down 3.5%), equipment, plant and machinery (down 4.2%), mining (down 7%), and other selected industries (down 1.6%).
The bright spot was manufacturing, where spending on investment rose 1%, which is another small glimmer of hope. The December private investment report from the ABS also contains the start of investment estimates for the new financial year – in this case 2016-17. The first estimate for that in yesterday’s report was a weak sounding $82.7 billion, down 19.5% from the first estimate for 2015-16.
But when you look deeper into the current year’s figures and the first estimate for 2016-17 you find more ‘good news’. We only have around a year of falling investment in mining and resources before it bottoms out and that fall covers all that 19.8% slide in the first estimate.
In fact the AMP’s chief economist Dr Shane Oliver says mining investment is estimated to notch up falls of 35% over each of 2015-16 and 2016-17 years as the investment boom comes to an end.
“Against this there are signs of a potential improvement in non-mining investment where plans point to a roughly 9% gain in the next financial year (2016-17) after a 20% fall this year,” Dr Oliver says.
“It should also be noted that mining investment as a share of GDP has fallen from around 7% of GDP at its peak in 2012-13 to now being around 3% this year and 2% next year if current plans are correct.
“In other words by the end of 2016-17 the unwind of the mining boom – and hence the resultant drag on the economy – is likely to have largely run its course,” Dr Oliver forecast.