Australian companies are planning to lift investment spending in 2017-18, boosting it from three months ago by 17.6% to $101.8 billion.
At the same time there is clear evidence that the long drop in planned spending is coming to an end, as the Reserve Bank has said on a number of occasions in the past few months.
In percentage terms, it is the highest rise from the second to third estimate since 2014 when there was a fall of 10.4% revealed.
Market surveys had the figure at less than $100 million – or around $96 million.
A year ago the third estimate for 2016-17 was just over $105 million (a rise of 15.2%), while a year earlier, the third estimate (a rise of 9.9%) was nearly $114 million.
Economists say the quarterly capex report from the Australian Bureau of Statistics only captures around 60% of business investment recorded in the national accounts as it doesn’t include the booming sectors of agriculture, health and education, and quite a few areas of small business activity.
This data flows into the national accounts for the June quarter and 2016-17 financial year that will be out next Wednesday.
But the more upbeat outlook does support the Reserve Bank and Treasury view that business investment outside of the mining sector is recovering.
Even the mining industry is planning to lift investment this financial year after years of cutting and slashing at spending.
But the level of spending remains under that for the 2016-17 financial years (for the third estimate). The sector is planning a 12.8% rise in new investment from the second estimate.
Manufacturing estimates a jump in spending of more than 24% for the current financial year compared with the second estimate – a real sign of an upturn in confidence in the sector.
Companies are enjoying some of the most advantageous business conditions in almost a decade, with lower wages growth and record lows for real unit labor costs and strong productivity, as well a low currency, alongside low interest rates spurring national competitiveness.
Three months ago businesses estimated that their capex spend in 2017-18 would be $85.4 billion, which included a 30% drop in mining investment and no lift in non-mining. That has now changed.
That figure has been upgraded to more than $101 billion, thanks largely to a 19.4% boost in spending plans among service companies, which now expect to outlay $61.4 billion in the current financial year . They are called “Other Selected Industries”.
"That’s a bigger upward revision than normal at this stage and suggests the rise in business confidence is helping to unlock firms’ coffers," said Paul Dales, economist at Capital Economics.
"The outlook for investment can’t be described as rosy, but it’s certainly not as bleak as it was a couple of years ago."
For the year to June 30, business spending on new equipment plant and machinery rose for a second straight quarter.
Total capital expenditure rose a seasonally adjusted 0.8% in the June quarter from the previous three months, when it rose by 0.9%.
That still left it down 3% over the year to June, a big improvement from the 9.3% slide in the year to March and 15.5% over the year to December 31. The slide is almost over.
