Business investment fell by more than expected in the March quarter, but the outlook for the 2019-20 financial year is better with a surge in mining investment now forecast.
But data out yesterday from the Australian Bureau of Statistics also showed building approvals for April continued to ease while the 3% rise in the minimum wage, also announced yesterday will have no impact on inflation and do little to boost household income and spending.
In fact, the data yesterday all but confirms its full steam ahead for Tuesday’s Reserve Bank rate cut.
Figures from the Australian Bureau of Statistics yesterday showed a worse than expected 1.7% dip in total private investment to $29.3 million (seasonally adjusted) in the March quarter.
Seasonally adjusted, private sector investment was down 1.9% in the 12 months to March as well.
With weak March quarter retail sales and the fall in the value of construction work done in the March quarter, next Wednesday’s GDP report is shaping up as possibly weaker than thought. Only the strong trade account will provide a boost to growth.
The fall in investment in the three months to March was much worse than the 0.5% rise forecast by the market and a rise in the December quarter.
However, businesses have maintained their positive outlook for 2019-20, with non-mining and mining firms planning strong increases in investment during the year.
The ABS data yesterday showed show the second estimate for business investment in 2019-20 was $99.1 billion, slightly above market expectations of $96 billion and 7.6% from the first for the next financial year and up nearly 13% on the second estimate for 2018-19.
The big positive though is in the growth companies expect in various sectors. For example, the slide in mining investment is clearly over and companies are planning a 21% boost to spending in 2019-230 compared to the first estimate three months ago.
Manufacturing investment is projected to be up 6.5% and other selected industries (phone companies, energy groups, solar panels, etc) are looking at a 9.6% lift.
And remember that this data does not fully capture investment by small companies, especially in software or investment in health and education which have been booming (or the NDIS).
Meanwhile, the ABS reported that building approvals dropped by a seasonally adjusted 4.7% in April.
Approvals for private sector houses dropped 2.6% while the “other dwellings” category, which includes apartment blocks and townhouses, was down 6.5%.
For the year to April, total building approvals for dwellings fell by a seasonally adjusted 24.2%, according to the ABS.
The ABS said that in seasonally adjusted terms, total dwellings declined by 4.7% in April, “driven by falls in Tasmania (19.1 percent,), Victoria (16.1 percent), Western Australia (6.7 percent) and South Australia (3.3 percent).”
And the 3% rise in the minimum wage fell short of the 3.5% last year and 3.3% in 2017, despite the Reserve Bank imploring business to hand out wage rises to boost household income and spending.
Around 2.2 million of the country’s 12.8 million employed Australian workers will benefit to the tune of an extra $21.60 a week from next month, taking the minimum wage from $719.20 to $740.80.
The increase fell well short of the 6%, $43 per week, rise the ACTU had sought but was higher than the 2% that business wanted.
But with inflation running at 1.3% in the year to March and not expected to reach 2% until next year, 3% is at least a solid rise in real terms.
But the decision ignored the concerns from the Reserve Bank governor Philip Lowe about slow wages growth in Australia and the impact that was happening on weak household income and spending – and at a time of still high household debt and falling house prices.
