Thursday, 28 February 2013 14:28
Australia's mining boom has plenty of life left, with the peak still some way off in the distance.
Official data released on Thursday suggest that businesses are planning to increase their investment spending this financial year and the next.
The fifth estimate of expenditure for 2012/13 was 4 per cent higher than the fifth estimate for 2011/12, the Australian Bureau of Statistics (ABS) said.
JP Morgan Australia chief economist Stephen Walters said mining investment would peak in 2013, it's just a matter of the precise timing.
"The figures show that the peak in mining investment is not rushing towards us," he said.
"Mining plans to spend $100 billion in the year ended June 2014, slightly less than in the year ended June 2013, but this is broadly in line with what RBA (Reserve Bank of Australia) officials have been telling us," he said.
The first estimate of expected capital expenditure for 2013/14 is 8.1 per cent lower than the first estimate for the previous year, but businesses at this early stage are still expected to spend a whopping $152 billion.
Mr Walters said this estimate was higher than the $145 billion JP Morgan had forecast.
He said the investment figures won't trigger a cash rate cut by the RBA at its board meeting on Tuesday.
"Those in the market who were calling for a cut next week probably were hoping for very weak forward-looking estimates, but these didn't materialise," Mr Walters said.
The investment figures showed capital expenditure (capex) fell 1.2 per cent in inflation and seasonally adjusted terms in the December quarter of 2012, compared to market expectations of a 1.0 per cent rise.
Mining investment rose by 2.9 per cent and manufacturing fell by two per cent.
HSBC Australia chief economist Paul Bloxham said that, while the December quarter figures were weaker than expected, the forward spending estimates suggested investment in the mining sector was unlikely to drop off following its peak.
"The fear out there was that you might get a projection which suggested you were going to get a sharp drop off in investment once the mining story peaked, but these numbers suggest it is going to be more of a plateau than a peak," he said.
"I think its consistent with the idea that the RBA won't need to cut interest rates any further to achieve a rebalancing of the economy."
CommSec economist Savanth Sebastian said the investment pipeline was still strong despite the small fall in the final months of 2012 following a fall in commodity prices in the second half of the year.
"The resource boom may not be ending, but more businesses are re-assessing spending plans," he said.
"The tough trading conditions and uncertain global environment have affected business confidence and as such businesses are pushing back investment projects until the outlook improves."
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