DATAWATCH Australian capital expenditure boom may be ending - HSBC
Thursday, May 26, 2005 5:17:14 AM
afxpress.com
SYDNEY (AFX) - The boom in Australian business investment may be ending, HSBC Australia senior economist John Edwards said following the release of the Australian Bureau of Statistics' (ABS) capital expenditure survey for the first quarter
The survey showed a sharp fall of 3.8 pct in seasonally adjusted figures in capital expenditure in the final quarter of 2004, but also indicated the possibility of slow capital expenditure in the fiscal year to June 2006
Edwards said it may be merely a passing downturn in sentiment, but if the survey of business investment plans is right the boom is clearly ending
He said the 3.8 pct fall in business investment for the first quarter is not by itself that worrying since some of it comes from upward revision to the previous quarter
Edwards added that compared with the same quarter in 2004, business investment in the first quarter was up 15.6 pct
But, he said, business investment plans for 2005/6 reported to the ABS this month and last month fall short of expected spending for 2004/05
"Our rough calculation applying realization ratios to expected investment in both years shows a slight decline in nominal business investment next year compared to this year," Edwards said
He said this is a somewhat sharper growth downturn than is evident in the previous survey, adding that the ABS data show the actual level of spending declining from the current quarter onwards, with the sharpest decline in equipment, plant and machinery rather than building and structures
"The projected decline is concentrated in 'other selected industries', which is most of the private sector apart from mining and manufacturing," Edwards said
He said a projected decline in nominal spending does not sit well with the Australian government's forecast of a six pct increase in real business investment over the same period -- particularly since that forecast is heavily weighted towards plant and machinery investment
Edwards acknowledged survey numbers can change quickly and by large amounts, but said, if today's plans are implemented, Australian output growth over 2005/06 will depend even more heavily on a sharp increase in exports, and a slowdown in the rate of decline in housing construction
"Neither are yet convincingly evident," he said
Edwards suggested the business investment numbers will discourage the Reserve Bank of Australia (RBA) from contemplating further tightening when its board meets on June 7 to mull over monetary policy
Any decision to change the central bank's official cash rate from 5.50 pct will be announced the following day
This month the RBA left the rate unchanged for the second consecutive month and following a 25 basis points rise in March -- the first rate increase since December 2003
The central bank is maintaining a tightening bias but has acknowledged that its March rate rise and other factors may have helped to dampen domestic demand and lessen inflationary pressures |
