Australia: All eyes on private business capex data - Westpac

Research Team at Westpac, notes that the Australia’s private business capex is falling as the mining boom shifts from the investment phase to the production stage.

Key Quotes

“Capex spend is set to moderate further in the June quarter, down a forecast 5%, after a 5.2% decline in Q1. That would hold the annual change weaken to –16% from –15.4%.

Building & structures, the majority of which is work on infrastructure projects, fell 7.9% in Q1 and appears likely to retreat at a similar rate in Q2, a f/c –8%.

Equipment spending prospects are more difficult to gauge. We anticipate a flat result, with a potential gain in the service sectors to offset weakness in mining. Although, there are risks to the downside, with businesses potentially delaying spending due to Federal election uncertainty.

Private capex expectations

• Business capex plans are understandably weak as mining investment deflates following the boom and with the service sectors yet to commit to a sustained lift in spending.
• The June survey, which was conducted in July and August, will include Estimate 3 of plans for 2016/17. This will be weak, very weak, centred on mining. A figure in line with that of Est 2 would not surprise. Est 2 was 14.6% below Est 2 a year ago, a fall of $15.3bn. Notably, mining is down 32%, -$17bn, more than fully accounting for weakness in aggregate capex plans.
• On non-mining plans for 2016/17, the survey provides mixed messages. The Est 2 on Est 2 comparison is a rise of 3.5%, but applying average 5yr realisation ratios points to a fall of 6%.”