Australia: Government spending to boost economy - AmpGFX

The RBA minutes from the 4 July policy meeting acknowledged for the first time the boost in demand from increased government spending on infrastructure, notes Greg Gibbs, Analyst at Amplifying Global FX Capital. 

Key Quotes

“It said, “The most recent Australian and state government budgets suggested that fiscal policy would be more expansionary in 2017/18 than had previously been expected. Some of this expansion was expected to come from more spending on public infrastructure, particularly in New South Wales. Reflecting this, work yet to be done on public infrastructure had increased in recent quarters to a relatively high share of GDP. Members noted that infrastructure investment was expected to have significant positive spillovers to other parts of the economy. Non-residential building approvals had also risen in recent months.”

“The government is already delivering on higher capital investment.  In Q1 real Public Gross Fixed Capital Formation was up by 15.3%y/y, rising from relatively flat growth a year earlier (contributing around 0.75% to overall GDP growth).  With the decline in investment from the mining sector largely complete, and expected improvement in non-mining private investment, the lift in government spending will help lift total economy investment in coming years.  However, residential investment that has helped sustain the overall economy through the mining investment downturn is peaking.”