Australian private sector capital expenditure increased modestly by 0.8% in the December quarter. Capex has risen strongly through the past year or so; however, the momentum has started to fade. Forward-looking investment plans were upgraded in this survey and generally remain upbeat amid an outlook for slower growth.
Private sector capex - a partial indicator of business investment that feeds through to the National Accounts - lifted by 0.8% in the December quarter, coming in above the consensus estimate (0.4%). The capex cycle has been in an upturn since mid 2022, but some of this momentum faded over the back half of 2023.
Capex advanced by a sharp 6.8% in the first half of 2023 before easing to a 1.1% pace for the back half. This dynamic was evident in both major segments: buildings and structures 1.6% (2nd half) from 7.5% (1st half) and equipment 0.5% from 5.9%. The withdrawal of pandemic-related tax incentives at the end of the 22/23 financial year partly drove this slowdown, after capex - particularly on equipment - was frontloaded into the first half. Meanwhile, the profile around buildings and structures is consistent with the picture painted in yesterday's construction activity data for Q4.
By sector, capex in the non-mining sector lifted by 0.6% in Q4, to be down by 1% for the second half of the year. But this was more than offset by a lift in mining sector capex, up by 1.1% quarter-on-quarter and 6.7% in the second half. This brought mining sector capex to its highest level since mid-2016. Non-mining capex sits near record highs.
Today's report also included firms' updated estimates of spending plans. The 5th estimate for capex in 2023/24 was nominated at $177.7bn, a rise of 4% on the previous estimate put forward 3 months ago and up 12.2% on a year-to-year basis. Within this figure, non-mining investment plans were revised up by 4.3% to $125.4bn (+12.6% year-to-year) and mining sector plans were raised by 3.2% to $52.3bn (+11.3% year-to-year).
Firms also put forward an initial estimate of capex plans for the 2024/25 financial year. This was put at a notional $145.6bn, the highest 1st estimate in 11 years and up 12.6% on estimate 1 for 2023/24. Non-mining plans were projected at $100.9bn (+15.1% year-to-year) and mining plans came in at $44.8bn (+7.3% year-to-year).
