Australian private sector capital expenditure increased by 1% in the March quarter, outperforming the 0.7% rise expected by markets. A strong rise in equipment investment (3.3%) drove capex higher through the first 3 months of 2024, providing a welcome boost to GDP estimates amid weak details around the consumer and the construction sector. Forward-looking investment plans were revised upwards in both the current financial year (to $181bn) and 2024/25 (to $155bn), the projected spend for the latter advancing to an 11-year high.
Private sector capex - an indicator of business investment that feeds into GDP growth calculations - rose solidly by 1% in chain volume (or inflation-adjusted) terms in the March quarter. Year-ended growth slowed from 8.1% to 5.5% - capex spending was brought forward into the first half of last year ahead of the withdrawal of Covid-related tax incentives - so this is still a decent pace in that context. In the most recent quarter, equipment investment lifted by 3.3% to comfortably offset a 0.9% drag from spending on buildings and structures.
Equipment investment in the non-mining sector lifted by 4.6%q/q - its strongest rise in 3 years - driving the overall increase in equipment spending. The ABS noted in today's release that this was supported by an expansion of investment in data centres by firms in the information media and telecommunications industries. Mining-related equipment investment declined 3.2%q/q.
The details around buildings and structures investment included a 1.9% rise in the non-mining sector but a 5.2% fall in the mining sector. Overall, this netted out to a 0.9% decline for buildings and structures, an outcome against the recent strength in this component, largely consistent with the picture painted by yesterday's construction activity data (see here).
Today's report contained firms' latest estimates of their capex plans in 2023/24 and 2024/25. For the current financial year, total investment was lifted to an expected spend (in nominal terms) of $181bn for estimate 6, an upgrade of 2.5% on the previous estimate from 3 months ago and tracking 11% higher on a year-to-year basis (relative to estimate 6 in 2022/23).
Firms were also surveyed for their 2nd estimates of planned capex spending in 2024/25. The headline figure was $155bn, a 6.8% lift on estimate 1 from 3 months ago and 12.8% higher than estimate 2 for 2023/24. Inflationary effects are a factor in those upward revisions but this was nonetheless the highest estimate since 2013/14.
Non-mining sector investment plans for 2024/25 increased by 6.8% (vs est 1) to $107bn, with upgrades coming through for both equipment (6.9% to $48bn) and buildings and structures (6.7% to $59bn). Meanwhile, mining sector plans advanced 7% to $48bn, with equipment spending projections rising 7.5% (to $13bn) and buildings and structures up 6.8% (to $35bn).
