Australian private sector capital expenditure (capex) slipped 0.2% in the December quarter, a weak outcome against modest expectations (0.5%). Capex spending plateaued over 2024, reflected in year-ended growth slowing to 0.6% from a 7.9% pace a year earlier. Firms' latest estimates for capex spending were upgraded to $183bn in the current financial year.
The capex report provides insights into business investment by Australian firms, which feeds into the quarterly GDP growth figures (to be published next week). Based on today's report and yesterday's figures on construction activity, business investment looks likely to have again weighed on economic growth following a 0.2% contraction in Q3.
In the December quarter, capex (in chain volume or inflation-adjusted terms) declined by 0.2%. This was the second decline in the past 4 quarters but comes after a 1.6% rise in the September quarter (revised up from 1.1% in today release). After rising strongly coming out of the pandemic, capex has largely plateaued increasing by 0.6% over the past year.
The decline in the latest quarter was driven by a 0.8% fall in equipment, plant and machinery investment (2.4%Y/Y), the construction industry (-8.1%q/q) a key contributor after an earlier run-up in vehicle spending on light trucks and utes. Buildings and structures increased by 0.2% in the quarter (-1.0%Y/Y).
Non-mining sector capex was down 0.1% in the quarter, with a 1.1% rise in the buildings and structures component offset by a 1% decline in equipment investment. Capex spending by the sector has risen by 35% from its lows reached during the pandemic, with investment in data centres and renewable energy projects picking up.
In the mining sector, capex declined modestly by 0.6% in the quarter following a 1.6% decline in Q3. A 1.1% fall in buildings and structures was partially moderated by a 0.6% rise in the equipment segment. Quarterly capex has remained in the $12-13bn range over the past couple of years, proving to be relatively stable amid swing in commodity prices through that period.
In today's report, firms submitted their 5th estimates of capex plans for the current financial year. The figure put forward was $183bn, up 3.2% on estimate 4 and 4.1% above estimate 5 for 2023/24 - both fairly modest upgrades. Plans in the non-mining sector came in at $129bn, on track for 3.9% rise compared to the previous financial year; while mining sector plans rose to $55bn, pointing to a 4.8% year-to-year rise.
In other news, the first estimate of capex plans in 2025/26 came in at $148bn, its highest since 2013/14 but only a modest 1.8% above estimate 1 for 2024/25. Non-mining sector capex was estimated at $101bn and $47bn in the mining sector.
