The slowdown in Australia's capex cycle has extended into 2025, with a weak report for the March quarter coming amid a backdrop of soft demand conditions and rising uncertainty on the eve of the announcement of trade tariffs by the US administration. Capex declined slightly by 0.1% in the March quarter, defying expectations for a 0.5% increase while year-ahead spending plans were upgraded modestly to $156bn.
Today's capex survey provides a partial read on business investment ahead of next week's quarterly economic growth figures. Business investment supported growth from 2023 onwards but faded over the back half of last year. This looks to have continued in early 2025.
Capex declined by 0.1% in the March quarter, contracting by 0.5% through the year. Offsetting movements were seen in both major segments: equipment investment (-1.3%) saw its largest decline since the pandemic while the buildings and structures component advanced (1.9%), broadly consistent with yesterday's construction work report (see here). Weakness in the non-mining sector (-0.9%) drove the overall decline in capex but was moderated by a rise (1.9%) in investment in the mining sector.
In the non-mining sector, capex declined (-0.9%) due to a 2% fall in equipment investment, its weakest quarter since Q2 2020. Buildings and structures rose by a modest 0.4%. Over the year to Q1, non-mining capex contracted by 1.6%, swinging from a 7.6% pace 12 months ago.
A 1.9% rise in mining sector capex was its strongest quarterly gain since Q3 2023. The level of capex investment made by the sector has remained fairly stable over the past couple of years. Both components rose: equipment up by 2.4% and buildings and structures lifting by 1.7%.
Today's survey included firms' 6th estimate of capex plans for the current financial year, as well as their 2nd estimates of year-ahead plans for 2025/26. Estimate 6 was upgraded by 2.2% to $187.6bn, an increase in line with historical revisions. That upgrade was driven entirely by the non-mining sector (+3.3% to $132.9bn). This estimate puts capex on track to rise by 3.6% on the previous financial year.
Firms were also surveyed for their 2nd estimates of capex spending in 2025/26. From an initial estimate of $147.6bn, capex plans rose to $155.9bn for estimate 2 - an upgrade of 5.6% but only 0.7% above where estimate 2 for 2024/25 came in. In a historical context, these are very minor upgrades for this stage of the estimates cycle, pointing to cautious firms amid the uncertain outlook. Mining sector plans were raised by 6% to $49.6bn and the non-mining sector saw a 5.4% upgrade to $106.3bn.
