Australian business investment was significantly stronger than expected in the September quarter. Capital expenditure accelerated by 6.4% (in chain volume or real terms) to its highest level since early 2015 as firms ramped up investment in data centres and on aircraft. A modest 0.5% rise was all that was expected, after capex firmed 0.4% in the June quarter. Forward-looking investment plans for the 2025/26 financial year were upgraded sharply to $191bn in the latest estimate, an outcome at the top of the range of expectations.
Capex by private sector firms advanced by 6.4% in the September quarter, its fastest quarterly rise since Q1 2012. That drove capex spending in the quarter ($49bn) to its highest level going back to the March quarter in 2015. Annual growth rose from 1.8% to 6.9%.
Equipment and machinery surged at its fastest pace in more than 20 years (11.5%) backed by investment in data centres and aircraft. Meanwhile, buildings and structures lifted by 2.1%, driven by the non-mining sector (3.6%).
At the forefront of the technology-driven investment surge has been the information media and telecommunications industry (40.7%q/q). Capex by the industry is up 70% over the year to the September quarter, and equipment investment has risen by nearly 150%.
The other industries of note in Q3 ware transport, postal and warehousing (23.4%) on the back of aircraft purchases, and accommodation and food services (16%) driven by investment in facilities.
Today's report also included firms' 4th estimates of expected capex in the current financial year, ending 30 June 2026. The aggregate figure put forward was $191bn. This was 9.4% above estimate 3 submitted in August and 7.6% above estimate 4 for the previous financial year.
My expectations going into the report were for a figure of between $187-191bn, so the latest estimate is robust, especially given the prevailing economic and policy uncertainties often highlighted by firms in surveys. Non-mining investment is now anticipated to come in at $137bn, a 12.1% upgrade on estimate 3, while mining investment was raised by a modest 3.3% to $55bn.
