Australia's capex upswing took a step back in the June quarter, though forward-looking investment plans indicate the data centre build out will keep the cycle rolling. Capex was down 3.6% for the quarter, slowing more than expected (0%) from the 6.9% acceleration in the March quarter. A pullback in equipment-related investment (-11.3%) will weigh on quarterly GDP, but that should prove a temporary headwind to business investment as a growth driver. Firms' 3rd estimate of capex plans in 2026/27 rose above $200bn following an uplift of 15.5% to the previous estimate.
The 3.6% decline in private sector capex was a downside surprise and its largest fall since the pandemic; however, the result is more a reflection of its recent strength rather than outright weakness. Capex was coming off its largest rise in 14 years after surging 6.9% in the March quarter (revised up from 6.5%) driven by the tech-related investment boom in data centres. Even after this decline, capex still rose by 10.7% over the year to the June quarter.
Equipment investment pulled back by 8.9% in the latest quarter following an increase of more than 18% in the March quarter. The data centre build out is equipment intensive, particularly relating to the fit out of these facilities, and this has underpinned the upswing in capex over the past year. Equipment investment is up 18.7% over the year. Buildings and structures lifted 2.1% in the June quarter to be up 3.8% year-on-year.
Non-mining sector capex unwound by 5.3% in the quarter, outweighing a 1.6% rise from the mining sector. While equipment investment in the non-mining sector declined by 11.3%, buildings and structures rose 3.3%. In the mining sector, buildings and structures were flat (-0.1%) but equipment increased 5.4%.
The data centre build out is largely playing out in the information media and telecommunications industry. Capex in the industry has nearly trebled over the past couple of years, reflecting both the construction of data centres as well as the fit out. In the latest quarter, investment in equipment fell 53% (after rising 200% in Q1), while buildings and structures rose 17.7%.
Firms' investment plans for the 2026/27 financial year rose to $200.7bn, with the 3rd estimate increasing by 15.5% on estimate 2 put forward three months ago ($173.7bn). For context, that is a little stronger than the average uplift from estimate 2 to 3 seen over the past 10 years of 13.5%. On a year-to-year basis, investment plans increased 14.8%.
Non-mining sector capex is on track to increase to $144.3bn, an uplift of 17.7% on the prior estimate. Within that, there were large increases to forecast spending on equipment (+16.9% to $68.9bn) and buildings and structures (+18.4% to $75.4bn). Capex in the mining sector is tipped to rise to $56.4bn, an upward revision 10.3%.
