SYDNEY (Reuters) – Australian business investment rose to a seven-year high in the first quarter, helped by a jump in spending on mining, manufacturing and transport, while firms affirmed plans for solid spending in the year ahead.
Data from the Australian Bureau of Statistics on Thursday showed private capital spending climbed a real 2.4% in the first quarter from the previous quarter, compared with forecasts ranging from a rise of 1% to 1.9% from big Australian banks.
The A$36.1 billion ($24.5 billion) invested was the highest level since 2015’s December quarter.
Firms also boosted their combined spending plans for the year to June 2024 to A$137.6 billion, up 6.4% from an earlier estimate.
“Business investment may yet prove to be a bright spot in what looks set to be a gloomy Q1 GDP print,” said Sean Langcake, head of macroeconomic forecasting for Oxford Economics Australia.
“Although expectations for growth have generally weakened over the past three months, firms’ expectations for capex spending in FY24 remain healthy. However, this may be an acceptance of higher cost inflation, rather than an intention to make larger additions to the capital stock.”
First-quarter investment by Australia’s huge mining sector climbed 1.7%, accelerating from a rise of 0.7% in the previous quarter. Spending on new equipment and machinery rose 3.7%, marking the largest quarterly growth in two years.
The capital spending figures will feed into data on gross domestic product (GDP) due next week. Growth is expected to slow due to slowing consumer spending and high levels of imports.
Construction work done came in better-than-expected, although residential building remained soft, likely making a flat contribution to Q1 GDP growth.
The Reserve Bank of Australia (RBA) has hiked rates by a wallet-busting 375 basis points since May and is warning that more increases may be required to get a grip on inflation.
Markets wager the current cash rate of 3.85% is certain to reach 4.1% by August and there is a higher risk that the RBA could surprise with a quarter-point hike as soon as next week, after a hot inflation report for April.
($1 = 1.4743 Australian dollars)
(Reporting by Stella Qiu; Editing by Jacqueline Wong and Edwina Gibbs)