Australia: Business investment uneven uptrend - Westpac
In the year to June, investment increased by 1.5%, a sharp turnaround from the prior year’s 10.3% decline and the first positive annual result since March 2013 for Australian economy, points out the research team at Westpac.
“Industry detail is encouraging. Comparing investment in the three years to 2016/17 with the three years to 2013/14 indicates a broad based improvement across all industries except for Transport which is still being affected by mining.”
“However, turning the focus to investment by asset class reveals an uneven recovery. Investment strength is centred on a rebound in construction activity and a long steady rise in computer software. As well as some further upside to infrastructure activity, non–residential building is set for an upward leg, led by office projects, followed by a likely consolidation. Concerning is the lack of strength in equipment spending, which has moved broadly sideways in dollar terms since the GFC. Lacklustre consumer spending is an issue here.”
“In summary, we expect the investment recovery to remain uneven, reflective of the uneven nature of the broader economic expansion, with the household sector the key source of weakness. If so, it is unlikely that the non–mining business investment cycle surprises materially to the upside.”