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Business Investment Remains Buoyant – ABS

Business Investment Remains Buoyant – ABS

(28 February 2023 – Australia) New private capital expenditure (capex) increased by over two percent to A$35 billion in Q4 2022 according to the latest Australian Bureau of Statistics (ABS) data, exceeding expectations.

The result follows a 0.6 percent slide in capex on equipment and other physical assets for Q3 2022. ANZ reported that capex plans for 2023-24 started at A$130 billion, an 11 percent year-on-year increase on the initial estimate for 2022/23. This signals that firms are still willing to take on risk and expand, even amidst expectations of slowing economic growth and squeezed household budgets. Elevated inflation plays into this, since the 11 percent YOY rise is importantly in spending, not volume of activity.

“Capex plans for 2022-23 were upgraded by 2.2 percent, against our forecasts of a downgrade” stated ANZ Senior Economist Adelaide Timbrell.

“The revised results for actual capital expenditure show that total capex in Q3 and Q4 is around halfway to the current estimate of A$159 billion for 2022-23 without seasonal adjustment and nominal terms. Q1 is generally a quieter period for activity though, given the holidays” Timbrell added.

"There was a relatively strong pipeline of work to be done over this period. The easing of supply bottlenecks facilitated a strong pick-up in activity over the second half of the year” commented BIS Oxford Economics Head of Macroeconomic Forecasting, Sean Langcake.

"Given the much higher cost base, it is hard to disentangle whether the strong figure represents an increase in firms' cost expectations, or a lift in the volume of work expected to be completed" he added.

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