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Capex Set to Stall in 2024 – Westpac

Capex Set to Stall in 2024 – Westpac

(31 January 2024 – Australia) As elevated inflation and interest rates drag on consumer demand, businesses are being forced into a widescale reassessment of their capital expenditure (capex) and strategic resourcing plans.

There is evidence that a more cautious approach by businesses to hiring and investment emerged during the second half of 2023 as businesses respond to softer demand by adjusting hours worked rather than recalibrating full time employee (FTE) numbers. Westpac anticipates that it will be a key dynamic evident during 2024, particularly in H1 2024 prior to policy relief.

In each of the past four instances of flat household demand, businesses across the non-mining economy responded by reducing business investment. In this instance, Westpac predicts total business investment to stall.

“Our central case forecast is for business investment to stall in 2024. This is in response to and mirrors the already evident stalling of household demand” stated Westpac Senior Economist, Andrew Hanlan.

“It is apparent that the current economic downturn in 2023 is generally more pronounced in the non-mining states - which are feeling the impacts of higher interest rates more acutely. It is likely that any equipment spending cuts will be led by these regions.”

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