Australia: Q1 capex weaker than expected but 2019-20 plans upgraded – ANZ

Catherine Birch, senior economist at ANZ, notes that Australian capex fell 1.7% q/q in Q1 following a downward-revised 1.3% q/q increase in the previous quarter.

Key Quotes

“Buildings and structures spending dropped by 2.8%, reversing the gain from Q4 2018, while machinery and equipment spending fell by 0.5%.”

“Capex plans for 2018-19 improved to AUD122bn in Q1 from AUD118bn in Q4.”

“Non-mining firms now plan to increase investment by 9.4% in 2018-19, up from the estimate of 7.8% in Q4, while mining firms downgraded the expected fall in investment to -7.8%.”

“For 2019-20, capex plans were upgraded to AUD99bn in Q1 from AUD92bn in Q4 2018. Despite the latest capex survey occurring during a period of weaker business conditions, as well as global and domestic uncertainty, businesses appeared to maintain their positive outlook.”

“Both non-mining (+9.2%) and mining firms (+21.0%) are planning stronger investment during 2019-20. The downward trend in oil and gas investment is likely close to its trough, as work on Ichthys and Prelude nears completion, while iron ore investment is gradually building.”