"This data is so bad it would worry the RBA and now raises the risk they cut rates again ahead (but probably not until after second quarter CPI)"
- UBS
Dismal capex data raised concerns that Australia's transition from a mining-led economy offers nothing but hard landing, spurring bets the Reserve Bank of Australia may cut its official interest rate again soon. Capex is one of the most important figures for the interest rate outlook, with the central bank relying heavily on a growth in non-mining investment to offset the expected decline in mining investment currently underway.
According to the Australian Bureau of Statistics, March-quarter capex plunged 4.4% to $35.9 billion over the first three months of 2015 on a seasonally adjusted basis, and 5.3% on the year, reaching recessionary levels. Plant and equipment investment declined 0.5% in the March quarter while spending on buildings and structures plummeted 6.5%. The most important part of the report, 2015-2016 expected capital expenditure, came in at $104.033 billion, considerably below expectations for a figure above $110 billion. Initially, the first estimate had been reported at $109.799 billion. The capex data provided some discouraging news for the RBA, with the drop-off in mining investment steeper than already weak forecasts, manufacturing continuing to fall and the services sector faltering.
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