-Daniel Been, ANZ Banking
New private capital expenditure in Australia fell more than analysts predicted in the December quarter, weighed down by reduced spending on buildings and structures, raising likelihood for another rate cut from the Reserve Bank of Australia. Private capital expenditure dropped a seasonally-adjusted 2.2% in the final quarter after increasing a revised 0.6% previously, the Australian Bureau of Statistics reported, coming in weaker than the market expectation for a 1.7% slide in investment. Measured on an annual basis, private investment declined 3.6%. Moreover, it is estimated that investment spending would fall by 12.5% to A$109.7 billion in 2015-2016. Meanwhile, capital spending by companies declined 2.2% in the December quarter, against economists' expectations for a 1.6% fall.
The weaker than expected data on capital expenditure followed data this week, which showed annual wage growth has declined to the lowest level in 17 years of 2.5%. Business investment remains sluggish, while consumer and business confidence falls amid below-trend growth of the Australian economy. The data adds to the likelihood of another interest rate cut at the next week's RBA meeting. In February, the central bank slashed the benchmark interest rate down to 2.25% from 2.5%, and it is expected to bring the OCR to 2.0%.
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