- Su-Lin Ong, RBC Capital Markets head of economics
The Australian economy is gradually moving away from its dependence on mining investment, albeit slower than expected. According to the Australian Bureau of Statistics, business investment increased 1.1% to $37.6 billion in the second quarter, mostly driven by services companies, overshooting economists' expectations for a 0.9% decline. The rise also showed a solid recovery from an upwardly revised drop of 2.5% in the three months through March, it was originally reported as a 4.2% slide. The rise was driven by a 2% increase in spending on buildings and structures to $25.3 billion, mostly led by the services sector, as mining investment continues to fade. All-important investment in equipment, plant and machinery fell as much as 0.9% quarter-on-quarter, to $12.4 billion, and 10.1% on an annual basis. This figure is the only component of capital expenditure that contributes directly into second-quarter GDP data. The final estimate for capex over the 2013-2014 financial year is $157.9 billion, down 1.7% compared to the level spent in 2012-2013. During the 2014-15 financial year, businesses expect to invest $145.16 billion, which is 10.2% lower than the corresponding figure made at the same time last year.
In the meantime, the Reserve Bank of Australia has warned against new policies that may encourage increased supply of mortgage finance in Australia, noting they could have implications for systemic risk.
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