Australia released its business capital expenditure (CAPEX) report Thursday and it wasn’t promising.
Capital expenditure for 2015/16, the most important item in the report, is predicted to come in at $104.033, a figure well below the anticipated $110 billion.
The second estimate for expenditure in the 2014/15 fiscal year which came in just over a year ago was $138.060 billion. The $104.033 billion figure for the upcoming financial year represents a drop of $34 billion, or 24.7%, indicating no economic rebalancing has taken place.
With regard to the mining sector, the second estimate came in at $52.192 billion, below the first estimate of $53.82 billion and well below, 56.2%, the second estimate offered back in 2012/13 during the height of the country’s mining boom. In other words, the mining industry has been cut in half in the last two years.
RBA
The Royal Bank of Australia was hoping to offset the drop in the mining sector with more spending in manufacturing and in the services that accompany it but the figures there were also below that of last year. The second estimate showed manufacturing slipping 13.3 per cent below a year ago and other industries coming in 10 per cent lower than 2014/15, albeit 6.6 per cent above the first estimate.
This contraction in expenditure is problem not only for the RBA but for the overall outlook for Australian economic growth and analysts believe that Aussies will have to double up on their current consumption in order to meet the already low GDP growth forecasts.