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* Capital spending falls 4.2 pct in Q1, following 4.5 pct fall in Q4
* Second estimate for spending in 2014/15 lifts to A$137 bln from A$125 bln
* Encouraging detail in report boosts local dollar
By Ian Chua
SYDNEY, May 29 (Reuters) - Australian business investment fell again in the first quarter but spending plans for 2014/15 were revised higher, a positive for the economic outlook - a fillip for the local dollar.
Thursday's survey from the Australian Bureau of Statistics showed firms planned to spend A$137 billion ($126 billion) in the year to June 2015, more than the A$128 billion many analysts had hoped for, and ahead of the previous estimate of A$125 billion.
The main contributors to higher spending plans came from miners and some other selected industries, suggesting the shift to non-resources sectors is gaining traction while mining investment is not dropping off a cliff.
"The Reserve Bank of Australia (RBA) will likely be encouraged by these data as it suggests that non-mining investment has started to pick up and will assist the economy in transitioning away from mining-led growth," said Dylan Eades, economist at ANZ in Sydney.
The result should support the view that the RBA will keep its cash rate at a record low 2.5 percent for an extended period.
"RBA officials consistently have communicated that this rotation in investment in the wake of the peak in the mining capex boom was on track," JPMorgan chief economist Stephen Walters said.
"Now, they have decent evidence to support their contention, which had for a while sounded more hopeful than emphatic."
Investors cheered the data, driving the Australian dollar to a session high of $0.9273 after initially selling the currency in reaction to the disappointing headline figure.
Thursday's report showed capital expenditure fell 4.2 percent in the first quarter, worse than the 1.4 percent decline forecast. It also followed a downwardly revised 4.5 percent drop in the fourth quarter.
The pullback by miners was evident again as they cut spending on building and structures by 8.7 percent compared to the previous quarter. Spending on equipment, plant and machinery, however, rose 3.3 percent.
Annual capital expenditure of the mining sector now accounts for 60 percent of the country's total private sector capital spending compared with 20 percent just five years ago, so the scale-back by miners was always going to be felt.
Encouragingly, manufacturers and other selected industries spent more on equipment, plant and machinery in the first quarter, while other selected industries also lifted spending on buildings and structures.
All of which implied private investment will not be too negative for economic growth and suggested to some analysts only a small downside risk to first-quarter gross domestic product data due out on June 4.
Analysts had been looking a rise of 0.8 percent to 1.0 percent in GDP over the quarter, following a 0.8 percent increase in fourth-quarter 2013. ($1 = 1.0848 Australian Dollars) (Editing by Eric Meijer)