* 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 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
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
"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
"Now, they have decent evidence to support their contention,
which had for a while sounded more hopeful than emphatic."
ACTUAL SPENDING NOT TOO BAD FOR Q1 GDP
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)