Business spending on rebound

AUSTRALIAN business investment has lifted for the second straight quarter, prompting some economists to upgrade economic growth forecasts.

Investment in capital goods rose 0.8 per cent to $28.3 billion in the June quarter, beating market expectations of a 0.2 per cent rise, figures from the Australian Bureau of Statistics showed. That follows a revised 0.9 per cent increase in the March quarter, and declines in investment in the preceding four quarters.

The June quarter’s gain in capital expenditure was driven by a 2.7 per cent increase in plant and equipment spending, which more than offset a decline of 0.6 per cent in building and structures.

Non-mining sectors of the economy accounted for the increases, with manufacturing up 1.4 per cent and services improving 2.8 per cent.

Mining investment slipped 2.8 per cent, but RBC Capital Markets senior economist SuLin Ong said the mining capex downturn is drawing to a close.

Businesses now expect to invest $101.8 billion during the 2017/18 financial year, which is 3.6 per cent lower than the corresponding estimate last year, but almost 18 per cent higher than the estimate from three months ago.

The rebound in investment intentions will provide some reassurance to the Reserve Bank of Australia that its growth forecasts are on track, economists said.