Opening wallets again

billion on buildings, equipment and machinery during the quarter, up 0.3 per cent on the December period but down 9.3 per cent on the same time a year earlier.

Economists had been looking for a jump of 0.5 per cent for the quarter.

It puts the nation on track for an outlay of $112.63 billion this financial year, which would be the lowest annual sum in more than a decade.

But signs are mounting that Australia’s services sector, which accounts for more than 70 per cent of the economy, is ready to step up to the plate. Latest estimates have the category known as “other industries” – a basket that includes retail, transport, utilities and construction – on track to spend $67.3 billion in the year to June, a decade-high tally.

The switch in spending from miners to the rest of the economy – the long-awaited “baton change” – is projected to accelerate next financial year, with spending intentions across industries excluding mining and manufacturing already tracking 6.2 per cent higher than at the same time a year ago.

With construction complete at many of Australia’s major LNG projects, miners unsurprisingly had little need to extend the investment boom that sustained the economy through the financial crisis; capex levels across the sector have fallen nearly 30 per cent so far this year.

But analysis from the RBA suggests the economy has endured 90 per cent of the mining downturn, meaning 201718 will be the final year overshadowed by the pullback.

Coupled with news of a larger-than-expected rise in retail spending in April, the result sparked a brief spike in the Australian dollar, which rallied as high as US74.55¢ before retreating below US74¢.

Capital Economics chief Australia economist Paul Dales said the quarterly rise in capex ought to be “welcomed with open arms” despite undershooting expectations.

“At least the size of the falls (in capex) is diminishing and the drag on overall gross domestic product growth from business investment is fading,” Mr Dales said.

The leap in retail sales – up 1 per cent in April – overstated the health of households, he said, given that Cyclone Debbie forced some retailers to close their doors in March.