MNI 5 Things: Australia 2018-19 Capex View Less Than Expected

By Sophia Rodrigues

     SYDNEY (MNI) -  - Following are the five key observations we made from

Private New Capital Expenditure and Expected Expenditure data for the fourth

quarter released by the Australian Bureau of Statistics on Thursday:

     --Total Capex rose 0.4% q/q in Q1, close to MNI median forecast but less

than Bloomberg consensus for 1.0% increase. The rise was entirely due to a 1.2%

increase in mining capex which offset a 3.3% fall in manufacturing capex which

was the biggest drop since Q3 of 2016. Services capex slowed to +0.5% q/q from

+2.5%, marking the smallest pace of increase since Q3 of 2016.

     --Estimate two for 2018-19 capex came in at A$87.7 billion and was 5.7%

higher than estimate one but fell short of MNI median forecast for rise to

A$90.5 billion. The rise in estimate two was mostly on account of rise in

services capex (up 5.2%) with intentions for both building and structures, and

plant and machinery up.

     --Estimate six for 2017-18 capex came in at A$117.5 billion and was up 2.8%

versus estimate five, and in line with MNI median forecast for A$117.0 billion.

Again, the rise was mainly due to increase in services capex where the

intentions for plant and machinery rose 6.7%. 

     --Looking ahead, the rise in capex is expected to come mainly from increase

in plant and machinery capex, as estimate two for 2018-19 showed a 4.7% increase

in plant and machinery intentions. From next quarter ABS will include capex for

education and training, and healthcare and social assistance in the data. Given

there is a lot of investment going into these two sectors, the capex data might

show a lot of strength going forward.

     --Overall the capex data was on the weaker side both in terms of rise in Q1

capex and intentions for next year's capex. The only bright spot is a 2.5% q/q

rise in plant and machinery capex for Q1 which will feed directly into GDP data

due next week.

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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