MNI Australia 2017-18 Capex Outlook In Line With RBA Forecast

--Q3 Capex Also Higher Than Expected

     SYDNEY (MNI) -  - From Private New Capital Expenditure and Expected

Expenditure data for the third quarter released by the Australian Bureau of

Statistics on Thursday:

                                       Q3  2017-18 Estimate 4

-------------------------------------------------------------

                             % Change Q/Q          In A$, Bln

Total                                +1.0               108.9

MNI Median                           +0.8               106.0

Range                      (-5.5 to +2.0)    (104.0 to 110.0)

Mining                                0.0                33.4

Manufacturing                        -2.7                 9.0

Other Industries                     +2.1                66.5

Buildings and Structures             +1.2                65.4

Equipment,Plant,Machinery            +0.7                43.6

     FACTORS: Total capital expenditure rose in the third quarter for the third

straight quarter, as an increase in the services sector offset a fall in

manufacturing. Significantly, mining capex was flat q/q after several quarters

of decline. Services capex has been an outperformer in recent quarters, rising

for four straight quarters, while manufacturing fell for the first time in four

quarters.

     Estimate four for 2017-18 capex was somewhat higher than expected due

mainly to a 8.3% jump in services capex and a 6.7% rise in manufacturing capex.

Mining capex estimate also rose but by a very modest 0.5%. 

     TAKEAWAY: The estimate four for 2017-18 capex was within the range

predicted by economists in an MNI survey. Overall, the data are in line with the

Reserve Bank of Australia's projection that non-mining investment will continue

increasing. 

     The RBA has flagged the possibility of upside risk from non-mining

investment, so other indicators of business investment will be important ones to

watch in the months ahead for signs that investment is accelerating.

     In the November policy statement the RBA said "there is a risk that

investment will pick up by more than is forecast, although leading indicators

currently do not suggest that this is likely in the near term. One area of

uncertainty relates to government infrastructure spending. Public investment

growth is forecast to continue and much of this work has been done by the

private sector for the public sector, which has supported business conditions

over the past year or so."

     "More recently, liaison contacts have reported that contracts to complete

public infrastructure works have begun to support their own private investment

in machinery and equipment. It is therefore possible that this infrastructure

work generates larger flow-on effects and boosts private business investment by

more than currently thought," the RBA said.

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

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