RBA Ellis: Public Investment Helping Pvt Non-Mining Investment

By Sophia Rodrigues

     SYDNEY (MNI) - There is a great deal of investment occurring in the

Australian economy at the moment, with growth in public sector investment

helping to stimulate a pickup in non-mining business investment, Reserve Bank of

Australia Assistant Governor Luci Ellis said Tuesday.

     Ellis was speaking at a panel discussion at an investment conference

organized by Citigroup in Sydney.

     The June quarter national accounts data show non-mining business investment

is picking up, Ellis said, adding, there is lot of synergy between the public

infrastructure investment pickup and non-mining private sector investment.

     "Lot of infrastructure is build by private firms on behalf of the

government, Ellis noted.

     The minutes of the RBA's October board meeting, published earlier Tuesday,

contained considerable discussion of public demand in the economy.

     "Public consumption had increased solidly and new public investment had

risen very strongly across most states. This recent strength had been supported

by a number of large infrastructure projects, especially related to the

construction of roads and railways," the RBA minutes said.

     On the question of whether Australia will be able to attract foreign

capital, Ellis said that the exchange rate will fall if investors are not able

to attract capital at the prevailing exchange rate.

     Ellis was asked a question on the energy sustainability and availability in

Australia -- which has been a key topic of discussion in recent months due to

concerns about rising costs -- and at what point it would affect the RBA's

growth projections.

     Ellis said the RBA has a reasonably good feel on how rising electricity

costs will impact headline inflation in the third quarter but has less clarity

on how it will affect investment decisions.

     This is the reason the RBA is engaging very intensively with its liaison

partners. The RBA is aware that electricity costs may not be a significant

proportion of a firms' overall costs but it may have a greater impact on

margins.

     At this point the RBA doesn't think it will impact its growth projections,

Ellis said, but the central bank is alert to the risk that this could have

"significant impact."

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

[TOPICS: MMLRB$,M$A$$$,M$L$$$,MT$$$$]