CAPEX falls against expectations in December

By a staff reporter, with AAP

New private capital expenditure fell against expectations of a rise in the December quarter, according to data from the Australian Bureau of Statistics (ABS), suggesting the mining investment boom might peak later than expected.

According to the ABS, CAPEX fell 1.2 per cent, seasonally adjusted, to $40.988 billion in the quarter.

The median market forecast was for a rise of 1.1 per cent.

Private capital expenditure is now 10 per cent higher than it was in the previous December quarter.

The first estimate for 2013/14 is $152.494 billion, which is 8.1 per cent lower than the first estimate for 2012/13.

The fifth estimate of expenditure for 2012/13 was $168.235 billion, which is 4.0 per cent higher than the fifth estimate for 2011/12, the Australian Bureau of Statistics (ABS) said.

Estimates are gathered in a series of seven quarterly surveys, the first in January and February before the start of the financial year in July, and the seventh immediately after the financial year ends.

The figures for expected capital spending in the 2013/14 financial year indicate the mining investment boom will peak later than expected.

Westpac Banking Corporation expects the Reserve Bank of Australia will not cut the official cash rate at next week's policy meeting, in the wake of the weaker than expected data.

JP Morgan Australia chief economist Stephen Walters said mining investment would peak in 2013, it's just a matter of the precise timing.

"The figures show that the peak in mining investment is not rushing towards us," he said.

"Mining plans to spend $100 billion in the year ended June 2014, slightly less than in the year ended June 2013, but this is broadly in line with what RBA (Reserve Bank of Australia) officials have been telling us," he said.

The first estimate of expected capital expenditure for 2013/14 is 8.1 per cent lower than the first estimate for the previous year, but businesses at this early stage are still expected to spend a whopping $152 billion.

Mr Walters said this estimate was higher than the $145 billion JP Morgan had forecast.

He said the investment figures won't trigger a cash rate cut by the RBA at its board meeting on Tuesday.

"Those in the market who were calling for a cut next week probably were hoping for very weak forward-looking estimates, but these didn't materialise," Mr Walters said.

HSBC Australia chief economist Paul Bloxham said that, while the December quarter figures were weaker than expected, the forward spending estimates suggested investment in the mining sector was unlikely to drop off following their peak.

"The fear out there was that you might get a projection which suggested you were going to get a sharp drop off in investment once the mining story peaked but these numbers suggest it is going to be more of a plateau than a peak," he said.

He said the figures meant the RBA was less likely to cut the cash rate below its current level of three per cent in 2013.

"I think its consistent with the idea that the RBA won't need to cut interest rates any further to achieve a rebalancing of the economy," he said.

"The RBA has time on their side, there's already a good deal of stimulus in the pipeline and investment is not about to drop off a cliff."

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