Data Snapshot - Private Capital Expenditure - ‘23/24 Small Upgrade Despite Challenges

 

• Capex spending rose 0.8% in the December quarter, to be 7.9% higher over calendar year 2023. In level terms, the volume of capex spending rose to its highest in eight years.
• Private business capex spending, while still expanding over the second half of 2023, is transitioning from a period of strength.
• After growing at a robust pace of 3.3% in both the March and June quarters, spending slowed to 0.3% and 0.8% in the September and December quarters, respectively. This coincided with the material slowdown in economic growth as rapid rate hikes from the Reserve Bank (RBA) worked their way through the economy.
• Estimate 5 for spending plans (adjusted for historical bias) suggests that capex will rise 10% in 2023-24. This is a modest upgrade from the 8.7% estimate in the previous quarter. Estimate 1 (which tends to be unreliable) for 2024-25 suggests slower growth of 6.8%.
• Calendar 2024 is likely to be a year of two halves. Economic growth is slowing, led by weak consumer spending. On the other hand, capacity utilisation and the infrastructure pipeline remain robust, the population continues to grow rapidly, and disinflation is underway.
• The drag from higher rates is likely to weigh on capex spending in the near term. However, as inflation continues to moderate, we expect the RBA to be able to cut rates from September. Additionally, household income will receive a boost from tax cuts from July and a return to positive real income growth. These factors will support the economy and business investment in the second half of 2024 and into 2025.

 

Please refer to the attached report for more information.

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