Capital expenditure realisation ratios on the rise

In addition to the monthly business confidence indicators, the ABS’ Capital Expenditure (CAPEX) survey provides a forward-looking view of firms’ investment intentions over the next financial year. It is usual for firms to underestimate their spending intentions, but this tendency has increased in recent years. Actual capital expenditure in FY18 was over 45% higher than firms’ initial estimates.

We are forecasting an improvement in domestic demand conditions, which should result in further increases in business investment as firms seek to keep up with demand and avoid capacity constraints. Based on the positive early estimate from the CAPEX survey for FY 19, we are forecasting business investment to grow by 1% this financial year, and within this for non-mining business investment to rise 6.6%.

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