New investment intentions figures point to a shocking financial year ahead with mining investment down 22 per cent, manufacturing investment flat, and other investment down 16 per cent.
The Bureau of Statistics figures, collected from the chief financial officers of the major companies, are bleaker than the soundings of the Reserve Bank board which in its last minutes pointed to “signs that non-mining business investment was rising in some parts of the economy”.
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WA to blame for money woes
WA is crying poor with a low share of the GST but as The Age’s Economics Editor Peter Martin explains, the State needs to take responsibility for the situation.
They are also much bleaker than those of the federal Treasury, which in the May budget forecast a drop in total investment of just 5 per cent in 2016-17.
The ABS figures point to an overall drop in investment of 17 per cent, from $127.5 billion in 2015-16 to just $105.2 billion in 2016-17. They would make 2016-17 the worst year for business investment since 2010-11.
As is traditional, the June quarter estimates for the financial year ahead were higher than the March and September quarter estimates.
Actual investment slipped 5.4 per cent in the three months to June, to be down 17.4 per cent over the year and down 29 per cent from the peak in December 2012. Mining investment slid 36 per cent over the year and 16 per cent over the quarter. Non-mining investment was flat over the year and up 2.1 per cent over the quarter.
Western Australia accounted for the bulk of the slide over the past year, investing just $8.6 billion in the June quarter of 2016, down from $13 billion a year before. Investment in NSW climbed from $7 billion to $7.6 billion. Investment in Victoria remained steady at $4.8 billion.
Commsec chief economist Craig James said the weak figures meant the Reserve Bank might well cut interest rates again, at its Melbourne Cup Day board meeting in November.
“The question is whether it will do any good,” he said. “Certainly retailers believe that cuts have lost their potency.”
The figures will weigh on the June quarter economic growth number due out next Wednesday with many analysts forecasting quarterly growth of just 0.3 per cent, down from an unusually high 1.1 per cent in the March quarter.
Separate Reserve Bank figures released on Thursday may lend support to investment. Its index of commodity prices climbed a further 1.5 per cent in August after climbing 3.9 per cent in July. It has been climbing since May.