Australia's private capex falls more than expected in Q2, but investment expectations jump

According to the Australian Bureau of Statistics, Australia's expenditure in Australia fell more than expected in the second quarter. Private capex fell 5.4 per cent quarter-on-quarter in the three months to June, weaker than the average of economists’ forecasts for a 4 per cent drop. March quarter’s contraction was revised to minus 5.4 per cent from an initial reading of minus 5.2 per cent.

Equipment spending rose by 2.8 percent, surprising to the high side while building & structures fell by 10.6 percent.  Spending on equipment, plant and machinery were however, down from their levels a year ago. Once again mining was the main drag, with new capital expenditure - or capex - down 16 percent over the quarter.

Investment expectations jumped to a solid $105 billion, up from $89 billion in the second reading three months ago. Despite the upward revision, it implies a roughly 10 percent decline in total capital expenditure from last year. Marked decline in investment spending, dominated by the deflating of the mining investment boom is likely the main cause.

"The final capex outcome for the 2015-16 financial year was revised up modestly but remained weak at -15.4 per cent, with last year defined by the move well and truly over the capex cliff," RBC chief economist Su-Lin Ong observed.

"For policy makers, this update suggests that the risks to their central case forecasts for business investment are now more evenly balanced rather than being skewed to the downside.” notes Westpac in a report.