Biggest lift in investment plans in almost a decade: CommSec's Craig James

Best lift in spending plans in nine years: The sixth estimate for investment in 2015/16 is $126.82 billion, up 2.9 percent on the fifth estimate (December quarter) and the biggest upward revision in almost a decade.

Sectors:
The unwinding of the mining construction boom is proceeding to plan. New investment in the mining sector is continuing to ease as the sector moves from the construction phase to production. Essentially new production capacity had to be put in place.
That has happened, and now businesses are going about the job of shipping higher volumes of iron ore, coal, gold and gas to other parts of the world.
Investment outside mining and manufacturing continues to lift although it is by no means going gangbusters. Over the past six months, investment outside of mining and manufacturing has lifted by over seven per cent. As the Reserve Bank Governor noted this week, what is required in Australia is more innovation and risk taking.
The encouraging aspect of the latest investment report is the upgrade to spending plans. Investment plans for the current year were revised up when they are usually revised down at this time of the year.
And the near 3 per cent upgrade in the quarter was the best in almost a decade. At the same time the coming year’s investments plans were lifted by more than 6 percent.
You would expect that the budget measures for small and medium-sized businesses will further lift investment plans in the coming year.
Investment in Queensland continues to slump, hitting 6- year lows. By contrast NSW investment is at 4-year highs.
What do the figures show?
Private business investmentOverall: New business spending on buildings and equipment fell by 5.2 percent in the March quarter after an upwardly-revised 1.8 percent lift in the December quarter.
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“Private New Capital Expenditure and Expected Expenditure” is released quarterly by the Bureau of Statistics. The figures show both actual and expected spending by businesses on tangible assets such as new buildings, machinery and office equipment. The figures are obtained after sampling 8,000 private business units.
What are the implications for interest rates and investors?
The Reserve Bank had always expected that the unwinding of the mining construction boom would be an extended process. And it is turning out that way. But investment is lifting outside mining and manufacturing. And businesses are becoming more confident about spending money to boost future prospects for their operations.
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