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The private capex update for 4Q2015 showed that investment was a touch more resilient than expected at the end of the year – with total capex rising by +0.8%qoq against the consensus expectation for a -3%qoq fall. Nevertheless, the investment intentions data confirmed that the Australian economy was on track to continue a deep retrenchment in capex in FY16, with the fifth estimate of capex for FY16 implying a fall of -19.0% (after adjusting for long-run realisation ratios), which was on par with the decline implied by the fourth estimate (-17.0%). More worringly, the first estimate for capex spending for FY17 was surprisingly disappointing, with the raw reading of $82.6bn implying a -12.5% decline after adjusting for the long-run realisation ratios.

Looking ahead to the 1Q16 update, we expect weak capex trends to continue. In terms of actual capex we expect a -6.0%qoq fall in the quarter (with machinery & equipment spending also falling by around this amount), taking the annual capex growth to -17.0%yoy.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.