Capex boom broadens (a bit)

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There’t no doubt that Australian capital investment intentions are booming. The good news is that in the latest round it was the broader economic sectors, including manufacturing that drove all of the jump in intentions. Here is the total chart:

You’re looking at the farthest bar on the right. That’s now the full year capex intention total for all sectors at a record $148.8 billion.

It was not all good news, however. Also on this chart, if you look at 2010-2011 column 7 you can see that capex for last financial year actually came in below expectations (compare it to the clear bars earlier in the year).

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Back to the good news, if we disaggregate intentions for next year we find that mining is virtually unchanged at $82 billion. One wonders if we are near a peak here given the global slowdown under way. Also, note that there is a quite consistent pattern of actual mining investment falling some distance short of expected (compare peak clear bars with column 7 shaded bars of actual outcome):

Manufacturing intentions rose $1.2 billion or so to $13.1 billion. Presumably these investments are intended to boost productivity given the sector is deep in recession:

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Also note that in recent years manufacturing has tended to under-perform intentions and, in growth terms, is going nowhere fast.

The intentions for all other sectors jumped $7.7 billion to 53.5 billion:

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Other sectors have tended to over-deliver on expectations. In terms of growth, we’re obviously obviously stuck at the same level as three years ago.

All things considered, this is good stuff for those (sane) folk that believe investment drives capital formation.

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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.