Goldman sees steepening capex cliff, rate cuts


Goldman’s Tim Toohey is out with his take on the capex report and it’s discouraging stuff. He uses recent realisation ratios to suggest that total investment is set to contract by over 5% in 2013-2014 or around $9 billion.

He also notes that the RBA has previously suggested that non-mining investment was on track to grow in 2013/14 but this survey now indicates that that is no longer the case with “Other Industries” expected to decline 0.6% and manufacturing by 9.6%.  Therefore his has reaffirmed his rate cut call for November.

He notes as well that the weak construction data supports his tracking estimate for June quarter GDP at 0.2% or 2.1% year on year. 

Solid analysis on all counts.


Houses and Holes
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  1. I would be interested to see Tim Toohey’s projections on how likely a mining cliff induced recession is after this latest data release.

    Back in early June he was calling a 20% chance of a recession.

    If Toohey is right about only 0.2% June quarter growth then things are far worse than anyone is willing to recognise especially if the capex projections are correct.

  2. This election is shaping out to be the one you would rather lose. Good luck to whoever gets in …

      • Heaven forbid we have a competent RBA board that could forecast with some small degree of accuracy and that would act early to minimise the damage to the Australian economy.

        Hopeless clowns should be sacked!

    • FF – it certainly is ironic that:

      1. Abbott is going to win this one while promising a bunch of Labor party style policies (paid parental leave, four years of Gonski, NDIS, government-built NBN)

      2. And yet it’s the Liberals’ reputation for economic management that is going to get trashed over the next 3-6 years.

    • I called this a few months back on another forum ( pre kevin taking over I think) and got laughed at mainly by Liberal die hards.

      @jelmech I hear you. We have been riding the mining capex for quite a while now.

      @Arrow2 True. The election more than ever both the parties are essentially only running with a different name. If only they could agree to support good policies like cheaper housing.

      I don’t think their reputation will get trashed. Given how they have been avoiding any direct answers and spruiking 10 year plans, they plan to blame labour and go with the flow.

      • I think their reputation will get trashed because the next 3-6 years will bring unavoidable recession and real problems, not because of anything the Libs have done or promised to date.

  3. “Solid analysis on all counts.”

    I presume you are talking about what IS going to happen rather than what SHOULD happen!