From the SMH:
ANZ co-head of economics Felicity Emmett
While the outlook for mining investment remains weak as expected, the outlook for non-mining is considerably worse than we expected. After adjusting for the typical bias in firms’ investment intentions, the survey suggests that non-mining investment is likely to contract by around 7 per cent over 2015-16 in year-average terms. This result suggests that firms remain very gloomy about the outlook and are unwilling to commit to lifting investment spending.
A softish number was not unexpected today given that business confidence has been trending lower over the past few months and the survey was taken over late January/early February at the height of the speculation over the Prime Ministership, but the magnitude of the decline is surprising.
The ongoing weakness in the outlook will provide further confirmation to the Bank that the economy needs further stimulus. We continue to expect another near term RBA rate cut, most probably at the March meeting.
AMP Capital Investors chief economist Shane Oliver:
It is consistent with further rate cuts from the Reserve Bank. When you put it together with record low wages growth, low inflation and an Aussie dollar which is still too high, the capex figures just reinforce the case for another interest rate cut. I have got one pencilled-in for next week. I don’t think we should rule out a fall in the cash rates into the ones (per cent).
What is lacking in the economy is investment and these figures are still fairly bleak. Mining is still declining at a rapid rate, non-mining investments are also declining at a rapid rate and there is a bit of light at the end of the tunnel for the rest of the economy, apart from manufacturing, but it’s still not enough to offset the mining decline.
JPMorgan chief economist Stephen Walters
The numbers look pretty bad. The estimate for 2015-16 was disappointing. It’s around $10 billion less than we were calling for. And it’s soft across the board. Mining is set to fall further, and manufacturing was revised down again.
That’s not a surprise, but there’s not much sign of a revival in other sectors either. This lack of animal spirits is not what the RBA has been hoping for.
It does add to the chance of a rate cut next week, though we think they will hold on to May. The survey was taken before this month’s easing and we haven’t seen what impact that has had on confidence.
OK, I was wrong, Stephen Walters is not a cheerleader.
