From UBS, comes more on the well-timed and much needed surge in public investment:
Reiterating our view of stronger public spending supporting GDP ahead
We recently highlighted (Public spending surprises…capex boost ahead) that there has been a long-awaited – but stronger than expected – rebound in government spending (or public demand). Real public spending has lifted to a trend of ~3¼% y/y, adding a significant ~¾%pt to GDP, the biggest since the tail-end of the GFC stimulus.
Public capex set to surge ahead based on commencements & Budget forecasts
Meanwhile, the capex/investment part of public spending is now also turning up sharply. After public investment collapsed by ~30% from 2010 to 2015, the recent bounce of construction commencements now points to a recovery ahead (Figure 4). Indeed, our detailed analysis of Government budgets implies that public capex/investment could potentially jump by ~15% y/y in 16/17, which is well above our current forecasts (Figure 1).
DAE Investment Monitor ‘confirms’ – with a ‘super spike’ in committed projects
Further to this, our analysis has now also been ‘confirmed’ by the just released Deloitte/Access Economic Investment Monitor. The DAE data showed a ‘super spike’ in Q2 of committed investment projects (Figure 6), up 205% y/y (to $73bn, or 4.4% of nominal GDP). While there has also been a notable bounce of mining from a depressed level (+90% y/y to $16bn or 0.9% of GDP), the key driver has obviously been nonmining (+266% y/y to a record $57bn or 3.5% of GDP), dominated by a spike of public-related spending on transport mainly in NSW & Victoria (Figures 2, 5 and 8). We also detail the top 10 committed projects in the DAE data, showing this concentration (Figure 7). Overall, the DAE data adds to our view that a much faster pace of public spending could provide a significant medium-term buffer against any future drag from a peaking housing market.
That’s one Hell of a spike even if nothing like what is needed relative to rising populations.