Frydenberg Unstimulus sinks into capex funk

Capex intentions are out from the ABS. These figures are estimates for the next eighteen months of business investment, direct input into GDP. They are better than some feared but still not well. Via ABS:

Total capital expenditure

  • Estimate 5 for 2020-21 is $121,428m.
  • This is 4.8% higher than Estimate 4 for 2020-21.
  • Estimate 1 for 2021-22 is $105,487m.
  • This is 3.4% lower than Estimate 1 for 2020-21.

So, despite reopening hopes and rebounding sentiment, capex plans are still very weak amid immense overcapacity.  20/21 will likely come in down in slightly down. And 2021/22 is already printing down another 3.4%.

Mining is soft despite the supposed “super-cycle”:

  • Estimate 5 for 2020-21 is $36,593m.
  • This is relatively unchanged from Estimate 4.
  • Estimate 1 for 2021-22 is $36,305m.
  • This is 5.6% lower than Estimate 1 for 2020-21.

The ABS has seen fit to erase manufacturing and lump it in with services under the generic label “non-mining” because…well… that’s all there is: mining and the rest. It is slightly less weak:

  • Estimate 5 for 2020-21 is $84,835m.
  • This is 7.1% higher than Estimate 4 for 2020-21.
  • Estimate 1 for 2021-22 is $69,182m.
  • This is 2.2% lower than Estimate 1 for 2020-21.

Actually, manufacturing lifted a little while lots of services went splat:

 

So, despite the Depressionberg Unstimulus which threw the better part of $30bn entirely at boosting these numbers in an unprecedented supply-side binge, they are going to fall and detract from GDP.

Arguably these numbers would been worse without it. But, equally, a better targeted balance of demand-side and supply-side stimulus would have helped backfill the output gap and these numbers might have been better for both.

Try a bit of Keynes instead next time.

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David Llewellyn-Smith
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