Business investment unexpectedly declined in the first three months of the year, another disappointing outcome heading into next week’s quarterly national accounts report.
The Australian Bureau of Statistics said new private capital capital expenditure (capex) fell 0.3 per cent per cent to $33.6 billion in the March quarter compared to economists’ forecasts for a 1.3 per cent increase.
This followed an unexpected fall in construction work for the March quarter, reported on Wednesday, another component of the economic growth result to be reported in the national accounts on June 1.
However, one saving grace from Thursday’s capex figures was a 1.2 per cent increase to $16.2 billion in equipment, plant and machinery, which feeds directly into the national accounts.
But building and structures for the March quarter fell 1.7 per cent to $17.3 billion.
The report also contained planned investment for the 2022/23 financial year. The $130.5 billion figure was 11.8 per cent higher than an earlier estimate.
Other components of the make-up of the national accounts are expected to show steady growth in household spending, but net exports are predicted to have a large drag on the overall outcome.
Economists will finalise their growth forecasts for the March quarter early next week when the ABS releases international trade, business profits and inventories, and government finances figures.
A possible lame growth result in the March quarter comes before the likely impact from a steady rise in interest rates by the Reserve Bank of Australia this year as it tries to curb inflation.
Economists expect the RBA to raise the cash rate at its June 7 board meeting by between 25 to 50 basis points following on from the hike earlier this month, the first increase in more than a decade.
Addressing a conference on Wednesday, RBA assistant governor for economics Luci Ellis reiterated the central bank board has made it clear there will be more rate increases.
“We will be watching the data and the evidence very carefully and working out what the appropriate action is,” Dr Ellis said, while declining to speculate what the peak in the cash rate might be.
The cash rate rose to 0.35 per cent from a record low 0.1 per cent at the May board meeting and economists expect it could be over 1.5 per cent by early next year.
