Capital spending by private sector companies in Australia recorded a surprise drop between April and June, official figures showed on Thursday. However, companies ramped up their investment spending plans for the current financial year, boosting hopes that the country's mining boom will continue to drive economic growth.
The Australian Bureau of Statistics said capital expenditure fell a seasonally adjusted 4% compared to the preceding quarter to A$26.2 billion. This was in contrast to expectations for a 2.3% increase and followed a downwardly revised 1% decrease in the previous quarter.
Business investment by private sector other industries fell 10.9% compared to the previous quarter. On the other hand, manufacturing investment surged 16.5% and mining investment increased 2.6%.
Spending on buildings & structures decreased 3.9% while that on equipment, plant & machinery was down 4.1%. On a year-over-year basis, capital expenditure decreased 4.8% in the June quarter.
The weak second quarter spending data was tempered somewhat by companies' investment intentions for the year ending June 30, 2011. Companies intend to invest A$123.3 billion in total for 2010/11, 17.5% higher than the previous estimate.
Mining investment was the biggest contributor to this increase, up 12.2%. Rental, hiring & real estate services and transport, postal & warehousing companies also revised up their investment intentions for the current financial year.
The strong mining investment plans will come as a boost to Julia Gillard's Labor party, as it suggests the Labor government's proposed resource super tax has not had a significant negative impact on investment intentions. Opposition leader Tony Abbott opposes the plan for a 30% profits tax on big coal and iron ore mining companies.
Australia's mining sector has enjoyed a boom in recent times, fueled by the rise of China and India, and is one of the major reasons why Australia managed to skirt a technical recession during the global financial downturn.
Meanwhile, the Conference Board said today that Australia's leading economic indicator climbed 0.1% in June from May. This followed a 0.4% increase in the prior month and a flat reading in April.
The coincident index, an indicator of current economic conditions, also rose in June, up 0.3%. It added 0.2% in May and 0.1% in April.
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