- Australian Bureau of Statistics reveals a 2.8% decline in business investment in the recent quarter.
- Australian firms saw no sign of improvement in business investment in the upcoming quarters.
- Spending on machinery and equipment saw a 0.8% increase in the recent quarter.
- Coronavirus outbreak is likely to keep global business investments under pressure.
The Australian Bureau of Statistics (ABS) announced its report on business investment on Thursday. The data suggested a sharp quarterly decline ascribed to the building and mining sectors keeping under pressure. Wednesday’s data fueled the expectations of another rate cut by the Australian central bank in 2020 and hinted at no improvement in spending in the short-term.
The ABS revealed a decline in business investment to 2.8% (A$28.5 billion) in the December quarter. Analysts, on the contrary, were expecting it to surge 0.4% in the recent quarter. Data for the previous quarter was also revised on Thursday that now posted a 0.4% drop in business investment in Australia.
Australian Firms Saw No Signs Of Improvement In The Upcoming Quarters
Australian businesses lacked confidence in their outlook for the upcoming quarter as well. Spending plans for this year and the next (2020 and 2021) were estimated at A$100.2 billion by the firms. Analysts, on the other hand, had forecast a much higher A$120 billion instead on spending’s front.
A pinch of optimism in Thursday’s data, however, was driven from higher spending on machinery and equipment that saw a 0.8% increase in the recent quarter. According to the experts, such an increase may have contributed a little to Australia’s quarterly economic growth. In terms of future outlook, the mining sector also suggested prospects for improved spending later in 2020 with chances of extending into 2021 as well.
2019-20 final estimate suggested a moderate improvement in spending plans to A$120.3 billion. But the outlook for the service sector remained weighed not only for this year but also for 2021.
Coronavirus Outbreak Expected To Keep Global Investment Under Pressure
A decline in business investment turned into a global phenomenon last year attributed to the complications of the U.S – China trade war. With the recent outbreak of Coronavirus in China disrupting the business operations, firms are likely to be reluctant in enhancing investments this year as well.
Australia’s GDP growth in the recent quarter is scheduled to be announced later this week. The A$2 trillion economy is likely to show a 0.3% growth in the upcoming report that will mark slower than the previous quarter. Such a quarterly report that translates into a 1.9% annual growth in GDP, as per the experts, is likely to push the Reserve Bank of Australia (RBA) to consider another rate cut this year.
Following three rate cuts from RBA in 2019, interest rates are currently at their record low of 0.75% in Australia. Financial markets forecast a 50% probability for the next rate cut by May 2020 to 0.5%.
Despite Thursday’s economic data, Aussie dollar kept its strength against the greenback in the forex market and climbed from 0.6545 to 0.6576.