Your 10-second guide to today's Australian CAPEX report

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Australia will get its latest report card on business investment today with the release of private-sector capital expenditure (CAPEX) data for the December quarter of last year.

This report captures investment from parts of Australia’s private sector, looking not only backwards but also where it’s likely to head in the quarters ahead.

While parts of it will feed directly into Australia’s Q4 GDP report next week, this report is unique in that it’s the forward-looking estimates on investment, rather than what has actually been spent, that markets tend to focus on.

This will be especially the case today with the first estimate for expenditure in the 2018/19 financial year set to be released.

Given the RBA expects non-mining investment to improve over the next couple of years, it’s likely this figure will drive movements in financial markets following the report’s release.

Here’s the state of play.

CAPEX estimates. Source: ABS
  • The CAPEX survey captures around 60% of total business investment, excluding spending from industries such as agriculture, health and education.
  • In the September quarter, expenditure rose by 1% to $29.368 billion. Spending on buildings and structures rose by 1.2% to $16.462 billion while that for equipment, plant and machinery climbed 0.7% to 12.906 billion.
  • The fourth estimate for total CAPEX spend for the 2017/18 financial year rose to $108.9 billion, higher than the $105.4 billion level expected by economists. It was also up 5.6% on the third estimate, helping to bolster confidence about the outlook for mining investment.
  • Today, economists expect another solid result, mirroring the outcome reported in the September quarter.
  • Looking backwards, the median economist forecasts looks for an increase in expenditure of 1% for the quarter. Individual forecasts offered to Bloomberg range from a decline of 4% to an increase of 3%.
  • While there is no forecast for spending on equipment, plant and machinery, economists at ANZ Bank are looking for an increase of 0.6%.
  • This figure will flow directly into Australia’s Q4 GDP report next week.
  • Looking ahead, the first estimate for 2018/19 CAPEX spend is expected to lift to $86.5 billion, above the first estimate of $81.2 billion offered for the 2017/18 financial year. Individual forecasts range from an increase of $80 billion to as high as $113 billion.
  • While expected expenditure is expected to be below the $108.9 billion fourth estimate offered for 2017/18, estimates tend to be revised higher over time as operating conditions for businesses become more certain.
  • As such, first estimates also have a tendency to surprise in both directions.
  • In February, the RBA noted that “the prospects for private non-mining investment were more positive than they had been for some time” with investment intentions pointing “to moderate growth over the coming year”.
  • Given that view, there’ll be plenty of interest on the first estimate for non-mining expenditure, classified in the report as manufacturing and “other” industries.
  • ANZ says a figure above $64 billion will likely be regarded as “a very positive result”, suggesting “ongoing improving momentum in non-mining business investment”. At the other end of the spectrum, it says a figure below $60 billion would be disappointing “as it would imply that the strength in business conditions is not feeding through to longer term investment spending plans”.

The report will be released at 11.30am AEDT.

Business Insider will have all the details once it hits the screens.

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