The hole in the Australian economy is getting larger as Australian business continues to reduce its capital expenditure (Capex) plans.
Data for Q4 2014 shows a fall in Capex of 2.2% against expectations of a fall of 1.9%. That’s not a huge miss really. But it is still a miss so the Aussie dollar has come under a little pressure and is back at 0.7860 from an overnight high of 79 cents.
While the actual spend feeds into Q4 2014 GDP, which will be reported soon, the key to the future is the spending plans of Australian business for the rest of the 2014-15 financial year and for the 2015-16 year.
Looking at the 5th estimate for the current financial year the ABS said that “Estimate 5 for 2014-15 is $152,656m. This is 8.6% lower than Estimate 5 for 2013-14. Estimate 5 is 0.4% higher than Estimate 4 for 2014-15.”
That’s not terrible but the first estimate for 2015-16 is “$109,799m. This is 12.4% lower than Estimate 1 for 2014-15.”
That’s the lowest initial Capex estimate for five years.
That is a huge step down even when we account for initial pessimism. But it is in alignment with the NAB ASX300 business survey, also released this morning, which showed the big end of town is “losing confidence, affecting medium-term growth and capital expenditure plans.”
This data supports calls for more RBA rate cuts. At least one, probably more.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.