A “super spike” in Australian capital expenditure is coming, thanks largely to government investment.
That’s the view of George Tharenou, Scott Haslem and Jim Xu, economists at UBS, who believe that it’ll provide a useful medium-term buffer for the Australian economy, particularly at a time when many are wondering what will drive economic growth in the years ahead.
So just how big must a spike in investment be to be deemed a “super spike”? A lot, as seen in the chart below, from the UBS team.
Using figures provided in the latest Deloitte/Access Economics (DAE) Investment Monitor released earlier today, it breaks down the dollar value of committed investment projects by mining and non-mining sectors.
Whoa, Nelly! The value of non-mining projects went stratospheric in the June quarter.
The DAE data showed a ‘super spike’ in Q2 of committed investment projects, up 205% y/y (to $73bn, or 4.4% of nominal GDP). While there has also been a notable bounce of mining from a depressed level (+90% y/y to $16bn or 0.9% of GDP), the key driver has obviously been non-mining (+266% y/y to a record $57bn or 3.5% of GDP), dominated by a spike of public-related spending on transport mainly in New South Wales and Victoria.
UBS believes that the DAE data “adds to our view that a much faster pace of public spending could provide a significant medium-term buffer against any future drag from a peaking housing market”.
Here’s the top ten committed projects by dollar value, based off the DAE report. Most are public, concentrated in transport.