Why today's Australian capex report is even worse than it looks at first glance

Getty/ Laurence Griffiths

Today’s capex data was a complete disaster.

There is no other way to look at it. It simply reinforces the hole left by the mining boom is huge – so huge that no amount of residential construction or consumer spending is likely to be able to fill the gap in the current environment.

Slower growth and more rate cuts will be on the table, which is why the Aussie dollar has fallen out bed.

But here’s the most remarkable thing about the forecasts for capital expenditure for the next financial year.

While the ABS reported that the 2nd estimate for Capex was “1.4% higher than Estimate 1 for 2015-16,” the reality is that – from a market perspective at least – that’s not true.

Here’s the chart we presented when the first reading was presented last quarter.

The estimate was $109.4 billion. It’s now been downgraded in the chart below.

That’s why this release is a disaster. Unless you realise that the initial estimate is now lower than it was three months ago, the data is actually even worse than it looks.

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