SYDNEY – (Reuters) – Australia’s decade-long boom in mining investment is not slowing nearly as quickly as many feared, while other sectors are beefing up spending at a rate that should greatly ease concerns about the economic outlook.
A closely-watched report from the Australian Bureau of Statistics out on Thursday showed businesses had upgraded their spending plans for 2013/14 well above expectations, with even once-laggard industries grasping the spending nettle.
That will be a huge relief to the Reserve Bank of Australia (RBA) which has been betting the farm on investment spreading outside of just mining.
“It’s consistent with other sectors starting to take over as drivers of the economy as the mining sector slows,” said Shane Oliver, chief economist at AMP Capital Investors.
“In a year’s time, we’re probably looking at growth heading back to around 3 percent, which is more optimistic that what the RBA was expressing,” he added. “Ultimately, it would also be consistent with it leaving rates on hold ahead of a possible rate hike sometime around September or October next year.”
The strength of the data saw the market price out almost any chance of another cut in interest rates, following the RBA’s last easing to 2.5 percent back in August. It also lifted the local dollar a third of a U.S. cent.
The survey of planned spending for the year to June 2014 came in at A$166.8 billion ($152 billion), up from a revised A$161.6 billion and at the very top end of expectations.
Planned spending by miners was still likely to dip over the year but by much less than previously assumed, while manufacturing and other industries lifted their outlook.
That is a critical shift since mining investment has been the main driver of economic growth in the last few years, reaching a massive 8 percent of Australia’s A$1.5 trillion in annual gross domestic product (GDP).
For the third quarter alone the ABS reported capital expenditure jumped 3.6 percent to A$40.9 billion, again confounding forecasts of a drop of 1.2 percent.
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