Country Report Australia October 1996 Main report

Economy: New business investment surges--

New private-sector investment leapt by 16% to A$10.4bn during the second quarter (real terms, seasonally adjusted; see 1st quarter 1996 for an explanation of the differences between this series and the national accounts investment data). Spending on construction rose by 37.3%, more than reversing the 24.2% decline recorded in the first quarter. Spending on equipment rose by 8.8%.

The overall growth in new private-sector investment came to 11.7% for 1995/96, with spending on construction rising by 26% and spending on equipment by 6.5%. The level of new private-sector investment for the year was A$37.8bn, in line with earlier business expectations.

New capital spending by the services industries rose by 27.7% during the second quarter. This surge at least partly reflects the roll out of cable for tele-phony and pay television. Spending by the mining industry also rose strongly during the quarter (by 16.5%), while manufacturing recorded a 6.5% decline.

--and firms expect that growth will continue

Business expects around A$39.5bn of new private-sector investment for 1996/97. This estimate is higher than both the previous one made for 1996/97 (by almost 10%) and the corresponding estimate for 1995/96 (by over 15%), suggesting that business remains bullish on investment. Typically, estimates of new private investment made 12 months in advance understate actual investment by around 8% (although there is substantial year-to-year variation in the degree of accuracy). If this relationship continues to hold good, new private investment of around A$42bn can be anticipated for 1996/97.

The mining sector is particularly optimistic, anticipating growth of over 28% in new capital spending for 1996/97 (compared with the corresponding estimate made for 1995/96, rather than the 1995/96 actual). The services sector also expects its strong investment growth to continue, with a rise of 17.6% being anticipated. In contrast, manufacturing is looking to an increase of only 2.1% for 1996/97. This modest expectation is hardly surprising, in the light of the recent slow growth in manufacturing output.

© 1996 The Economist lntelligence Unit Ltd. All rights reserved
Whilst every effort has been taken to verify the accuracy of this information, The Economist lntelligence Unit Ltd. cannot accept any responsibility or liability for reliance by any person on this information
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