Biggest fall in business investment in 5½ years

by Julia Corderoy29 May 2015
New business spending on property or equipment took its biggest hit in five and a half years, which will keep the Reserve Bank tipped towards an easing bias.

Business investment fell by 4.4% in the March quarter, according to figures released the Australian Bureau of Statistics, which is the biggest fall since the September quarter in 2009. 

Spending on buildings fell by 6.5% in the quarter while spending on equipment fell by just 0.5%. Investment is down 5.3% over the year, with buildings down by 9.5% while equipment is up by 3.5%.

Expected business investment in 2014/15 is $149.9 billion, down 8.1% on a year ago, while expected business investment in 2015/16 is 104 billion, down 24.6% on a year ago. 

Craig James, chief economist at CommSec, says there wasn’t a lot of good news in the business investment report, however, that may change quickly.

“The main good news is that the data is old... Rates have been cut in early May and the budget cut taxes for small businesses as well as providing taxation provisions for writing off spending on new assets up to $20,000,” he said.

When it comes to interest rates, James says the Reserve Bank won’t panic, but the latest data will likely keep an easing bias in place for monetary policy.