Australian business investment rose last quarter as stronger mining spending outweighed a decline in manufacturing.
Capital spending gained 4 percent from the first quarter, when it fell a revised 4.1 percent, the Bureau of Statistics said in Sydney today. That compares with the median forecast for no change in a Bloomberg News survey of 20 economists.
Reserve Bank of Australia Governor Glenn Stevens and his board slashed borrowing costs by 2.25 percentage points over the past 22 months to 2.5 percent to foster a transition to industries including residential construction as resource investment wanes. Prime Minister Kevin Rudd, who has called the end of Australia’s China-led mining boom, has set an election for Sept. 7 framed around economic management.
“The capital spending numbers confirm mining investment isn’t headed for a sharp decline in coming quarters,” Katrina Ell, an economist at Moody’s Analytics in Sydney, said before the release. “It’s good news for the broader economy.”
Today’s report showed Australian companies forecast investment of A$160.5 billion in the year ended June 30, 2013, which was 1.4 percent lower than their estimate three months earlier. They predicted investment of A$159.2 billion in 2013-14, which was 2.3 percent higher than their estimate three months earlier. Australian mining investment in 2013-14 is projected at A$102.8 billion, compared with A$101.5 billion three months earlier.
The local dollar was little changed after the report, buying 89.69 U.S. cents at 11:37 a.m. in Sydney.
Traders are pricing in a 59 percent chance that the RBA will cut its benchmark rate to a fresh record of 2.25 percent by the end of the year, interest-rate swaps data compiled by Bloomberg show. The odds of a reduction at the next policy meeting Sept. 3 are less than 10 percent.
Today’s report showed spending on buildings and structures rose 7.1 percent last quarter. Company investment in new plant and equipment declined 1.2 percent, it showed.
The Australian dollar slumped 12 percent in the second quarter, the biggest slide worldwide behind the Syrian pound, after holding above $1 from mid-June last year to May 9, the longest stretch above parity since it was freely floated in 1983.
The central bank in August reduced its forecast for gross domestic product growth this year to 2.25 percent from an earlier prediction of 2.5 percent.