Australia Falling Capex Signal Growth Challenges, Moody’s Says

The Australian Bureau of Statistics announced that Australia’s capital expenditures had fallen 4.4% in 1Q 2015 from 4Q 2014; separately, the ABS released data showing that construction activity had fallen 2.4% during the same period.

  • “These numbers and accompanying projections for investment in the coming year signal a decline in investment in Australia despite historically low global and domestic interest rates,” according to Moody’s in its credit outlook dated June 1
  • “Unless the trend reverses, Australia’s growth over the next two years will be lower than the 2.9% average of the past decade,” ratings co. says; Moody’s forecasts 2% GDP growth this yr
  • “Lower growth is credit negative for the sovereign because government tax revenues will grow more slowly, impeding efforts to stabilize government debt, which increased to 30.7% of GDP in 2014 from 9.7% in 2008,” Moody’s says
  • “In addition, lower growth could reduce foreign direct investment inflows, which would either exacerbate lower growth or increase the country’s reliance on more volatile portfolio and debt capital to finance its current account deficit,” according to Moody’s

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