With an election based around jobs and growth and a budget largely dependent on that growth delivering revenue, the government would have been looking for some good news from the capital expenditure figures. Alas there is very little joy to behold with the sharp falls in investment continuing. For those wanting good news, the best you can say is that things don’t look to be getting any worse and that maybe the outlook for the next 12 months in the non-mining sector might even be better than expected.



Three months ago when viewing the capital expenditure figures – which measure essentially business investment either in buildings, structures, machinery and equipment – economist Stephen Koukoulas tried to find some positives by suggesting they were “sort of unhorrible”.

This time round, there was no sense of coating the figures with any sugar. Koukoulas tweeted that they were “a shocker”.

In the March quarter, private new capital expenditure continued its long slide with just $30.72bn in new expenditure compared to $42.1bn worth of spending in the peak quarter of June 2012:

It meant in seasonally adjusted terms total capital expenditure fell 5.2% – the fourth biggest fall this century. In trend terms it wasn’t as bad – just a fall of 2.8% – but it marked a record 14th quarter in a row that capital expenditure has declined (the previous record set during the 1990s recession was for 11 quarters):



As ever, the falls are driven by the mining sector. While there was slight increase of $50m in capital expenditure in the non-mining sector, in the mining sector such spending was down $925m from the December quarter:



The massive falls in investment in mining mean that the non-mining sector is now easily the biggest – even excluding manufacturing:

Mining investment is at levels only just above what they were in March 2011. But the problem for our “transitioning” economy is that non-mining investment is actually below what it was five years ago:



In the past five years mining investment has boomed and busted, manufacturing investment has slid ever steadily, and investment in the “other selected industries” (which includes all other industries except the mostly public ones such as health and education) has remained flat.

But if you are looking for some good news, you could say that at least the non-mining sector is no longer going backwards (how’s that for over-the-top optimism!)

In the March quarter while investment in mining fell 6.6%, non-mining sector investment rose 0.3%. Even better is that investment in the “other selected industries” rose 0.9% – the best quarterly improvement since December 2014:

The rose-coloured glasses rather get ripped off your face however when you look at the annual growth figures, for here, as is the case with mining sector, investment in the non-mining sector is going backwards – down 3.2%:



And just to make you feel even less joyful, the falls in investment spending are not just in buildings and structures – which would be expected with the end of the mining boom – but also in machinery and equipment.



In the non-mining sector, investment in machinery and equipment is down 2.2% on where it was 12 months ago. That is not exactly a winning result for the $20,000 instant asset write off which was supposed to spur investment in such things:

But where it all gets really dicey for the government is when we peek at the outlooks for investment in the coming financial year. This quarter’s data includes the second estimate for the 2016-17 year. And it is not good from a budgetary aspect, but it is a bit better when we think of it from an economic aspect.



The May budget estimated that mining investment in 2016-17 would fall by 25.5% and overall investment would fall by just 5%. But the second estimate for investment in 2016-17 is down 14.6% on the second estimate for 2015-16, and the expectations for mining investment down 32.1%:

Such large falls suggest company tax revenue will not be as good as expected.



Now the 14.6% fall in expectations does not mean that investment for 2016-17 will actually fall by that much, but the outlook is not great. Even if you consider that actual expenditure ends up being a bit more than is usually expected at this point, it still looks like a fall of around 20% to 25%:

There is however some good news for our transitioning economy. The expectations for non-mining investment are up 3.4% on those from 12 months ago. I would be a bit more excited about that, but it largely comes off an odd jump in expectations for manufacturing investment from that made three months ago:



The expectation for manufacturing investment is up 11% on where it was three months ago – the biggest such jump since 2011.



Now that’s good news, but it’s not money in the bank. Back in 2011 the growth in manufacturing expenditure ended up being closer to that observed in the first estimate than the more optimistic second estimate.



And in the end it means that given the terrible actual figures, for any good news we are reduced to looking at expectations of things to come – ie hoping that any optimism businesses may have now is neither overstated nor subject to being hit by reality later on.

And that requires a fair bit of faith given how the economy here and in the rest of the world is looking.