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Transcript
Box C: Recent Trends in Business Investment
Graph C1
Business Fixed Investment
Year-ended percentage change, chain volumes
%
%
Total
20
20
0
0
Machinery &
equipment
-20
-20
Non-residential
construction
-40
1993
1996
1999
2005
2002
-40
Source: ABS
Graph C2
Investment by Industry – 3 Years to 2004/05*
Annual average per cent growth, chain volumes
Wholesale trade
Construction
Transport & storage
Manufacturing
Health & community services
Retail trade
Property & business services
Electricity, gas & water
Accommodation, cafes & restaurants
Total
Finance & insurance
Mining
Personal & other services
Agriculture, forestry & fishing
Education
Cultural & recreation services
Communications
0
5
10
%
15
20
* Includes transfers of second-hand assets between the business and other sectors
Sources: ABS; RBA
Business investment has made a
strong contribution to growth in
aggregate demand over the past
three years. In real terms, spending
has expanded at an average annual
rate of around 14 per cent, well
above the average rate recorded over
the previous decade (Graph C1).
Investment has responded to the
combination of strong growth in
world and domestic demand, high
levels of capacity utilisation and
favourable funding conditions.
The declining price of imported
capital goods, in part reflecting the
appreciation of the currency in 2002
and 2003, has also been an incentive
to invest.
The strength in investment
growth has been most pronounced
in investment in computing and
electrical equipment. There has
also been a recent sharp upswing
in construction investment. But,
consistent with the generally
favourable
macroeconomic
environment, strong investment
growth has been broadly based
across most industries, with even
those industries below the average
recording healthy growth rates
(Graph C2).1 Buoyant external
demand for resource commodities
has provided additional support for
1 These data are constructed using nominal private-sector spending together with price deflators calculated for total investment,
since deflators for private investment are not available by industry. This approach implicitly assumes that within each industry,
private firms spend the same proportion on various types of investment goods, and at the same prices, as the public-sector firms
in the same industry.
38
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investment spending by the mining
industry, as well as by resourcerelated firms in other industries.
Perhaps surprisingly, investment in
the manufacturing sector has been
very strong, though this mostly
reflects the resource-related areas of
metals, petroleum, coal and chemical
products, with investment growth
relatively muted elsewhere.
Graph C3
Investment and Funding*
Share of nominal GDP
%
15
%
n Internal funding
n Net equity**
n Debt
15
Investment
10
10
5
5
The recent strength in overall
0
0
investment has also been facilitated
by favourable conditions for both
-5
-5
1993
1997
2001
2005
internal and external funding.
* Funding measures – three-quarter moving average
** Issued equity less equity buybacks
Corporate profitability has been high,
Sources: ABS; ASX; RBA
although the resulting pick-up in
retained earnings has been outstripped by the expansion in investment spending. Consequently,
firms’ demand for external funds has also increased, with the larger and generally more cyclical
debt component picking up by more than net equity raisings (Graph C3). The strength in debt
financing in recent quarters has been encouraged by relatively low corporate bond yields and
interest rates on business loans. R
S T A T E M E N T
O N
M O N E T A R Y
P O L I C Y
|
F E B R U A R Y
2 0 0 6
39
40
R E S E R V E
B A N K
O F
A U S T R A L I A