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Business investment in retreat for the second successive quarter

The Australian Bureau of Statistics released the latest version of – Private New Capital Expenditure and Expected Expenditure, Australia – today (May 26, 2022), which is part of several releases leading up to the publication of the June-quarter National Accounts next Wednesday. Today’s business investment data shows that private new capital expenditure in Australia fell by 0.3 per cent in the March quarter but was up by 2.2 per cent on the year. This is the second successive quarter in which business investment has fallen and it is likely the September-quarter will also record a contraction, which will all but wipe out the positive annualised result. This is the Australian business community at work – they are enjoying massive cuts to real wages for their workforces, record levels of profits, a rising profit share – and their investment performance is pathetic. There is some tension in the data though – as the expectation series indicates business investment growth over the next 12 months. I think that is overly optimistic given that household expenditure is likely to slow down with the rising interest rates and high energy prices really squeezing low-income families. One of the challenges facing the new Federal government is to somehow convince the business community to change their behaviour in this respect. Good luck with that. The way that the business sector has hijacked the ‘Jobs and Skills Summit’ agenda to turn it into a justification for more skilled migration – which will further dampen wages growth, push up unemployment, and further strain the almost impossible rental and home market – is evident that they are not for changing. And, if the new Treasurer keeps harping on about the $A1 trillion debt and the need to cut the fiscal deficit we will sink into recession.

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