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Australia third-quarter business investment slips, outlook surprisingly resilient By Reuters

© Reuters. FILE PHOTO: People stroll via the Central Business District (CBD) at nightfall in Sydney, Australia, June 4, 2021. REUTERS/Loren Elliott

By Wayne Cole

SYDNEY (Reuters) – Australian business investment slipped within the third quarter as pandemic lockdowns shut many corporations, although future spending plans proved surprisingly resilient and a fast restoration is anticipated now that the majority restrictions have been lifted.

Figures from the Australian Bureau of Statistics out on Thursday confirmed capital expenditure fell an actual 2.2% within the third quarter to A$32.7 billion ($23.57 billion), consistent with market forecasts of a 2.0% drop.

Spending plans for the yr to finish June 2022 have been upgraded to A$138.6 billion, above most analysts’ estimates and an indication business confidence had weathered the disruptions nicely.

“It suggests that spending this financial year will be over 10% higher than fiscal 2021, comfortably outstripping the levels seen in the three years prior to the pandemic,” mentioned Sarah Hunter, chief economist for BIS Oxford Economics.

“Construction, wholesale trade and transport, postal and warehousing led the way, reflecting the need to expand capacity to properly service the substantial shift to online retailing.”

For the third quarter, many of the pullback in investment got here in plant and equipment with the retail and schooling sectors significantly laborious hit by the lockdowns.

Data on gross home product (GDP) due subsequent week is anticipated to point out a pointy contraction given stay-at-home guidelines in Sydney and Melbourne hammered consumption through the quarter.

Yet with 86% of the grownup inhabitants absolutely vaccinated, most restrictions are gone and spending has rapidly ramped up as retailers rely on a bumper Black Friday of gross sales this week.

Separate information on payrolls out on Thursday confirmed employment jumped sharply within the final two weeks of October, rounding out a robust month for the states of New South Wales and Victoria.

That choose up in jobs has but to see a lot acceleration in wages progress which languished at an annual 2.2% within the third quarter, nicely in need of shopper value inflation at 3%.

That is simply too sluggish for the Reserve Bank of Australia (RBA), which desires to see wage progress operating at 3%-plus earlier than pulling the set off on fee rises, one thing it doubts will occur till 2023 on the earliest.

Investors are wagering the financial institution is behind the curve on inflation and can really should hike the 0.1% money fee by June subsequent yr, if solely to maintain up with different central banks.

The Reserve Bank of New Zealand (RBNZ) on Wednesday lifted its fee for a second month operating and flagged additional rises to 1.5% by mid-2022.

($1 = 1.3881 Australian {dollars})

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