Private Capital Expenditure (CAPEX) data from the ABS for the fourth quarter disappointed the market with a 2.2% decline on the quarter (against an expected 1.6% decline). This comes after an upward revision to the Q3 data saw a 0.2% increased upgraded to a 0.6% increase (see our post on Q3 data here). Actual CAPEX in Q4 was 3.6% below it’s level in Q4 last year. Total CAPEX for the year to date in the first 2 quarters on 2014-15 is 3.2% below the level seen at this stage last year. Budget projections of a decline of around 5.5% in CAPEX for the full 2014-15 financial year would still appear to be broadly realistic.
However, the results for QLD are much worse. Here we see actual CAPEX for the quarter down 8.5% for a decline of 24.6% from Q4 last year. The ABS provide industry breakdowns at State level only on a Current Price basis which we cannot directly compare to the Chain Volume measures quoted above, however when comparing like with like we see mining CAPEX fell 38% in Q4 from the same period last year in QLD while it was down 14.9% at a national level. The mining CAPEX slowdown is having a severe impact in QLD. Gene Tunny at Queensland Economy Watch posted an interesting piece with the same message yesterday following the Construction Work Done data.
The 5th (of 7) estimates of expected total CAPEX for the 2014-15 year show a 8.6% decline from the 5th estimate last year and a 0.4% increase from the 4th estimate this year (although estimate 4 was revised slightly lower). The 1st estimate for 2015-16 sees a 12.4% decline from the 1st estimate this year. In all cases the primary sector responsible for the declines is mining. The graph below makes clear the slowdown in CAPEX we have been seeing over the past few years, but it also highlights the fact that we have not yet seen the kind of “CAPEX cliff” that some commentators have been talking about. As mining CAPEX has fallen increases in other industries have taken up at least some of the slack and the total CAPEX slowdown has been far more gradual that many were expecting. Also worth noting that despite the declines already seen CAPEX remains significantly above the levels seen in 2010-11.