Australia: CAPEX plans to provide further guidance on growth prospects - Westpac

Andrew Hanlan, analyst at Westpac, suggests that the Australia’s ABS CAPEX survey of private business investment plans will provide some further guidance on growth prospects.

Key Quotes

“The December quarter update will be released on February 28, including the 5th estimate of capex plans for the 2018/19 financial year and the 1st estimate of plans for 2019/20.”

“Markets will focus on plans for 2019/20. Estimate 1 for 2019/20 may, on the face of it, appear to be quite positive.”

“However, a strong 'headline figure' (Est 1 on Est 1) can be misleading. We assess that on this occasion it will be flattered by favourable base effects (with the Est 1 of a year ago relatively low compared to the likely outcome for the 2018/19 year). A more appropriate approach, calculations based on average realisation ratios (RRs), will paint a less upbeat picture.”

“We also caution that estimates 1 and 2 can be an unreliable guide to actual spending - the degree of error varying from year to year. Plans begin to become more reliable when the outcome for the preceding year is known, that is from Est 3 on.”