Gloomy outlook for Australian economy as private investment shrinks, according to the latest ABS stats

Falling private sector investment “is a canary in the coal mine” for Australia’s economic outlook, a peak industry lobby group has warned. Fresh data from the Australian Bureau of Statistics shows new private capital expenditure fell by 0.1 per cent in the first quarter of 2025 year-on-year. Taking mining investment out of the equation points to a steeper fall of 1.1 per cent. The largest declines in private sector investment by states and territories was the Northern Territory with a 13.2 per cent fall, Victoria experienced a 5.3 per cent decline, and Queensland was down 0.9 per cent. South Australia was a bright spot — rising 11.1 per cent — and Western Australia was also up, by 2.1 per cent. “Falling private sector investment in early 2025 is a canary in the coal mine for Australia’s increasingly concerning productivity and growth outlook,” Australian Industry Group (Ai Group) chief executive Innes Willox said. “The Productivity Commission has recently found that insufficient investment levels are a major driver of the productivity drought afflicting Australia. This data shows their concerns are well-placed, and hopes for a productivity turnaround in 2025 are at real risk. “Of particular concern is the decline in equipment and machinery investment, which is critical to augment labour force productivity.” The Ai Group, which represents 750,000 members predominately in the labour hire space, highlighted that this downward trend in equipment and machinery investment has been persistent post-pandemic. Non-mining equipment and machinery capital expenditure for the first quarter of this year fell largely due to a 17.9 per cent drop in the information media and telecommunications industry. The finance and insurance segment decreased 9.2 per cent and there was also less investment in labour-intensive professional, scientific and technical services — down 7.9 per cent. “Uncertainty is a major factor behind falling investment levels. With the economy at a low ebb, regulatory settings in flux and global markets in turmoil, businesses do not have sufficient confidence to make the long-term investments needed for productivity or growth.” Mr Willox said. “Treasurer Jim Chalmers has recently said that improving productivity will be his top economic priority for this term of government. Getting investment moving in the right direction will be an essential first step to achieve this goal.” CommSec chief economist Ryan Felsman labelled the private sector investment data as “underwhelming” but said the market’s attention was focused elsewhere on Thursday. “Today’s underwhelming Aussie capital expenditure data had limited impact on financial markets as investors focused on global trade policy developments,” he said. “On Wednesday, a US federal court blocked US President Donald Trump’s ‘Liberation Day’ tariffs from going into effect, sending the US dollar and US Treasury yields higher. “The Manhattan-based Court of International Trade ruled that President Trump overstepped his authority by imposing across-the-board duties on imports from nations that sell more to the United States than they buy. Mr Felsman said Australian businesses investing less in durable working capital is expected to swiftly flow through to the country’s gross domestic product figures. “Combined with yesterday’s flat construction work done data, today’s capex figures imply minimal contribution from private investment to next week’s GDP data, as some private sector softness persists.” “Labour productivity growth will remain weak and points to further inflation in unit labour costs in the quarterly GDP report.”