Business investment plans soar to 27 year high

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The latest NAB quarterly survey on business outlook shows business investment plans soaring to highs not matched since Australia came out of the recession it had to have.

Business growth: Upward curve for Australia business in 2021

The survey results point to a sustained economic recovery for Australia as it emerges out of Covid, and is good news for print, which traditionally rides or falls with the economy.

The NAB survey revealed that business conditions, hiring intentions and capital expenditure are all strongly above the levels of pre-Covid, with analysts saying business is clearly responding to the government’s huge investment incentives it announced in October.

According to NAB, both capex plans and labour costs have doubled over Q1, propelled by the strongest forward orders since 1994.

Alan Oster, chief economist at NAB, said. “The strength of forward orders therefore indicates that the economic recovery is likely to continue in coming quarters.”

Business conditions and confidence strengthened in the quarter, with both now at +17 index points, well above their long-run averages. All the sub-indices of business conditions improved substantially – NAB says profitability, trading and employment are now all well into expansionary territory.

Capacity utilisation also continued to rise. It increased by almost 2ppts to 82.3 per cent in Q1, and is now above both its historical average and its pre-Covid level. Again, the improvement was broad based, with only mining not seeing a gain in the quarter.

And in official figures, just released from the Australian Bureau of Statistics, capital expenditure in December increased for the first quarter in two years, and at three per cent tripled the widely held expectations of a one per cent increase.

The rate of increase in the December quarter was the highest for eight years. Business pushed $29.4bn into capex in the quarter. Non-mining increase was 2.5 per cent.

Oster is predicting that GDP for the March quarter will rise above pre-Covid levels. The December quarter saw the nation’s GDF slip by 1.1 per cent.

Oster said that the growth increases across all major indices was a key indicator that a strong sustainable recovery was underway in Australia.

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