Business investment falls in March quarter

Business investment during the March quarter was down more than 6 per cent on the same quarter in 2019, new ABS figures show.

Business investment fell 1.6 over the March quarter, new ABS figures show. Picture: Roy VanDerVegt

Business investment fell 1.6 per cent in the March quarter, as the economy started to feel the full hit of the coronavirus pandemic, figures released by the Australian Bureau of Statistics show.

The quarterly survey of private capital expenditure also showed spending plans by business for financial 2020 ­- the year ended March 2020 - totalled $27.96 billion.

That figure is 5.6 per cent lower than plans for financial year 2019 reported at the same stage of the survey cycle a year ago.

For financial year 2021, planned capex is $90.89 billion, down by 7.9 per cent from the corresponding survey for financial 2020.

The report released by the ABS on Thursday reported survey data gathered in January and early February.

Making up the headline figure, spending on buildings and structures during the March quarter came in at $14.69 billion in seasonally adjusted terms, down 1.1 per cent from the December quarter and down 7.9 per cent on last year.

Business spending on equipment, plant and machinery of $13.26 billion in seasonally adjusted terms fell 2.3 per cent in the March quarter from the December quarter. Spending on the year fell 4 per cent.

Spending on mining fell $1.39 billion since December, while manufacturing faired somewhat better $397 million.

In his opening remarks at a parliamentary hearing in Canberra early Thursday, Reserve Bank of Australia governor Philip Lowe said that with earlier than expected reopening of the economy, it was “entirely possible” that the economic downturn from the coronavirus will not be as severe as first thought.

However economic outcomes depended how quickly confidence was restored, he said. The pandemic may continue to “cast a shadow” over the economy, Dr Lowe said.

Despite some businesses being able to operate during the lockdown, many were finding jobs were coming to and end as business had ceased investing.

“We’re seeing a decline in businesses that were able to stay open,” Mr Lowe said.

“As that pipeline gets worked off, if it’s not replaced by new jobs and new contracts you could see a weakness in construction and professional services.”

“It’s a complex picture with some parts of the economy doing better than others.”

Earlier this week the ABS released figures that showed the value of construction work done fell across Australia by 1 per cent to $49.48bn in the March quarter.

Thursday’s figures from the ABS are an early glimpse into the cost of the economic downturn caused by COVID-19. The full picture will be released in July.