Australian business investment rose by a larger-than-expected 3% with firms ramping up spending on plant and machinery despite the coronavirus pandemic in a positive sign for the country's economy.
During the December quarter, investment rose 3% to A$29.4 billion ($23.44 billion), the first increase since early 2019, figures from the Australian Bureau of Statistics (ABS) showed on Thursday.
Analysts in a Reuters poll had forecast no change.
The unexpected increase was all due to non-mining activity, mostly construction, accommodation, food services and transport postal and warehousing led by demand for online shopping.
"We had expected a fall... Instead, the result indicates that with the business mood upbeat, firms have opted to increase spending in response to the rapid rebound in activity conditions as COVID restrictions are rolled back," said Westpac economist Andrew Hanlan.
"The backdrop is the economy is recovering and conditions have surprised to the upside. That suggests an upturn in business investment is likely to emerge – the issue is the timing," Hanlan added.
Business investment is a critical driver of productivity growth in the economy and the Reserve Bank of Australia (RBA) has often referred to the need for the return of "animal spirits" to support a recovery.
In yet another welcome sign, Australian firms seemed a little more confident about the future, with the latest estimate for spending plans for 2020/21 revised up to A$121.4 billion.
Data next week is expected to show Australia's A$2 trillion economy grew at a rapid clip in the December quarter as it emerges from its first recession in three decades led by massive fiscal and monetary stimulus.
The RBA slashed interest rates three times last year to an all-time low of 0.1% and launched a massive quantitative easing programme while the government boosted spending too.
(Reporting by Swati Pandey and Wayne Cole; Editing by Shri Navaratnam and Sam Holmes)
