Australian business investment fell by more than expected last quarter as coronavirus lockdowns forced firms to delay purchases of equipment, but future spending plans were upgraded in a hopeful sign of recovery.
During the September quarter, investment declined 3% to A$25.85 billion ($19.04 billion), adding to a hefty 5.9% fall in the June quarter, figures from the Australian Bureau of Statistics (ABS) showed on Thursday.
The outcome was far worse than forecasts for a 1.5% decline.
In a welcome sign, Australian firms seemed confident about the future, with the latest estimate for spending plans for 2020/21 at nearly A$105 billion, 6.3% higher than the previous estimate.
However, spending plans for the current financial year-ending June 2021 barely improved to -5.7%, from -6.1% in the previous survey. Mining spending plans were revised downward to around flat.
"The Q3 capex survey was disappointing across the board and suggests that business investment, a critical driver of stronger productivity, may well take longer to strengthen than hoped for," said RBC economist Su-lin Ong.
"We suspect that policy makers will be somewhat disappointed with these data. They suggest that the animal spirits have yet to stir much and patience is required," Ong added.
"Stronger business investment is critical if we are to lift productive and potential growth."
Australia's central bank has often referred to the need for the return of animal spirits, or the emotional factors that drive confidence in the economy, to support a recovery.
It slashed interest rates to an all-time low of 0.1% and launched a A$100 billion quantitative easing programme in an effort to keep borrowing costs low as the economy limps out of its first recession in three decades.
Data out next week is expected to show the A$2 trillion ($1.5 trillion) economy expanded by a solid 3-4% last quarter led by household consumption and government spending.
Still, it is expected to take a long time for economic output to reach its pre-pandemic levels, Reserve Bank of Australia (RBA) Deputy Governor Guy Debelle said earlier this week.
(Reporting by Swati Pandey; Editing by Tom Hogue and Lincoln Feast.)
