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Investments feel mining slowdown

Business investment rose by just 2.8 per cent in the September quarter, as miners continue to revise down their spending plans in response to weaker global economic conditions.

Figures published today by the Australian Bureau of Statistics showed mining continued to dominate business investment spending, but its quarterly growth had slowed to 2.8 per cent, down from 10 per cent in the June quarter.

Outside the resources sector, manufacturing investment slumped by 9.7 per cent, while in other industries spending rose 5.5 per cent.

While the growth in overall spending during the September quarter was stronger than the 2 per cent rise economists had expected, the figures also showed miners had revised down their plans in between June and September.

Miners expected to spend $109 billion in 2012-13, it said, 8 per cent less than they had expected in June.

An economist at JPMorgan, Tom Kennedy, said the downgrade showed miners were clearly cutting back their spending expectations for this financial year in response to weaker economic conditions.


‘‘The forward-looking expectations were pretty downbeat,’’ Mr Kennedy said.

‘‘No matter how you look at it, it really is a deceleration in anticipated spending in the current financial year and it’s largely on the back of the mining sector,’’ Mr Kennedy said.

The figures come amid growing concerns that non-mining industries may struggle to pick up the slack as the resources boom fades, with some business leaders warning of a looming ‘‘growth cliff’’.

A senior economist at NAB Capital, David de Garis, said the downgrades to spending plans could be enough to convince the Reserve to cut the cash rate at its board meeting next week.

‘‘From a policy point of view the outlook is always the key thing,’’ Mr de Garis said. ‘‘It’s keeping the door open to more easing in December,’’ he said.

Money markets are betting there is a better than even chance of a rate cut next week.

Despite the stronger-than-expected result for the September quarter, Mr de Garis said the numbers suggested the pull-back in investment activity was ‘‘broad-based’’ across mining and other industries.

Earlier this morning markets were betting there was a slightly better than even chance of a rate cut next week.

In another sign of these concerns, Rio Tinto this morning said it would slash spending by $5 billion by the end of 2014.

Despite the slowdown in the mining investment boom, actual capital investment across the economy had still risen 14.2 per cent in the past year to $42.5 billion.

However, the yearly pace of expansion is much slower than the 27.4 per cent growth recorded in the previous quarter.