Wayne Swan's belated budget surprise
The federal budget's predictions for mining investment in the new financial year were wrong – Wayne Swan has been too conservative by a margin of 10 per cent.
The highlight of today's private capital expenditure release from the Australian Bureau of Statistics is that the resources capex boom is even bigger than promised.
While the Treasury estimated that we would invest $76 billion in 2011-12 to get stuff out of the ground, the resources companies have told the ABS they'll spend $83.3 billion. And they're still counting.
Total capex next year is estimated at $139.54 billion – let's round it up to $140 billion as the trend has been for the final spend to end up higher than what the CFOs estimate in the March quarter of the previous year.
Not all industries at this stage intend to increase their capex investments though. Given the current currency pressure, manufacturing expects to spend $11.9 billion in the new year, down from $12.2 billion when the current financial year is totalled.
Not dead yet
To keep that in perspective, the latest estimate for the new year is in line with what the manufacturing CFOs were saying at 2010-11 at the same time. Capex for the manufacturing sector looks like being more-or-less steady, give or take a billion, for the sixth year in a row. Not much evidence in that of Australian manufacturing disappearing.
The broad “other selected industries” category fares worse with the 2011-12 estimate of $44.8 billion down on the 2010-11 estimate of $60.6 billion. At a time of rising utilities costs, it appears that the sub-sector most responsible for that fall is electricity, gas, water and waste services. But again, the March quarter estimate is pretty much in line with last two years.
What makes the capex survey such an important ABS release is its forward-looking nature.
Every day the ABS churns out all sorts of very valuable information about the past, leaving it to those with crystal balls to draw inferences for the future, but this one tells us what the CFOs are actually planning.
And CFOs, often parsimonious sods by nature and trade, have a tendency to underestimate the next year's spend. This time, it really does look different, obviously led the resources sector.
Blame the weather
Those who miss the point and want to concentrate on bad news might highlight the dip in expected capex this financial year. With a quarter to go, the estimate is $124 billion, down 4 per cent from three months ago, but still a clear record high.
A 10 per cent decrease in the mining sector estimate is the main cause - weather would be the main suspect for that - but the plans for 2011-12 more than make up for it.
Spending in the manufacturing and buildings and structures categories also are down on the estimates made last quarter, but that's a relative quibble with the overall message: the capex boom riding on the back of the commodities boom is on track and growing ever more robust.
The big fundamental fact that is at the core of fiscal, monetary and labor force policy shows no sign of faltering.
Michael Pascoe is a BusinessDay contributing editor