Capital expenditure falls

The markets took a hit on Thursday on the release of disappointing figures showing that business capital spending fell by 11.2 per cent in the December quarter, and fell by 16.2 per cent over the last twelve months.

The major areas where spending decreased was investment in plant, equipment and machinery, signalling a fairly major downturn in manufacturing. It also contrasts sharply with recent surveys, such as the Westpac or Dun and Bradstreet surveys, indicating that business confidence is at a high level at the moment.

Some analysts have taken the news as an indicator of a slowdown in growth, while others still believe domestic demand will pull us through any slowdown. Still others have pointed out that the fall in capital expenditure follows six years of continual growth, and as such, is to be expected.

None the less, it would appear that the current domestic data indicates that any interest rate movement is likely to be down, or at least, holding at the current rate.

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