Recent data from NAB Group Economics suggests underlying business investment will rise modestly in 2017 before picking up the pace in 2018 and 2019.
The Australian economy appears to be “gaining momentum” in the near term, according to the NAB Monthly Business Survey for March, and while confidence has been “muted”, it has held steady at a strong level, NAB said.
“Of relevance to business investment more specifically, capacity utilisation rates rose in the month, while the survey’s indicator of capital expenditure improved on already solid levels,” the bank said.
NAB cautioned, however, that demand for credit had receded over the past three months and that this could be an indicator the demand for credit has receded in the previous three months, suggesting that firms are facing difficulties in obtaining credit.
Business data from the Reserve Bank of Australia was also “disappointingly weak” since the start of 2017, NAB said.
“Other timely indicators of capital expenditure still suggest that firms are reluctant to pull the trigger on big ticket items, despite record low interest rates, an improving global economic environment, and consistently above average business conditions,” the bank said.
NAB said its Quarterly Business Survey found that expectations for capital expenditure had remained positive, but the ABS Private Capital Expenditure Survey indicated a slowdown in the non-mining investment recovery in 2017 and 2018, resulting in mixed expectations for the longer term business outlook.
Consequently, the bank said it expects business investment to grow 1.2 per cent in 2017, before improving to 5.5 per cent and 6.5 per cent in 2018 and 2019 respectively.