Australia Business Investment Slips, Spending Peak in Sight

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Australian business investmentsuffered a surprise fall last quarter as firms outside thered-hot mining sector cut back, while estimates of futurespending confirmed the long boom in resource investment waslikely to crest this year.

The Australian Bureau of Statistics reported private capitalexpenditure fell 1.2 percent last quarter, confounding forecastsof a 1 percent increase. Total spending amounted to A$41 billion($41.9 billion), which was still 10 percent higher than in thefourth quarter of 2011.

(Read More: Australia Central Bank Saw Scope to Ease If Needed, Policy Already Loose-Minutes)

A closely watched estimate for spending in the 12 months toJune 2014 came in at A$152.5 billion, which would be a slowdownfrom the A$168.2 billion expected for 2012/13 but still a majorsupport for the A$1.5 trillion economy.

"The first estimate of $152 billion is quite good. Thatshould give the Reserve Bank some relief. Although the peak isin mid-2013, the follow-on from that will be quite mild," saidJoshua Williamson, a senior economist at Citi.

(Read More: What Aussie Earnings Season Says About the Economy)

"So we're not looking at an investment cliff, more a gentleslope."

Investors seemed to have been braced for a weaker result,and after an initial dip the Australian dollar rallied back to$1.0242 . Interbank futures slightly lengthenedthe odds the Reserve Bank of Australia (RBA) would cut interestrates its March policy meeting next week.

(Read More: Australian Central Bank More Upbeat, Notes Low Rates)

The central bank has repeatedly highlighted the importanceof the data for the outlook for rates, both for the insight onwhen the boom in mining investment might finally peak and onwhether spending outside of mining will strengthen enough tooffset it.

The central bank cut rates to a record-matching low of 3percent last year in large part to encourage a recovery innon-mining investment, and particularly home building.