The decline in Australian manufacturing is likely to weigh on the recovery in business investment over coming years, Reserve Bank governor Dr Philip Lowe has warned.
Speaking ahead of today's release of official economic growth figures, Dr Lowe signalled that non-mining investment will eventually account for a lower share of gross domestic product (GDP) than once was the case.
"This largely reflects the decline in manufacturing as a share of the economy and the fact that the ratio of investment to output in the manufacturing industry is higher than in most other industries," Dr Lowe told a business forum in Sydney.
"We estimate the shift away from manufacturing could reduce the steady-state ratio of non-mining business investment to GDP by 1 to 2 percentage points."
Economists are forecasting steady growth of 0.6 per cent and 2.5 per cent growth over the year when the Australian Bureau of Statistics (ABS) releases official figures for the December quarter at 11:30am (AEDT).
Mining maintenance and infrastructure boost spending
However, Dr Lowe is now predicting a decline in overall investment in Australia's economy even though investment in the resources sector is likely to remain higher than it was before the mining investment boom.
"We are already seeing some evidence of this with increased spending on sustaining capital stock being one of the factors behind the recent improvement in the Western Australian economy," Dr Lowe said.
Dr Lowe said factors such as the decline of manufacturing and the rise of service industries showed "the nature of investment in the Australian economy is changing."
Dr Lowe said Reserve Bank research showed that non-mining business investment increased by around 9 per cent in 2017.
"This is stronger than we were expecting a year ago and would be the largest increase since the global financial crisis," he said.
Dr Lowe added that there has been strong growth in public infrastructure spending, particularly for transport in eastern states where "the pipeline of work to be completed is large."
In positive comments, Dr Lowe said the RBA's business liaison shows that firms are investing more to meet extra demand from the infrastructure projects.
IT professionals benefit from rising tech spend
Dr Lowe also highlighted the greater importance of information technology to increase productivity.
"Increasingly investment decisions ... are also just as much about technology as they are about other things. Businesses are having to make investments in information technology to remain competitive," Dr Lowe said.
As a result, Dr Lowe said there has been a pickup in wages growth in professional, scientific and technical roles as part of the additional investment and demand for special labour.
The Reserve Bank yesterday left the cash rate on hold at 1.5 per cent as expected, retaining the level set in August 2016.
Dr Lowe repeated that, while interest rates remain "still quite low", the next move would probably be up rather than down.
Follow Peter Ryan on Twitter @peter_f_ryan.
Bagikan Berita Ini
0 Response to "RBA lowers economy's investment outlook on manufacturing decline"
Post a Comment