RBA forecasts capex droop in 13-14

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We do have a firm idea about RBA capex expectations for 13-14 — from the Kent speech.

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They are expecting a gradual decline in 2013-14. Say a headline number of 137.5b (nominal, first estimate). I think it must be materially worse than this to get a cut in March.

Post-script: as it turns out, the first estimate for capex in 2013-14 was ~152.5bn, so it looks like the capex droop may be slower than the RBA forecast.

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12 comments

  1. Thanks for this. With mining capex estimates for 2013-14 at $100b, it looks like the RBA forecast is fine at about 7.5% of GDP.

    Manufacturing is dead and investment seems to be dried out completely.

  2. Yes, interesting that manufacturing and other industries capex is falling by a lot more than mining. I’m not sure I have interpreted the data properly, but assuming flat G and NX, doesn’t this mean that consumption and housing investment will need to pick up by at least $15 bn in 2013/14 just to maintain our current sub-trend growth? Given that RGDP only grew at a reasonable rate when capex rose $40 bn from 2011/12 to 2012/13, I think we really need to see a turnaround in consumption plus housing investment of $50 bn in 2013/14 to keep unemployment from rising. I have no idea how realistic that is.

    1. Once you adjust for realisation ratios, the 2013-14 intentions data suggests growth of investment in 2013-14. I am not sure that will occur, but it is notable as it is not what the RBA had anticipated in their Feb SOMP. The first intention is the least reliable, of course.

      1. Estimate 1 for total capital expenditure for 2013-14 is $152,494 million. This is 8.1% lower than Estimate 1 for 2012-13. The main contributor to this decrease was Mining (-11.6%).
        It is the first time since 2008-2009 that we see a fall in estimate 1 for total capital expenditure.

        If you consider Mining only, estimates have been falling since Estimate 4 2012-2013 (4th estimate 2012-2013 lower than first estimate, very rare). Estimate 1 for Mining for 2013-14 is $100,204 million. This is 11.6% lower than the corresponding estimate for 2012-13. I think this matches exactly RBA latest forecast.

        1. You must compare the latest realisation rate adjusted forecast for 2012-13 to the first realisation rate adjusted adjusted estimate for 2013-14. On this basis, there is growth. The issue is that the first 2012-13 estimate was terribly bullish, so the first-to-first comp is distorted — not that it is ever all that meaningful if you are gauging capex growth over the next year.

      2. Then you go into data interpretation and forecasts of forecasts. :)
        Why would the first 2012-13 estimate be terribly bullish, but 2013-14 OK?
        2013-14 realization ratio could be similar to 2012-13 as opposed to previous years.
        Obviously it is hard to forecast but the fact remains that intentions are generally lower than 2012-13. We may find out that 2013-14 was too bullish too.
        It is actually the first time in 4 years that the estimate for 2013-14 is lower than the estimate for the current year, mining included.

  3. One more thing :)

    The current estimate for TOTAL CAPITAL EXPENDITURE for 2012-13 is very similar to the first estimate 2012-13 at ~168b. Actual for 6 months so far is ~$82b, which is spot on to the estimate.

    But first estimate for 2013-14 is $152b. In a declining environment, there’s no reason to expect this estimate to be too low. Estimates are generally too low if business is booming, not if business is consolidating.

    ** It is significant that the estimate for next year is actually lower than the current estimate for the current year, even if it is just the first one.

    1. All fair analysis… It is a complex report, and extracting the signal is an art. Given what we know about how the rba uses the data, i would say for sure that they are not going to downgrade their numbers — which means cuts are a post-May question (earliest).

      And i agree, things are softening – my take is that it is just not quite as much /fast as the RBA had expected.

      1. Yes, I agree, on this data, no rush on more cuts. But if AUD does not drop, more cuts will come. I do not think the RBA will upgrade their mining forecats, we’ll see… I think they’ll be very much bothered by the manufacturing numbers which are literally collapsing, until today’s report they weren’t too bad, and by “Other selected industries” which are flat since 2008-2009.

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