RBA predicts rising business investment

RBA predicts rising business investment

The Reserve Bank of Australia expects businesses to significantly increase capital expenditure this year, particularly in the resources sector.

In the minutes to the bank's latest board policy meeting, published on Tuesday, the RBA said the outlook for spending in the commercial building construction sector had improved as well.

The resources sector is forecast to increase business investment to a level that is unprecedented as a share in GDP, the RBA said.

Economic data also suggests that business investment increased slightly in the December quarter.

At the March 1 meeting, the RBA decided to leave the cash rate unchanged at 4.75%.

The Queensland floods are having an undeniable impact on the economy, the RBA said, and may take around half a percentage point from growth in both the December and March quarters. But the effect on aggregate agricultural production is expected to be comparatively small.

The RBA also noted that profits and returns on equity were finally back to near pre-crisis levels for the largest Australian banks, and the retail sector is also showing signs of recovering from the subdued spending of late 2010.

Employment meanwhile improved in January, with the unemployment rate remaining at 5%, and projections indicate solid employment growth over the coming year.

The RBA also said the global economy was continuing to recover at an above-trend rate, with most of Asia expanding strongly. But this meeting took place before the Japanese earthquake, which is having a significant effect on financial markets.

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Tags economyCAPEXReserve Bank of AustraliaQueensland floods

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