Australian companies are cautious and their investment plans show they expect difficult economic conditions to continue next year, Australian Treasurer Wayne Swan said yesterday.
Company spending for the fiscal year will probably contract for the first time in nine years, even as sentiment shows some recent gains, Swan said in a weekly newsletter.
While federal and state stimulus programs are helping maintain construction jobs and spending, a report released on Thursday showed private investment in buildings, plant and equipment fell 3.9 percent in the third quarter, he said.
Australia’s government is under mounting opposition pressure to peel back the A$42 billion (US$38 billion) stimulus faster as the economy recovers and interest rates rise toward pre-crisis levels.
The central bank has increased its benchmark rate twice since last month and will probably increase it to 3.75 percent tomorrow, 18 of 20 economists surveyed by Bloomberg News said.
“Things have picked up, rebounded, but they haven’t fully recovered,” Australian Industry Group chief executive officer Heather Ridout said by telephone yesterday.
“People are very cautious still, even though they are seeing better levels of orders. People still aren’t confident the economy can stand on its own two feet,” he said.
Australia’s economy expanded 1 percent in the first half of the year, aided by a rebound in demand for the country’s iron ore, coal and natural gas.
The Reserve Bank is forecasting growth of 3.25 percent next year and in 2011.
Still, while mining companies increased investment by 3 percent in the third quarter, manufacturers slashed spending by a record 13.4 percent.
“It’s patchy,” Ridout said. “Those capex figures were a bit of a reminder.”
Business investment intentions remain 7.7 percent lower than the same estimate for last year and this year and imply a contraction in spending for next year and 2010, Swan said.
Those “numbers underscore the continued importance of our infrastructure stimulus, which is working to support investment in our economy and activity and jobs,” he said.
Next year presents challenges that “will be just as difficult as the ones we have faced over the past year,” he said.
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