Recent surveys of Australian businesses indicate that last year’s high levels of business spending may well continue into 2006-7, driving economic growth and more than compensating for the recent fall in consumer spending. 

The Australian Bureau of Statistics has reported that business investment, particularly on capital and equipment, is likely to remain high over the next year, with firms expected to spend $52.7 billion, a figure which is 17.6% higher than the corresponding estimate for 2005-6.

However, actual business spending on capital and equipment in 2005-6 exceeded the Australian Bureau of Statistics estimate by 38%, with total expenditure for that year being expected to reach $67.2 billion. This will be the highest rate of business spending ever experienced in Australia.  

Economists now believe that business spending will remain high in 2006-7 but will be a little lower than last year, partly because some companies brought forward their planned projects into 2005-6 to meet concerns about rising fuel and labour costs.

The latest Dun & Bradstreet Business Expectations Survey (November 2005) supports this view, revealing that employers are optimistic about the economic outlook for 2006, and that the majority expect to maintain their level of spending.

The very high level of business spending last year was largely accounted for by some very large mining and transport projects, with transport and storage companies exhibiting a 45% increase in spending, and mining companies a 16% increase, while the construction sector increased its spending by 20%.

Australia’s banks have been quick to respond to the increased demand for business finance by expanding their branch networks and business loan facilities. For small businesses, government loans and grants are also on offer.