RBA Keeps Interest Rates on Hold While Capital Expenditures Increase

RBA Interest Rate UnchangedDespite a rise in capital expenditures during the September quarter, the RBA is remaining cautious and the interest rate is still on hold at 2.5%. While the strength of capital expenditure is good news for investors, the RBA is holding interest rates until they are sure that the economy is sustainable.

For the September quarter, capital expenditure rose 3.6% but is still 0.7% lower than in September 2012. Construction expenditures are driving the growth with an increase of 6.3%. The statistical profile in the September quarter benefited from a decrease of 1.4% for the June quarter.

The mining sector rose by 4% for the quarter, which surprised those who are still pessimistic about the resource industry. An even bigger surprise was the manufacturing sector, which stopped a streak of seven consecutive quarters in which expenditures declined with a rise of 2.5%. All other industries combined increased by 3.1%.

Intended Capital Growth

The ABS also asks businesses how much they intend to invest for the coming year. While projected expenditures seldom match up perfectly to actual expenditures, they are an accurate indication of whether companies are growing or pulling back.

The expected expenditures are 3.2% higher than they were last quarter, but they are also 2.2% lower than a year ago.

What It Means to You

We are encouraged by the growth in capital expenditures, especially in the mining sector. Since WA benefits most from mining industry expenditures, we are very encouraged by both the near future and long-term prospects for the WA economy.

As mortgage brokers, we are excited because we feel that the mining industry is proving to be more sustainable than most economists have predicted over the last year. It is no secret that WA owes a lot of its prosperity to the fact that the mining boom insulated us from the worst of the Global Financial Crisis.

Consequently, we feel that WA is on solid footing. We like the combination of higher capital expenditures and lower interest rates. We also think that now is the time for potential buyers looking for home loans in the Rockingham, Baldivis and Kwinana areas to take advantage of reasonable prices and low interest rates before both rise.

Call (08) 9527 1800 today.