"Falling private sector investment in early 2025 is a canary in the coal mine for Australia's increasingly concerning productivity and growth outlook," said Innes Willox, Chief Executive of industry peak body the Australian Industry Group.
New ABS data shows new private capital expenditure fell by 0.1% in first quarter of 2025 on year-on-year terms. However, the figures for the non-mining market sector point to a much steeper fall of 1.1%.
After a boom immediately following the pandemic, capex growth has been trending down since the start of last year. Investment in equipment and machinery is trailing below the headline indicator, dropping 2.5% in the first quarter of 2025 compared to a year ago.
"The Productivity Commission has recently found that insufficient investment levels are a major drive of the productivity drought afflicting Australia. This data shows their concerns are well-placed, and hopes for a productivity turnaround in 2025 are at real risk," Mr Willox said.
"Of particular concern is the decline in equipment and machinery investment, which is critical to augment labour force productivity. We urgently need this indicator to rise, not fall.
"Uncertainty is a major factor behind falling investment levels. With the economy at a low ebb, regulatory settings in flux and global markets in turmoil, businesses do not have sufficient confidence to make the long-term investments needed for productivity or growth.
"Treasurer Jim Chalmers has recently said that improving productivity will be his top economic priority for this term of government. Getting investment moving in the right direction will be an essential first step to achieve this goal," Mr Willox said.
