Here are what a couple of the top investment banking economists have said in response to today's extraordinary capex intentions data:
UBS's Scott Haslem:
"[T]he more important story today lies in the intentions data. For the current year, adjusting the expectations (5th est $128.9bn, up from $124.4bn…a slightly above average upgrade, see charts), the data implies y/y growth for 2010/11 of 23.5%, up slightly from 22.5% from the 4th estimate…so steady as she goes for circa 20% capex growth this financial year. More interestingly, the first estimate for the next year, 2011/12 was nothing short of 'huge', at $132.72bn (UBSe +$112bn), this implies growth (off a high base) of an additional 37.8%...the highest 1st estimate implied in at least a decade. Of significance (a view we have had for a while) is that the capex is also showing signs of broadening out beyond just mining, with intentions in 10/11 for mining easing from 60% y/y to 50%, but rising to 10% from 3% ex mining and manufacturing. For 2011/12, mining intentions remain most of the story (at +92%y/y), while manufacturing is 2.5%, and other 3.8%)."
JP Morgan's Stephen Walters:
"Today’s business investment survey for the December quarter included upgrades to firms’ near term spending intentions and even more upbeat longer-term investment plans. It indicates that the resources boom will be much larger, and extend for longer, than previous such experiences. When coupled with what RBA Governor Glenn Stevens yesterday described as the largest terms of trade boom since Australia’s federation in 1901, the medium term outlook for Australia’s already healthy economy continues to improve. The current strain on resources, therefore, will intensify.
Yes, consumers are cautious (for now) and the floods (and cyclone) punched a hole in growth in the current quarter, but there is a massive wall of income and new investment spending poised to hit the economy. Consumers ultimately will benefit via even stronger employment growth (on top of record gains last year)...in our view, the RBA needs to stay in front of this unprecedented phenomenon to cap the medium term inflation risks."
