The March quarter private capital spending figures released today by the ABS confirm that Treasury was right to make conservative, sub-par growth forecasts in developing the Federal Budget. Queensland Treasury will have to do the same in the Queensland Budget, which is being released next Tuesday 4 June. The economy will clearly be impacted by declining private capital spending, which fell 11.1% in the State in the March quarter – compared with a fall of 4.2% nationally – largely related to declining mining sector investment (see chart below). The Queensland Budget delivered next Tuesday will have been developed in a challenging environment, and hence it’s even more important to rely on asset sales to pay down debt, rather than cutting spending or raising taxes, which would adversely impact an already sub-par economy. We will need to wait and see whether the recovery in non-mining building activity reported yesterday will be sufficient to offset the contractionary effect coming from the decline in mining investment.

For other coverage of today’s capital expenditure figures, see:

CAPEX falls again but it’s not all bad

Actual capital expenditures fall sharply on mining