Positive undercurrents for for business confidence

While the latest capex figures were weaker than expected, the estimate of future capex in 2015-16 was almost 10% lower than the markets expectations. The big drag here remains mining capex which is seen falling ~37% from the prior year. We remain positive that the undercurrents of reform in China will see benefits to the economy in future years, signalled by a strongly rising stock market. This of course would feed into demand for mining and future mining capex in Australia. Outside of mining, lower rates and stronger property markets should be driving the positive feedback loop for consumer confidence. This will only get stronger as job growth begins to improve, bolstered further by a falling AUD. Forecasted growth in major Australian infrastructure projects (+ ~30% growth over the next 4-5 years) will also help drive improving business confidence over the period.

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