The press has been hot with articles about yesterday's tepid CAPEX figures. Amongst the headlines and froth were articles lamenting the demise of mining capex and the inability of manufacturing and services industries to pick up the slack. How surprising should these figures really be? Interest rates have been at record lows and falling in Australia since the second half of 2013. Cost of capital is unlikely to be the main factor at play. Justin Braitling from Watermark Funds makes the following observations, "A corollary of the low growth/low interest rate environment we find ourselves in, is lower investment. Companies are not investing to sustain growth and are paying out more of their earnings to shareholders instead. Investors in their quest for income are pressuring companies to return more capital via dividends and buybacks." It's a fair point - supported by the charts below. The argument for 'Dividends vs Growth' has been somewhat abstract, however, if more 'alarming' investment figures surface the implications of such a trade-off are likely to become far more tangible. (VIEW LINK)
Cracking article - Chart 2 in that report is a ripper!
The whole report is excellent, the introduction is one of the better pieces of analysis/commentary I have read in a while.