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Australia's business investment remains strong, with Australian dollar at 24-year high

Australia's business investment remains strong, with Australian dollar at 24-year high

Australia's business investment remained strong in the fourth quarter, a government agency indicated Thursday, despite rising domestic interest rates and turbulence in global financial markets.
Private new capital spending on buildings and equipment rose 5.1 percent to 20.68 billion Australian dollars (US$19.4 billion; euro12.9 billion) in the final quarter of 2007, from A$19.68 billion in the third quarter, the Australian Bureau of Statistics said.
Spending was up 15.3 percent from the fourth quarter of the previous year, it said.
The increases have come despite a series of interest rate hikes that started in mid-2002. The Reserve Bank of Australia meets next Tuesday and is wide expected to raise interest rates for the 12th time in the series. Earlier this month, the bank raise its key rate 25 basis points to 7 percent, bringing the cash rates to its highest level since 1996.
Partly because of those rate hikes _ which have come amid stagnant or falling interest rates in most other major economies _ the Australian dollar is trading at 24-year highs versus its U.S. counterpart. The unit rose slightly after the spending data was released to US$0.9430.
The Australian dollar is "well above what we were expecting," said Shane Oliver, chief economist at AMP. "It provides a strong lead to national income and suggests business investment overall still remains pretty robust."
Economists on average had expected that spending in the fourth quarter rose 3 percent on a quarterly basis.
"There has been no back-off in business investment," said Michael Workman, senior economist at the Commonwealth Bank of Australia.
He forecast business investment would continue to grow by rates of 11-14 percent per year for some time, more than enough to support solid economic growth.
Australia remains on track to post economic growth of around 3.8 percent in the fourth quarter from a year ago, still well above trend, he said. Fourth quarter gross domestic product will be announced next Wednesday.


Updated : 2021-04-18 02:22 GMT+08:00