Friday, May 27, 2011
If they can, then the hawks have a case for lifting interest rates now, despite almost all the arguments against it. If they can't, then let's preserve our options as the future grows murkier.
Yesterday's Bureau of Statistics survey of business investment reveals a widening gulf between what mining companies say they will invest and what they actually invest. Three months ago, they said they had invested $22 billion in the six months to December 2010. But they told the ABS they would invest $35 billion in the six months to June.
Uh-huh. Well, three months later, we find they invested only $10 billion in the March quarter.
Sure, there was a cyclone and floods, and yesterday's figures are only preliminary. But 2010-11 will be the fifth consecutive year in which mining investment will stop well short of the forecast.
It matters because the miners forecast $83 billion of investment in 2011-12 twice what they're investing now. If they achieve that, it would be by sucking resources from other parts of the economy to clear shortages that limit investment now.
The main story of 2010-11 was that Australia sank back into below-trend growth as interest rate rises forced consumers to tighten their belts. Fitch Ratings reported yesterday that mortgage delinquencies soared in March to 1.8 per cent. Take care.