BUSINESS investment in the non-mining economy has shrunk to its lowest share of gross domestic product for almost 40 years, as a result of the high dollar and appears set to fall lower still.
The Bureau of Statistics estimates that in the nine months to March, business investment in manufacturing and services such as finance, retailing and IT fell to 4.95 per cent of GDP, its lowest level since 1972-73.
The bureau's quarterly survey, taken in April and May, found companies plan to invest even less in 2012-13. Manufacturers' investment plans were 11 per cent lower than at the same stage last year, while service companies' plans were down 4 per cent.
Even if these plans are upgraded as usual over the year ahead, the survey implied that non-mining business investment would shrink, to about 4.5 per cent of GDP.
That would take it back to levels last seen 60 years ago, in the savage bust that followed the Korean War boom.
The bureau figures were published weeks ago, but escaped attention, as analysts focused on the mining industry's record investment plans. At face value, two-thirds of all business investment in Australia this financial year will be in mining, and just a third in all other industries combined.
The Reserve Bank reported last week that in 2011, more than half of Australia's growth in GDP came from mining investment. Since the entire economy grew just 2.1 per cent, that implies growth in the rest of the economy was barely 1 per cent.
The Reserve voiced concern that the high dollar is doing more damage to the economy than it anticipated. While mining is booming, the Reserve reported that activity in the rest of the economy is subdued.
"In liaison, many firms indicate that they are slowing their investment spending in line with weaker cash flows, and are becoming more selective about which projects to pursue," it said. "Many companies [are] prepared to spend on machinery and equipment investment [only] to the extent necessary to offset depreciation."
The bureau figures show investment by non-mining companies has now slid well below its worst levels in the 1990-01 recession.
Non-mining investment between 1987 and 2000 averaged 6.6 per cent of GDP, as companies built new offices, hotels, retail complexes, or re-equipped factories, truck and car fleets or equipment hire centres.
But since 2010 it has ebbed as mining investment has boomed. Manufacturing investment, which averaged 3.4 per cent of Australia's GDP in the 1960s, has now slumped to less than 1 per cent, with much of that invested to process minerals before export.
