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Monday, 23 March 1998
Page: 1371


Mr Kelvin Thomson asked the Treasurer, upon notice, on 23 September 1997:

(1) Does the Australian Bureau of Statistics expect that private sector new capital investment will be 2.4% below the comparable figure in 1996-97; if so, is his Department reviewing its forecasts of economic growth; if not, why not.

(2) Have stock markets in the Asian region recently collapsed; if so, (a) has his Department made recommendations on the likely impact on Australian economic growth and (b) will the impact on currencies have a negative impact on Australian trade in the region.

(3) Has his Department analysed the probable impact the El Nino effect will have on Australian agricultural output over the next 12 to 18 months; if so, what are the details; if not, why not.


Mr Costello (Treasurer) —The answer to the honourable member's question is as follows:

(1) The most recent data in respect of private sector investment expectations for 1997-98 were published on 26 February 1998 in Private new capital expenditure and expected expenditure to June 1999 (ABS Catalogue No. 5625.0). Based on responses from businesses to the survey conducted in January and February, estimated private new capital expenditure for 1997-98 is $46,074 million. This, the fifth estimate for the 1997-98 financial year, is 5.6 per cent higher than the estimated level of new capital expenditure reported by businesses in the fifth set of investment expectations for 1996-97.

Investment intentions data are not used in isolation to forecast investment. A broad range of factors are considered, particularly the key influences on investment such as the rate of return on the capital stock, capacity utilisation, profitability, and the cost of borrowing. In addition, leading indicators, such as approvals, commencements and finance commitments, are also examined when preparing investment forecasts.

At present, both the investment fundamentals and leading indicators point to strong growth in real business investment in 1997-98. The outlook for business investment, including revised forecasts for growth in business investment in 1997-98, is discussed in detail in the Government's Mid-year Economic and Fiscal Outlook.

(2) (a) and (b) There has recently been considerable instability in some Asian financial markets, particularly in the ASEAN countries (Thailand, Malaysia, Indonesia and the Philippines) and Korea. This instability and its impact on trade and the outlook for the Australian economy are discussed in detail in the Government's Mid-year Economic and Fiscal Outlook.

(3) Drier than normal weather conditions have occurred throughout much of 1997. However, timely rainfall occurred in September, resulting in upward appraisals of winter crop production to around expectations formed at the commencement of the season. In terms of the outlook, the most recent Bureau of Meteorology reports indicate that slightly drier than normal weather conditions are expected to continue into mid 1998. The implications of weather conditions for farm production were addressed in the Government's Mid-year Economic and Fiscal Outlook.