Annual growth in new business investment

Business investment to remain solid

Business investment should grow solidly in 2003-04, after very strong growth in 2002-03. Despite considerable global uncertainty, the fundamental drivers of investment are sound. Profits and cash flows are solid. Many businesses are operating at close to capacity. Interest rates are low and corporate balance sheets are sound.

Fundamentals strong

Business investment is forecast to grow solidly in 2003-04, after very strong growth in 2002-03. It is expected to be one of the key drivers of economic growth.

Global weakness and uncertainty have tempered the near–term outlook. However, the fundamental drivers are supportive of strong growth in business investment once some of the uncertainty clears.

Profits and cash flows are solid; many businesses are operating at close to capacity; interest rates are low; and corporate balance sheets are sound. Business confidence has held up well considering the global backdrop.

Plant and equipment investment is expected to be strongest in the mining, manufacturing and transport sectors. Buildings and structures investment is expected to be strongest in engineering construction, which includes investment in minerals processing, and transport infrastructure and utilities. Several large projects have commenced or are just about to commence. The value of engineering work yet to be done is the highest on record.

Business investment provides increased capacity to produce goods and services in the future. It often replaces older stock and incorporates newer technologies, helping to increase efficiency and boost productivity. As such, it lays a solid foundation for future economic growth.

The strong growth in investment is a vote of confidence by Australian businesses in our economic future.