Australian businesses' spending plans have recorded their biggest fall since the financial crisis as the recovery in the non-mining sector splutters, in a sign the economy is slowing as the resources investment boom peaks.
The first reading of companies' investment intentions by the Abbott government was well below analysts' expectations and led several economists to lower their forecasts for fourth-quarter growth.
''There are still very few signs that growth is rebalancing,'' HSBC economists Paul Bloxham and Adam Richardson said of the investment estimates, released by the Bureau of Statistics yesterday.
''Clearly, the transition from mining to non-mining-led growth will be challenging.''
Sluggish growth in non-resources industries as mining investment faces its ''capex cliff'' is set to pose a headache for the Reserve Bank and Treasurer Joe Hockey, who recently pledged to lift Australia's growth to 3 per cent, above the official forecast of 2.5 per cent.
The latest figures came on the back of job cuts in the aviation and manufacturing industries.
Companies' reluctance to invest is also borne out in the current earnings season, where dividend payouts remain close to record highs.
Business spending plans for the three months to December fell by 5.2 per cent, the largest drop since 2009 and missing forecasts of a 1.3 per cent slide.
The first estimate of 2014-15 capital expenditure expectations, which provide an early sense of a possible recovery in the non-mining sector, came in at A$124.9 billion (NZ$133.6b), below forecasts of $139b.
The fifth estimate for businesses' spending plans in this financial year was A$167.1b, a 0.8 per cent increase from the fourth estimate.
Economists from Barclays, Citigroup and TD Securities lowered their GDP forecasts for the last quarter of 2013.
The GDP figures are to be published next Wednesday, a day after the Reserve Bank board meets.
Financial markets also lowered expectations of a rise in interest rates in the next 12 months, pricing in just a 4 per cent chance of a 25-basis-point rise.
Earlier this month, markets had priced in a 20 per cent chance of a lift in the cash rate over the next year, after the Reserve Bank moved to a neutral monetary policy stance and flagged a ''period of stability''.
Analysts said the capital spending estimates could lift the chances of a rate cut later this year.
While the fall-off in mining investment - set to plunge more than 25 per cent according to the first estimates for next financial year - was expected, spending plans in the manufacturing sector for 2014-15 were also projected to drop by between 20 per cent and 35 per cent.
- Fairfax Media