Australian Capex Powered by Renewables, Backing Hawkish RBA Tilt

dw[vsbocn3lq9pcc)6oltwus_media_dl_1.png ABS, RBA

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(Bloomberg) — Australian business investment rose more than expected in the final three months of last year, buoyed by a surge in renewable energy projects and suggesting the economy was on a solid footing before the Reserve Bank raised interest rates this month.

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Private new capital expenditure advanced 0.4% in the fourth quarter, confounding expectations for a flat result and leaving spending almost 8% higher than a year earlier, Australian Bureau of Statistics data showed Thursday. The figures will feed directly into gross domestic product for the period that’s due next week. 

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The pickup reinforces the central bank’s assessment that domestic activity remains firm, underpinned by a tight labor market and persistent price pressures. The RBA next meets on March 16–17 and is widely expected to keep the cash rate at 3.85%, with markets and economists assigning the next real chance of a hike in May.

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Spending on buildings and structures climbed 2.3%, driven by large electricity, gas, water and waste projects, ABS head of business statistics Tom Lay said in a media release. 

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“Business investment in battery energy storage systems featured strongly this quarter,” Lay said. “Spend on wind and solar developments also remained at an elevated level.”

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By state, South Australia posted the largest gain, up 4.8%, followed by Western Australia and Victoria.

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The data will be welcomed by policymakers who have long bemoaned weak private investment as a drag on productivity. Stronger business investment is necessary to help lift the supply capacity of the economy, allowing for faster growth without fueling inflation pressures.

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Today’s result aligns with a record quarter for newly commissioned renewable projects and big batteries, according to the Clean Energy Council, highlighting renewed momentum in Australia’s energy transition.

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Australia is pushing to replace aging coal-fired generation and cut emissions in line with its international commitments. Canberra has pledged to reduce emissions by 62%–70% below 2005 levels by 2035. 

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Australia in December passed sweeping changes to national environmental laws, tightening nature protections while aiming to streamline approvals for major projects in renewable energy and mining — reforms intended to unlock more large-scale investment.

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That momentum is reflected in firms’ forward plans. Investment intentions for the 2026–27 fiscal year rose 7.3% from 12 months prior to A$158.4 billion ($113 billion). For the current year ending June 30, businesses expect to spend almost A$200 billion — 4.3% more than estimated three months earlier, according to the ABS.

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The gains in renewables were offset by a 1.7% fall in equipment and machinery spending, following record high investment from data centers in the previous quarter, Lay added. Information media & telecommunications led the weakness, down 30.1%, the ABS said.

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