Upswing broadens as businesses join the consumer
Private capex surprised on the upside growing 6.4%qtr and 6.9%yr in the September quarter 2025. There was a broad-based lift in actual and expected capex as businesses respond to the firmer consumer and the fall in machinery prices. This suggest the economic upswing is broadening.
Private capex surprised massively on the upside, growing 6.4%qtr and 6.9%yr in the September quarter 2025, compared to the 0.5%qtr expected by Westpac Economics and the market consensus. This was the strongest quarterly growth since the back end of the mining investment boom (March 2012) outside of the Covid pandemic.
Investment in new machinery, which will flow through to next week’s National Accounts, lifted 11.5%qtr – the strongest gain in over two decades since the December quarter 2004. While the increase was led by equipment for data centre and transport experiment (or aircrafts), there was a broad-based pick up with consumer facing industries, including accommodation & food services and recreational services also recording solid growth over the September quarter. Investment in buildings and structures grew 2.1%qtr in total and 3.6%qtr in the non-mining sector, with the increase also being broad-based across different industries.
Looking ahead, CAPEX plans not only suggest that this level of investment will be maintained, but that there could be more growth over the remaining three quarters of FY2026 – pointing to an inflation-adjusted (or real) lift of around 7.0% in year average terms.
What does this mean for next week’s National Accounts?
Today’s capex numbers, coupled with yesterday’s construction work done outcome, point to significant upside risk for business investment in next week’s Q3 National Accounts.
The question remains, how much of this rise will be offset by higher imports? While uncertain, in our view around half of the impact on GDP will be lost through imports, mainly relating to the 200% increase in civil aircrafts imports in Q3 (nominal terms). We are not expecting much more leakage outside of this, as capital imports excluding civil aircraft (which include telecommunications equipment and ADP equipment) declined around 0.7%qtr in Q3 – this suggest a large bulk of the new machinery was imported in previous quarters or produced/improved domestically, pointing to upside risks to next week’s GDP outcome.
Our GDP Preview will be published tomorrow, and we will update it once the final partials land early next week.
What about inflationary pressures?
The machinery deflator has fallen 2.3% in six-month annualised terms – sharpest fall since 2017 outside of the Covid pandemic. Some of this likely reflects changing trade patterns and excess capacity in China which has seen producer price deflation for two years. This disinflationary impulse will help keep inflationary pressures contained going forward, while also encouraging businesses to continue to invest in their capital stocks.
Industry detail
Non-mining capex rose 8.6%qtr, the steepest in almost sixteen years. The strength was broad-based among major categories, but most of the impulse came from machinery and equipment, which surged 13.0%qtr after moving broadly sideways for a while. Buildings and structures category also rose firmly, by 3.6%qtr, extending its steady upward trend seen in the last year or so.
Mining capex rose 0.9%qtr reversing a drop of a similar magnitude in the June quarter. Buildings and structures decreased by 0.4%qtr, but machinery and equipment rose 4.5%qtr, the steepest in around three years. The increase likely reflects efforts in the mining sector to expand capacity where profit margins have been particularly attractive, given high prices of key commodities, such as iron ore and gold.
Looking at the industry breakdown, the biggest stand out was machinery and equipment capex in the information and telecommunications – having risen by more than 40% in the four quarters up to Q2 2025, it has now almost doubled in one quarter, to leave the overall capex in this category rising 40.7%qtr. As we highlighted in the past, structurally driven industries have been the major source of capex growth recently, with investment in data centres and IT equipment taking a centre stage, and this trend seems to have accelerated further. Interestingly, other categories that we previously placed in this camp – the utility sector, which reflected transition to cleaner energy sources, and professional and scientific services, which facilitated some of these structural trends – did not do as well. The latter sector saw capex falling by more than 11%qtr, while the former reported a 1.0%qtr increase.
Among other sectors, we have been looking for evidence that firmer private domestic demand is starting to support investment in more cyclically sensitive sectors. On this front, today’s data provided some encouraging signals. For example, transportation rose 23.4%qtr, wholesale trade increased 8.7%qtr, while accommodation and food capex was 16.0%qtr higher. Although some other sectors such as retail trade, financial, and healthcare reported a decline in investment, they followed significant increases in the prior quarter. Overall, while the information and telecommunication technologies remain the dominant force, the industry profile seem to be consistent with broadening economic recovery.
Capex spending plans
Alongside the capex data, the ABS also publishes businesses spending plans for this financial year, which allows us to assess how the capex spending is likely to evolve over the coming quarters. Usually, those plans tend to have a bias, with companies first estimates usually erring on the side of caution. Over time, business tend to revise their plans higher. We apply historical ratios of plans to actuals which allows us to get more realistic capex estimate in the year ahead.
Alongside the surge in the Q3 capex, companies indicated a significant upward revision to the investment plans in FY2026. The unadjusted estimate 4 was $191.3bn, which represents an increase of 7.6% from the equivalent estimate produced a year ago. This is signalling a much stronger growth outlook ahead in comparison to the prior estimate, which showed only a 3.0% lift. Given how these estimates evolved historically, they imply FY2026 nominal capex spending of around $206bn, which would represent a 9% increase on the FY2025 outcome. It is worth highlight that today’s capex estimate for Q3 feeds into the calculation for the full financial year, lifting its starting point. From there our assumed profile implies normalization of the capex growth closer to recent norms.
Price effects usually play an important role in the capex plans, as they are provided in nominal terms. Capex deflator has been signalling easing inflationary pressures after the pandemic. Growth rates have been a bit more stable in the last year or so at around 2.5%, falling to 2.0%yr this quarter. We think that the deflator will remain at similar levels going forward, so FY2026 full-year growth should also be around 2.0%yr. Alongside 9.0%yr nominal growth indicated by the capex plans, the deflator estimate implies 7.0%yr real capex growth, a large upward revision from our previous expectation of only 1.2%yr growth.
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Australia and NZ Weekly 24 November 2025
Australia and NZ Weekly 24 November 2025
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