A capex reset, not a shutdown
Private capex surprised on the downside, falling 3.6%qtr in the June quarter 2026, although remaining up a solid 10.7%yr. Machinery and equipment led the decline as information media and telecommunications unwound part of last quarter's surge, while buildings and structures provided support.
Private capex surprised materially to the downside, falling 3.6%qtr in the June quarter 2026. Despite the decline, investment remained 10.7% higher than a year ago, while the March quarter result was revised up by 0.4ppt to 6.9%qtr. Today's outcome was the weakest quarterly result since June 2020 and came in below our expectation for a flat result and well-below that of market consensus of a 0.8%qtr rise.
The decline was driven by machinery and equipment (M&E), which fell 8.9%qtr. As expected, information media and telecommunications unwound part of last quarter's exceptional strength, although the magnitude exceeded expectations, with M&E investment in the industry falling 53%qtr. Even so, M&E investment in the sector remains exceptionally strong, up 93.5%yr. Excluding information media and telecommunications, total M&E investment rose a solid 3.2%qtr. By contrast, buildings and structures increased 2.1%qtr and provided support to the headline result.
Looking ahead, spending plans continue to point to a significant acceleration in investment through FY2027, with real capex growth of around 16%yr expected. Information media and telecommunications is likely to remain a key driver, with short-term expectations in the June quarter running 92% above equivalent levels a year earlier.
What does this mean for next week’s National Accounts?
Today's result points to a downside risk to our Q2 2026 GDP nowcast, although the drag on activity is likely to be less pronounced than the headline capex figure suggests. The weakness was concentrated in the import-intensive machinery and equipment component of information media and telecommunications, much of which would net out of GDP. Excluding that segment, total capex rose 2.6%qtr.
What about inflationary pressures?
Capex price pressures have re-emerged, with the headline deflator rising 1.0%qtr following a 1.1%qtr decline in the March quarter. The machinery and equipment deflator was flat in Q2, ending a year of consecutive declines, although it remains down 4.6% in six-month annualised terms. The modest reacceleration in prices likely reflects a reduced disinflationary impulse from imported capital goods. ADP equipment imports fell 26%qtr in Q2, limiting the pass-through of lower-priced imported equipment that weighed on prices over H1 2026.
Industry detail
Mining capex supported the headline, rising 1.6%qtr. Machinery and equipment led the increase, up 5.4%qtr, while buildings and structures were broadly flat, down 0.1%qtr. Non-mining capex fell 5.3%qtr but remains 13.8% higher over the year. The decline was driven by machinery and equipment, down 11.3%qtr, while buildings and structures rose 3.3%qtr.
As anticipated, information media and telecommunications was the primary drag on the headline result, falling 30.2%qtr, its largest quarterly decline since 2002. Leading indicators had been mixed, with ‘other commercial building’ approvals remaining elevated through H1 2026 while trade data pointed to a sharp pullback in ADP equipment imports. The divergence between asset classes remained clear. Buildings and structures rose 17.7%qtr, extending growth into an eighth consecutive quarter, while machinery and equipment fell 53%qtr, subtracting $3.1bn from headline capex. The result highlights the volatility associated with large-scale data-centre investment. Despite the quarterly correction, total investment in the industry remains up 76.8%yr and the sector remains the second-largest source of capex behind mining, suggesting the broader data-centre build-out continues at pace. The sector's contribution to aggregate investment is increasingly reminiscent of the early stages of the mining investment boom, with movements in information media and telecommunications continuing to dominate overall capex outcomes.
Elsewhere, professional, scientific and technical services also weighed on the headline, declining 12.0%qtr. Machinery and equipment fell 16.3%qtr, partly offset by a 17.2%qtr rise in buildings and structures. Offsetting some of this weakness, transport and construction recorded strong gains of 16.5%qtr and 16.1%qtr respectively. In both industries, machinery and equipment outperformed while buildings and structures were weaker.
Electricity, gas, water and waste returned to growth, rising 5.5%qtr following a 6.3%qtr decline previously. Buildings and structures increased 7.8%qtr, while machinery and equipment fell 14.1%qtr. The ABS attributed the rise to the commencement of several large projects during the quarter. The sector is likely to remain supported by the energy transition and growing infrastructure requirements associated with expanding data-centre capacity.
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 a methodology, that takes historical ratios of plans to actuals alongside business conditions which allows us to derive a more realistic capex estimate in the year ahead.
Full-year nominal FY2026 spending came in at $210bn, exactly in line with our expectations. A somewhat stronger-than-expected deflator saw real capex growth come in at 10.2%yr, slightly below our 10.7%yr forecast.
Estimate 3 for FY2027 was $201bn, above our expectation of $195bn. The improvement comes alongside a marked recovery in business confidence through Q2. Estimate 3 recorded 14.8% above the equivalent estimate a year ago and 15.5% higher than Estimate 2. Based on the historical profile of estimates, this implies nominal capex of around $247bn in FY2027, representing growth of 17.9%yr.
Price effects continue to appear contained, with the capex deflator flat in year-ended terms. However, this largely reflects base effects following the sharp decline in prices earlier in 2026. While we expect the deflator to increase through FY2027, a still-elevated AUD and the import-intensive nature of data-centre investment should keep price pressures relatively subdued. Combined with nominal growth of 17.9%yr, this implies real capex growth of around 16%yr, which would be the strongest outcome since the mining investment boom in FY2012.
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Australia and NZ Weekly 24 August 2026
Australia and NZ Weekly 24 August 2026
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