Australian Private Capital Expenditure for the April to June quarter of 2025 showed a 0.2% increase quarter-on-quarter. This was below expectations of a 0.7% rise, but an improvement from the prior quarter’s 0.1% decline.
Capital Expenditure Categories
Building Capital Expenditure increased by 0.2% compared to a 0.9% rise in the previous quarter. Plant and Machinery Capital Expenditure saw a 0.3% increase, recovering from the prior quarter’s 1.3% decline.
Estimate 3 for 2025-26 projects capital expenditure of $174.8 billion. This is a 12.0% increase from Estimate 2 for the same period.
The weak headline capital expenditure figure is a disappointment, suggesting current business investment is soft. This could put immediate, short-term pressure on the Australian dollar as it points to a weaker contribution to Q2 GDP. The miss against the +0.7% expectation will likely overshadow the other details initially.
This report complicates the picture for the RBA, which has been holding the cash rate at 4.35% to combat inflation that is still above its target. The softness in current spending argues against any further rate hikes and could lead traders to price in a longer pause. Consequently, we could see a slight rally in short-term bond futures as the market pushes back the timing of any potential tightening.
Positive Future Outlook
However, the significant 12.0% upgrade in spending plans for the next financial year is a major positive signal. It suggests businesses are confident about future demand, likely supported by iron ore prices that have stabilized above $110 per tonne and ongoing energy transition projects. This forward-looking strength should limit any significant downside in the ASX 200, particularly in the resources and industrial sectors.
This mixed data creates a tricky environment, suggesting range-bound trading for the AUD/USD pair in the coming weeks. Traders might consider strategies that benefit from this uncertainty, like selling options to collect premium, assuming the currency stays caught between the weak present and the strong future outlook. This reminds us of the pattern in late 2024 when weak data was consistently offset by strong commodity exports, creating a choppy but ultimately sideways market.
