After driving growth for several years, mining investment has peaked in Australia and is declining significantly, in line with falling commodity prices, HSBC chief economist for Australia and New Zealand Paul Bloxham says.
The rebalancing of growth away from mining investment was progressing, but only slowly. Low interest rates had sparked greater housing investment and stronger household demand, but the next stage of the rebalancing of growth - a ramp up in non mining business investment - had, so far, been weak, he said.
''This is despite low interest rates, strong population growth and limited investment in recent years: the key ingredients in the usual recipe for a business investment upswing.
''Indeed, non mining business investment has barely grown since 2008.''
However, that was not just the Australian story, but one reverberating around the world, Mr Bloxham said. A major factor had been low business confidence, to which years of uncertainty over the state of the global economy, the domestic outlook and government policy had contributed.
The collection of forward looking indicators of non mining business investment intentions continued to suggest little growth over the coming year.
However, because there was significant ''herd behaviour'' in investment planning, those measures needed to be watched carefully as small changes in sentiment could often presage large swings in investment intentions, he said.
There were also measurement challenges. The often cited ABS capital expenditure (capex) survey showed weak forward looking readings for 2015 16 in February, but only covered about half of all non mining capex and suffered from severe measurement error.
Watching employment trends was also important, as capital investment often went hand in hand with hiring. The recent lift in jobs growth was positive, Mr Bloxham said.
''For Australia's growth to return to trend, greater investment in new capacity will be needed. The level of interest rates does not appear to be a constraint.''
This year's more positive fiscal plans, including support for small businesses, might help lift investment. But, overall, what was clearly needed was a lift in business confidence. How to spark that remained highly uncertain, - although when it came, it usually did so quickly.
