Australian Business Investment Gains Most in a Year, Boosts Rates Outlook
Australian Private Capital Expenditure, a measure of business investment, surged 5.5 percent in the fourth quarter to register the biggest increase in a year. Economists were forecasting a more modest 2 percent increase ahead of the release. Plant and equipment spending led the metric higher, yielding an impressive quarterly increase of 12.4 percent. The apparent decision to expand production capacity suggests Australian firms are turning more optimistic about future demand, which has potential to translate into greater hiring, wages and consumption – the largest component of overall economic growth. The outcome boosted expectations that the Reserve Bank of Australia will raise benchmark interest rates at next week’s monetary policy meeting, with a Credit Suisse gauge tracking the markets’ priced-in outlook rising to show traders now see a 53 percent chance of a 25bps increase versus just 30 percent yesterday.
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