By the numbers: money goes underground, not in the cloud

Despite the economic gloom, capital expenditure (capex) is on the rise in Australia, but the growth is in the mining sector.

Despite the economic gloom, capital expenditure (capex) is on the rise in Australia, but the growth is in the mining sector. IT-related companies are reducing their level of capex spending, showing a lack of confidence in the sector.

Figures from the ABS make gloomy reading for anyone hoping that this country — a land of early adopters — will use technology to drive future growth. We've already seen how productivity here is low compared to other lead nations and how part of the issue could be a failure to invest enough in technology. And we've seen how the ICT sector is attracting a smaller proportion of private equity funding. To add to the sorry picture, new figures from the ABS show how the sector is reducing its capital investment.

Capex spending is an important economic indicator. If it falls, you know the private sector is not investing in its future. Growth becomes a lower priority than survival. Fortunately, 2011 saw capital expenditure increase by 29 per cent in Australia, but a big slug of that is accounted for by an 80 per cent hike in spending by the mining sector. In June 1987, the resources sector accounted for 15 per cent of all capex; today it accounts for more than half of all spending.

(Credit: Phil Dobbie/ZDNet Australia)

If ever you wanted a clearer indication of a two-speed economy, this is it. Finance is available for expansion, so long as your business involves digging something out of the ground. The amount of capital expenditure in the information, media and telecommunications sector (unfortunately, the ABS doesn't break it down any more than that) has actually fallen 16 per cent since March 2008.

We often talk about information technology as the next industrial revolution, yet investment in the sector is showing no sign of growing. Then again, if you were a bank trying to reduce risk, would you lend to a mining magnate or a fledgling IT company? Could the success of our mineral exporters be preventing some funding reaching the IT sector? Is the government so contented with our export figures that it doesn't see an issue here?

There's already the fear that we're suffering from Dutch Disease, where the high exchange rate brought about by mineral sector makes other industries fail as overseas demand slips away. Could an overheated resources sector, by grabbing more than half of all available finance, also be ruining our only future-proof chance of a sustainable economy?


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