Australian businesses to spend $52bn on equipment in 2017

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Australian businesses to spend $52bn on equipment in 2017

equipment equipment
Francesca Krakue 2 minute read

Businesses’ asset acquisition intentions, particularly in Western Australia and Queensland, have seen a significant increase recently according to a non-bank SME lender.

The latest findings from the Alleasing Equipment Demand Index found that nearly one-third of businesses nationally (30.6 per cent) plan to increase their asset base during the June quarter, compared to 25.6 per cent from the previous Index.


Further, according to the Australian Bureau of Statistics, Australian businesses are forecast to spend around $52 billion on plants and equipment in the 2017 financial year.

Index data suggests there is a bias towards the outright purchase of this equipment, with respondents reporting that an average of just 25 per cent of their current asset base is leased or otherwise financed. These figures suggest that of the assets acquired this financial year, $40 billion, or around 2.5 per cent of GDP, will be purchased outright, while $12 billion will be financed.

Further highlighting the bias towards outright ownership of assets, four in 10 respondents said they use their own equity to fund asset purchases. The figure was higher for smaller businesses, at 45 per cent for SMEs and 37 per cent for upper corporates.

“Not all of the $40 billion businesses will spend on buying assets this year could be financed, but if a portion of these funds were freed up for growth via the use of alternative capital, we could see a significant impact on individual businesses and the broader economy,” Alleasing chief executive Daniel Blizzard said.

Alleasing highlighted that in particular, a rebound in sentiment in the mining services sector has driven a “significant” increase in the asset acquisition intentions of businesses in Western Australia and Queensland.

The Index result for Western Australia increased from 14.0 per cent of businesses in the March 2017 quarter to 25.9 per cent this quarter, while the figure for Queensland almost doubled from 16.5 to 31.4 per cent.

Meanwhile, businesses in South Australia and the Northern Territory were the least positive in terms of sentiment, with a below average 23.2 per cent planning asset acquisitions.

Of other states, businesses in NSW and the ACT continue to deliver the most positive response, with 33.8 per cent planning an increase in assets.

In Victoria and Tasmania, a lower 29.4 per cent of businesses are forecasting acquisitions, down from 31.3 per cent in the previous round.

[Related: SMEs bullish on growth despite capital constraints]



Australian businesses to spend $52bn on equipment in 2017
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