Better Than Expected Economic Data Provided a Cushion for The Australian Dollar

Better than expected economic data provided a cushion for the Australian dollar yesterday, with a sharp rebound in home building and still-resilient corporate investment plans easing the need for the central bank to cut rates again.

But the numbers were a mixed blessing.

New business spending on equipment and buildings fell 4.7 per cent in the March quarter from the previous three months. While spending plans for the next fiscal year were revised higher for the quarter, they fell a sharp 9.8 per cent from a year earlier.

Overall, economists said the statistics from the Australian Bureau of Statistics told a story of a mining investment boom coming to a peak rather than a shuddering crash as some had feared.

Crucially, they said the numbers did not show an urgent paring back of spending plans in the resources sector and there were also some signs that businesses outside mining and energy were starting to expand.

That should comfort the Reserve Bank, said Mansoor Mohi-uddin, currency strategist at UBS. "Today's data suggests Australia's capex boom has peaked now but future investment is set to slow down steadily rather than abruptly decline," Mr Mohi-uddin said.

"The RBA is thus unlikely next week to act on its easing bias and cut interest rates again."

The Aussie fell to a low of US96.03c after the release of the data. In late Asian trading it had recovered to US96.82c from US95.29c late on Wednesday.

Helping the unit was a robust set of building statistics with dwelling approvals leaping 9.1 per cent in April and up 27.3 per cent for the year.

The RBA meets on Tuesday.