Australia Businesses Expand Investment BUSINESS ASIA By Bloomberg

By Hans van Leeuwen

Australian business investment rose in the first quarter as miners expanded, signaling that economic growth may pick up in the world’s largest exporter of iron ore and coal, the government said Thursday. Capital spending on equipment, buildings and plant climbed 9.1 percent in the three months to March 31 from the previous quarter, the Bureau of Statistics said in Sydney. The median estimate of 21 economists surveyed by Bloomberg News was for a 4 percent gain.

Rising investment may stoke exports and economic growth as Australia expands for a 16th consecutive year. Unflagging Asian demand, record commodity prices and higher corporate profits are encouraging miners and energy producers to expand output and ease bottlenecks at ports and railways.

“The investment cycle still has a few years left in it,” Joseph Capurso, an economist at Commonwealth Bank of Australia, said before the report was released. “Business conditions are supportive, the global economy is strong and the high Australian dollar reduces the cost of imported machinery and equipment.”

Spending on buildings and structures rose 17.2 percent and company investment in new plant and equipment gained 6.1 percent in the first quarter, Thursday’s report showed. Investment increased a revised 0.1 percent in the fourth quarter.

Companies have forecast investment of 78.07 billion dollars, or $64.2 billion, in the year ending June 30, which is 5.6 percent more than they estimated three months ago.

They plan 70.03 billion dollars of new investment in the year ending June 30, 2008, which is 10.2 percent more than they estimated three months ago and 21.7 percent more than the corresponding estimate last year.

Rising demand from China and India has pushed commodity prices up 37 percent to a record over the past two years, according to the Reserve Bank of Australia.

China’s economy has grown at an annual pace of more than 10 percent for five straight quarters, and India’s growth rate has averaged 9 percent over the past year.

That has prompted an investment surge as resource companies including BHP Billiton and Rio Tinto Group spend a combined 43 billion dollars to bolster production and reduce port and railway bottlenecks, according to a government estimate last month.

The inadequate capacity of ports and railways has put a brake on exports and kept Australia’s trade balance in deficit since 2002.

The South Korean steel maker Posco is developing coal contracts in countries like Russia, Indonesia and Mongolia because Queensland state’s railways have been expensive and unreliable, according to a newspaper report in the Australian on Wednesday.

To remedy that, BHP and Xstrata are among the companies and government agencies spending 2.2 billion dollars on the state’s coal ports and railways.

BHP, Centennial Coal and other coal producers will also build a third terminal at Newcastle port, the world’s largest coal export harbor, in New South Wales state. They estimate the project will bolster exports by 1 billion dollars.

Coal producers including BHP and Wesfarmers completed projects worth 1.4 billion dollars in the seven months to April 30, the Bureau of Agriculture and Resource Economics said.

BHP also plans to spend $2.2 billion on a plant, railways and a port in Western Australia state to raise iron ore sales. Rio Tinto is spending more than $1.5 billion to expand two ports there.

“In the next three years, we obviously see Australia being very strong in infrastructure and mining, and we have an expectation that it will go on for even longer than that,” Dieter Adamsas, chief financial officer of Leighton Holdings, Australia’s biggest construction company, said May 14.

Demand will be underpinned by catch-up spending on roads, rail, water and electricity after “decades of underinvestment,” Leighton said in a statement the same day, forecasting that its profit would climb about 55 percent in the year ending June 30.

Australia’s economy grew 1 percent in the three months to Dec. 31 from the previous quarter, the fastest pace in more than a year, as the mining investment boom created more engineering and construction jobs, buoying consumer spending.

The Bureau of Statistics is due to report first-quarter economic growth Wednesday.

Thursday’s report may overstate business investment growth, according to economists including Capurso at Commonwealth Bank, because Telstra, Australia’s fourth-largest company by market value, has been added to the survey for the first time.

Telstra qualified for the Bureau of Statistics’ survey after the Australian government in November sold 15.5 billion dollars of shares from its 51.8 percent stake in the company, leaving only 17 percent in public ownership.

(c) 2007 International Herald Tribune. Provided by ProQuest Information and Learning. All rights Reserved.