Private Capital Expenditure on Machinery & Equipment

IBISWorld forecasts private capital expenditure on machinery and equipment to increase by 0.7% in 2024-25 to $107.8 billion. This is primarily driven by rising expenditure from the construction and transport sectors. State governments like Victoria and New South Wales have spent heavily on new infrastructure programs and encouraged greater capital investment as construction firms look to compete for contracts or complete current projects. Examples of these projects include the Victoria suburban rail loop, the expansion of the metro network in Sydney and the ongoing development of the Western Sydney airport. Subduing some of this growth is the projected fall in actual capital expenditure on mining in 2024-25, largely thanks to variability in prices across major commodities in recent years, driven by global supply and demand dynamics. For example, steel prices are forecast to drop in 2025, which is attributed to an expected fall in global construction activity because of a high interest rate and inflationary pressure environment in major economies globally. This results in more mining firms being reluctant to spend on machinery and equipment.

Capital expenditure on machinery and equipment in the transport sector declined significantly in 2020-21, with lockdown restrictions weighing on the use of public transport. This discouraged considerable investment across the transport sector and restricted capital expenditure over the past five years. The professional services sector reported a sharp rise in capital expenditure on machinery and equipment in 2020-21. Many firms within the sector have been quick to adopt modern technology, particularly driven by shifts to remote working. Smaller enterprises that were initially resistant to new technology also invested heavily in new equipment in line with the transition to working from home. Elevated interest rates over the past two years have slowed growth in private capital expenditure on machinery and equipment. Most notably, expenditure in the construction sector fell. Overall, IBISWorld forecasts private capital expenditure on machinery and equipment to rise at a compound annual rate of 5.5% over the five years through 2024-25.