Hard to “chill out” when capex is collapsing

Even though the recent comment by the Reserve Bank of Australia Governor that everyone should “chill out” was clearly said in jest, it looks a little misplaced when we have since found out that capital expenditure is falling off a cliff. The absence of any real signs of a transition from mining investment to non-mining investment is a big worry. This is particularly the case given the slowing housing market means that residential investment can no longer be relied on to fill some of the hole left by mining.