A STRONGER-than-expected rise in capital expenditure by firms augurs well for economic growth and should continue to improve in the next couple of years, economists say.
New private capital expenditure rose 5.5 per cent in real terms, seasonally adjusted, in the December quarter, the Australian Bureau of Statistics (ABS) said.
This was much better than the median market forecast was for a rise of 1.5 per cent in the quarter.
ICAP senior economist Adam Carr said the rise in business spending signalled an upbeat outlook for the local economy.
"It is just reflecting the strong investment environment we are going into," Mr Carr said.
"This data really confirms that investment will be a key driver of growth, going forward."
The ABS also released updated projections for capital expenditure for this financial year and the next.
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The fifth estimate of expenditure for 2009/10 was $110.636 billion, which was 0.4 per cent higher than the fifth estimate for 2008/09.
The first estimate of expenditure for 2010/11 was $101.393 billion, which was 15.3 per cent higher than the first estimate for 2009/10.
"The estimates have revised up quite significantly," Mr Carr said.
"Growth in investment should be very strong for the next couple of years at least."
Earlier this week, Reserve Bank of Australia (RBA) deputy governor Ric Battellino said mining investment would rise over the next few years.
"I don't think it's unreasonable to expect mining investment to rise to six per cent of GDP (gross domestic product) over the next few years," Mr Battellino said on Tuesday.
"That would be about twice as high as it was up to in the previous boom. It's a very big boom."
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