Capex jumps 6.5% on data centre imports. Household spending plunges 1.1%. The RBA faces a mixed picture that undermines the hawkish case for AUD.
Alpha Score of 37 reflects weak overall profile with moderate momentum, poor value, weak quality. Based on 3 of 4 signals — score is capped at 90 until remaining data ingests.
Australian private capital expenditure surged 6.5% in the March quarter, driven entirely by data centre equipment imports. April household spending fell 1.1%, more than double the expected decline. The combination undermines the hawkish case for the RBA and leaves the Australian dollar exposed to further downside.
Total new private capital spending rose 6.5% quarter-on-quarter in seasonally adjusted terms, the Australian Bureau of Statistics reported on Thursday. The consensus forecast was 1.0%. The prior quarter printed 0.4%. The ABS explicitly attributed the lift to investment in data centre equipment, a direct reflection of the global AI infrastructure buildout.
The composition within the capex figures illustrated both the strength and the narrowness of the result. Plant and machinery investment, the category that captures equipment including data centre hardware, rose 18.1% in the quarter. Buildings and structures fell 3.8%, reversing a 2.3% gain in the prior period. The investment boom is real. It is concentrated in a single category driven by a single theme.
The forward-looking expenditure estimate added a further positive note. Estimate 2 for capital spending in 2026-27 came in at $173.4 billion, running 9.9% ahead of Estimate 1 for the same financial year. That suggests businesses are planning to sustain elevated investment levels through the year ahead.
April household spending fell 1.1% month-on-month, more than double the 0.5% decline expected by markets. The prior month recorded a 1.6% gain. Discretionary spending bore the brunt, falling 0.8% in its steepest monthly decline since February 2024. Analysts described the discretionary result as the first signs of demand destruction, a signal that higher living costs and borrowing pressures are beginning to bite into consumer behaviour in a more meaningful way.
| Metric | Actual | Forecast | Prior |
|---|---|---|---|
| Capex QoQ | +6.5% | +1.0% | +0.4% |
| Plant & machinery | +18.1% | – | – |
| Buildings & structures | -3.8% | – | +2.3% |
| Household spending MoM | -1.1% | -0.5% | +1.6% |
| Discretionary spending MoM | -0.8% | – | – |
The contrast with the capex surge could hardly be sharper. One part of the economy is investing in imported servers. The other is pulling back as cash buffers erode.
The two data points together present the RBA with a characteristically mixed picture: a business investment number that flatters the headline, and a consumer sector showing genuine signs of strain. Whether that strain is enough to influence the rate outlook will depend on how persistent the discretionary pullback proves in coming months.
The capex headline is strong. The ABS caveat is critical: the surge in equipment investment is heavily concentrated in data centre imports. When next week's Q1 GDP figures are released, much of the capex boost is expected to be offset by a corresponding increase in capital goods imports, limiting the net contribution to growth. The domestic inflation impulse is limited because the equipment is manufactured offshore and installed with minimal local subcontractor work.
For the AUD, the implication is clear: the currency lacks a domestic demand catalyst that would normally accompany a strong capex print. The rate differential between Australia and the US remains the primary driver. A capex story that does not translate into tighter monetary policy removes a potential source of AUD support.
The household spending miss is the more domestically significant number. Discretionary spending is the category most sensitive to interest rates. Its 0.8% decline marks the steepest monthly contraction since February 2024. If this becomes a trend, the RBA's policy calculus shifts. The bank has held rates steady at 3.35% since November 2024, arguing that the labour market remains too tight to ease. A sustained consumer pullback weakens that argument.
Markets are pricing around 30 basis points of rate cuts over the next 12 months. A second consecutive weak consumer print would push that pricing toward a full 25bp cut by the September or November meeting. That repricing is already visible in the AUD rate differential, which has narrowed against the USD in recent weeks.
The AUD/USD pair has been trading in a 0.6150-0.6350 range since late March. The lower end was tested after the April spending miss. The Australian two-year yield spread over US Treasuries has compressed to about 40 basis points, down from 55 bps in early April. A further narrowing would push the AUD toward the bottom of the range.
Traders monitoring positioning via the weekly COT data will note that speculative short positions on the AUD have been building. They are not yet at levels that would signal a crowded trade. The currency strength meter currently shows the AUD in the lower third of the G10 rankings, reflecting the combination of a soft consumer outlook and a neutral-to-dovish RBA.
The immediate risk event is next week's Q1 GDP release, due on Wednesday 4 June. The ABS caveat suggests the net contribution from capex will be small, possibly zero, depending on the import adjustment. A GDP print below 0.5% quarter-on-quarter would reinforce the dovish narrative. Above 0.7% would keep the debate alive.
The RBA next meets on 18 June. No change is expected. The statement language around consumer spending will be scrutinised. If the bank acknowledges the discretionary pullback more explicitly, the market will take it as a signal that cuts are coming earlier than previously assumed.
For the AUD, the path of least resistance is lower as long as the consumer data remains soft and the capex story fails to generate domestic heat. The AUD Holds Near Weekly Low as RBA Hike Bets Fade article from earlier this month captured the same dynamic: fading rate hike expectations leave the currency exposed. The Thursday data reinforces that theme. Traders should watch the 0.6150 level as a potential trigger point. A break below that opens the door to the 0.6050 area, where the next significant support sits.
The AlphaScala forex market analysis section provides daily updates on positioning and rate differentials. For traders building a watchlist, the key question is whether the April discretionary spending drop marks the start of a new downtrend or a temporary pullback. The May data, due in late June, will provide the answer.
Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.