Australian strong capital expenditure data increases chances of June rate rise

The Australian strong capital expenditure data for the March quarter suggests a June interest rate rise is likely, economists said on Thursday.

New private capital expenditure rose 3.4 percent in the March quarter, the Australian Bureau of Statistics (ABS) said on Thursday.

The median market forecast was for a rise of 2.9 percent in the March quarter.

Chief economist Stephen Roberts from Nomura Australia, a leading financial services firm, said the capital expenditure ( capex) data was strong, particularly in the mining sector.

"There was a good mix between buildings and plant and also machinery," Roberts said.

He said the data would add around 0.1 percent to most analysts' estimates of GDP growth for the quarter.

Roberts said Thursday's capital expenditure data increased the likelihood that the Reserve Bank of Australia will increase the cash rate at its June board meeting from 4.75 percent to 5.0 percent.

Senior economist Adam Carr form ICAP, the financial services provider in Australia, said the strength in the data was broad- based and not concentrated in the mining sector.

"The data today showed that there were some other sectors which had a decent tick up in investment for the quarter, including transport, wholesale, construction, utilities and other services," Carr said.

He said the capex figures showed the economy was strong and that a cash rate rise by the central bank was looking like a near-term prospect.

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