Capital expenditure by the private sector

IBISWorld forecasts capital expenditure by the private sector to decrease by 5.9% in 2024-25, to $52.5 billion. Private capital expenditure is expected to shrink in line with a decrease in total capital expenditure and shrinking expenditure from construction. However, solid demand for New Zealand's agricultural exports and recovering tourist activity are expected to support capital expenditure in 2024-25. The ongoing Russia-Ukraine conflict and sharp cash rates rises by the RBNZ are all weighing on investment in capital assets.

Capital expenditure by the private sector has consistently increased since the global financial crisis and its flow on effects over the two years through 2009-10. Part of this capital expenditure is attributable to earthquakes that have occurred over the past decade. Earthquakes, such as the 2016 Kaikoura earthquake, caused severe damage to infrastructure and equipment. Additional capital investment was required over the subsequent years to repair what was damaged or destroyed. However, much of the related construction has now concluded, reducing potential private investment.

Prior to the pandemic, which drove a fall in spending in 2020-21, private capital expenditure was trending upward. Strong population expansion, coupled with GDP growth, has supported capital spending over the past few years. Rising residential housing prices over recent years have also encouraged firms to invest in construction activities. However, volatility in the construction and mining sectors have affected private capital spending over the period. Growth from agriculture has been constrained by falling demand from sheep farming and volatile demand from beef cattle and grain farming over the period. Meanwhile, mining firms have frequently adjusted their investment in machinery and equipment, following significant volatility in commodity prices over the past few years. Overall, IBISWorld forecasts capital expenditure by the private sector to rise at a compound annual rate of 0.6% over the five years through 2024-25.