Having a look at the global economy, it is realized that business investment spending has been amongst the ongoing themes since the recorded financial crisis. The theme has remained to be a major challenge despite the conditions that have been in progress favouring investment spending like low rates of borrowing, solid profitability and stable corporate balance sheets.
When it comes to Australia, the business investment story is quite different and has been so for some time now. Their level of business investment has remained in the high position for a period of more than 10 years. The main reason for this continuous improvement is because of the of the high investment strength they put on the sector of resources. The investment strength has been recorded to have reached its peak share of activity for a period of more than hundred years.
For the last ten years, Australia has been making a significant addition to its capital stock. The fruits of this business investment are indicated by its strong growth when it comes to the sector of resource exports.
The high strength of business investment spending in Australia is mainly connected with the industry of mining and the spillovers. For the case of spillovers, there is both positive spillovers and negative spill over. For the last ten years, business investment has been recorded to have reached the multi-decade peak. This is because no time within this period there was a record relating to the lack of business investment in Australia.
However, looking at the non-mining sector, we find that business investment has been weak in this area. The main reason that has led to this effect is low expectations of the future demand. This is normally referred to as the animal spirits. For the case of business investment in the mining sector, the main reason for its high rank is due to high expectations for the future demand compared to the non-mining sector. Moreover, the reason for their high ranking is because they does not have any uncertainty about the future expectation.
The Australian government is promoting business investing by offering incentives. This is made successful by its 30% tax deduction when it comes to the small and the general businesses that buy eligible assets. This performs an essential role in attracting the business investors who are after offering business investment to the respective companies. The government also offers stimulus packages, cuts, and grants to some sectors. These incentives add stimulus promoting business investment to the areas that are in support of the economic plan. As a result, this has helped the Australian economy to grow, it has supported employment and has led to the creation of employment opportunities.