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Business investment nose-dives

Business investment dropped by 2.3 per cent in the March quarter, continuing its three-year downward trend.

When seasonally adjusted, the fall was even worse at 4.4 per cent, according to figures released by the Australian Bureau of Statistics.

The figures are stark evidence of the problem facing the national economy: mining investment continues to fall, but other businesses are failing to pick up the slack.

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This is despite the Reserve Bank attempting to stimulate economic activity by cutting the cash rate in February.

Investment in mining, building and structures, and manufacturing all fell, mining by 4.4 per cent, building by 3.7 per cent, and manufacturing by 0.9 per cent.

Graphs illustrating trends for mining and construction are almost identical to the overall capital expenditure trends, demonstrating how closely tied the economy has become to the fortunes of the mining industry.

On the upside, equipment, plant and machinery continued its 12-month upward trend, rising by 0.7 per cent in the March quarter.

While these figures are disappointing, they only go up to March, and therefore do not take into account either the May rate cut or the federal budget.

The June quarter figures will come on 27 August. Both the Reserve Bank and the Abbott government will be praying for signs of an improvement by then.

But they may have to wait until the US Federal Reserve starts to lift rates, which commentators predict it will begin doing in September. This should boost the value of the US dollar, and by default put downwards pressure on the Aussie dollar.

A low dollar is what the non-mining sectors need.

A foreshadowing of this was seen over the last couple of days, with positive signs in the US pushing the Aussie down to 77 cents.

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