. au / speeches / 2017 / sp - dg - 2017 - 11 - 13. html 7 / 13 13 / 11 / 2017 business investment in australia | speeches | rba while the mining investment boom was in progress, there were very apparent positive spillovers to non - mining business investment in western australia and queensland. at the same time, this was creating headwinds to investment in the rest of the country, particularly new south wales and victoria, not least because of the very elevated level of the exchange rate at the peak of the commodity boom. [ 6 ] one area of the economy where the negative effect of the high exchange rate on investment was evident was tourism. our liaison with the tourism sector highlights that the low level of investment while the exchange rate was at its peak is having an impact on the industry now that tourism demand has increased with the lower australian dollar. as these forces have reversed, non - mining investment in queensland and western australia has declined along with the decline in mining investment, while it has risen noticeably in new south wales and victoria. these spillovers are evident in the blade database. the data show that investment by firms in mining - exposed industries in queensland and western australia has declined sharply since 2012, whereas investment by firms in other industries has remained broadly unchanged. that is, the effect of the mining investment rise and fall has been larger than we initially anticipated because of the spillovers to other parts of the local economies. firms'and shareholders'reduced appetite for ( and assessment of ) risk investment could be held back if firms have become more risk averse or if they have reassessed the likelihood of bad outcomes. while it is difficult to differentiate between these two, there are some signs that suggest that one or both have changed post - crisis. liaison suggests some managers are less willing to take risks, and have tightened investment criteria since the crisis. companies have reduced their gearing and increased their cash holdings, and hurdle rates remain relatively high despite falls in borrowing rates. related to the latter point is that there are some indications that the stock market is rewarding cost reduction rather than investment spending where the payoffs are multi - year rather than immediate. that is, the risk aversion may be coming more from shareholders than a company's executive or board. there appears to be a desire to have ‘ excess ’ capital returned to shareholders through buybacks and dividends, rather than utilising that capital for investment with uncertain returns ( graph 7 ). http : /

sector and so much stronger than investment in other advanced economies? fairly obviously, it is because mining companies expected that demand in the future was going to be strong. the other factors affecting these investment decisions were generally comparable with those in other parts of the economy. funding was as cheap and readily available ; uncertainty was not obviously any more or less. indeed, the long horizons for these projects meant that uncertainty was at least as large as in other sectors. non - mining business investment now i will turn to investment in the non - mining sector. the sharp contraction in business investment during the financial crisis, and the subsequent weak recovery, has primarily been a phenomenon of advanced economies. [ 1 ] a large body of literature has attempted to explain the underwhelming pick - up in investment and has attributed it to a range of factors, which i will spend some time discussing. australian non - mining investment ( in real terms ) is currently around 17 per cent higher than it was at q1 2008. by way of comparison, investment spending in the us has increased by about the same amount, while in the uk it has risen by 13 per cent, by 3 per cent in japan but in the euro area it is still 4 per cent lower than in 2008. in all of these cases, this is a disappointingly low level of investment spending. what has been holding investment back? there are a number of possible explanations, some of which i will discuss here. [ 2 ] in doing so, in a number of cases i will use evidence from a new database from the abs called blade ( business longitudinal analytical data environment ). the blade database contains matched administrative and abs survey data for ( almost ) all australian firms with data available from 2002 to 2015. it includes annual data on capital purchases, sales, capital stock, wages and a number of other variables. the data on capital purchases are well aligned with investment spending in the national accounts and coverage is considerably larger than that in the abs capital expenditure survey ( graph 5 ). http : / / www. rba. gov. au / speeches / 2017 / sp - dg - 2017 - 11 - 13. html 5 / 13 13 / 11 / 2017 business investment in australia | speeches | rba graph 5 weak economic growth an obvious candidate to explain the post - crisis behaviour of investment is weak aggregate demand. research finds that much of the weakness in global investment since the crisis can be explained by slower economic growth. [ 5 ] however, when we look at