The chances of another interest rate cut have been given a boost, with new data showing business investment slumped in the first three months of the year.
Business investment fell by 4.4 per cent in the March quarter, worse than economists' forecasts of a 2.4 per cent fall, official figures released on Thursday showed.
The Australian Bureau of Statistics figures, which cover investment in capital goods like buildings and equipment, also showed a decline in the outlook for future investment.
Commonwealth Bank of Australia economist Diana Mousina described the result as "pretty disappointing", especially for mining investment.
"On the mining side it's indicating a much larger drop off, that's a little bit weaker than what the RBA is thinking at the moment," Ms Mousina said.
"There's definitely the risk that we might see another rate cut if we don't see enough of a pick up in other parts of the economy."
The RBA cut rates to an historic low of two per cent at its May meeting, citing factors including weak business investment and slowing Chinese growth.
Market expectations are for the cash rate to be kept on hold when the RBA next meets on Tuesday.
According to the latest capital expenditure data, businesses expect to spend $149.946 billion on capital goods by the end of the 2014/15 financial year, 8.1 per cent lower than the same estimate made for last year.
During 2015/16, firms expect to invest $104.033 billion, a 24.6 per cent drop from the corresponding estimate made for 2014/15.
NAB senior economist David de Garis said the investment outlook was quite soft, despite a small upgrade in non mining related businesses.
"It's probably what the Reserve Bank expected to see when they cut interest rates twice this year," he said.
Mr de Garis was confident the economy would start recovering later in 2015, helped by industries not covered in Thursday's release, like housing and retailing.
"Other indicators have been more encouraging than today's release," he said.
"We've seen retail sales have been a bit better, we've seen the labour market show some sense of stability and the NAB business survey is also showing some signs of improvement."
Mr de Garis didn't think the capital expenditure figures would change the RBA's interest rate outlook, expecting it to wait to see how much the February and May cuts help the economy before moving again.
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