Business investment contracted more than 9 per cent in the third quarter, suggesting economic growth in the three months to the end of September will next week come in below expectations.
Economists were expecting only a 3 per cent decrease, and the Aussie dived from around US72.60¢ to US72.24¢ on the news.
The ABS said total new capital expenditure for the three months to the end of September came in at $31.4 billion, down 9.2 per cent on the June quarter and 20 per cent on the same time last year.
This follows a revised-down 4.4 per cent contraction in the June quarter.
Economists had tipped a 2.9 per cent decrease in the September quarter.
The latest shrinkage of business spending was led by buildings and structures, down 9.8 per cent, followed by equipment, plant and machinery, where investment dropped 8.2 per cent over the three months. Mining was down more than 10 per cent, but manufacturing was up nearly 7 per cent, helped by the weakness of the Australian dollar.
Investment in "other selected industries" dropped 10 per cent.
However, there was consolation in investment intentions among survey respondents. Total planned investment for the current financial year was $120.4 billion, 4 per cent higher than when they were surveyed in July and August this year.
The latest data suggest the transition from mining investment to services-led growth in Australia is moving slower than the Reserve Bank of Australia and private sector economists had reckoned.
The shock numbers also mean growth in Australia's third-quarter gross domestic product will be lower than than expectations of as high as 1 per cent when they are published next week, said analysts. Westpac, for one, now sees it at 0.7 per cent for the quarter, equating to 2.1 per cent year-on-year.
"The much weaker than expected third-quarter Australian private capital expenditure data suggest that GDP growth in the third quarter was a little weaker than we had been expecting and, more worryingly, that non-mining investment is not filling the hole left behind by the mining collapse," said Capital Economics' chief economist for Australia Paul Dales.
Jamieson Coote Bonds executive director Charlie Jamieson said Thursday's quarterly contraction was the largest on record.
"This capex number points to further downward revisions to GDP," he said.
