The mining sector plans to cut its spending by $25 billion in the coming year in what looms as a threat to the economy and the Abbott Government's Budget.
Australian Bureau of Statistics figures show the sector expects a 25 per cent fall in building and engineering equipment spending.
It would be the nation's biggest one-year collapse in mining capital spending.
Overall capital spending, which has helped hold up the economy for the past two years, is tipped to fall more than 17 per cent in the coming year.
The beleaguered manufacturing sector also plans to cut spending, though there are signs of improvement in home building.
Overnight, the spot price of iron ore fell below $118 a tonne, its lowest in months, to continue a tumble of more than 13 per cent over the past three months.
The figures had an immediate impact, with the Australian dollar falling almost half a cent.
Financial markets also started to wind back expectations that the Reserve Bank may lift official interest rates this year.
HSBC chief economist Paul Bloxham said there were signs the fall in investment would be partially offset by a large increase in resources exports.
He said there were also good signs in areas such as retail sales, housing approvals and business conditions.
"Nonetheless, these numbers present a significant downside risk to Australia's growth outlook over the coming 18 months or so," he said.
"While we expect growth to continue to rebalance, it will be a challenge to absorb the decline in mining investment that is expected."
Shadow treasurer Chris Bowen said the figures, on top of Government decisions in areas such as repealing instant asset write-off provisions, showed businesses outside mining had to start pulling their economic weight.
He said Treasurer Joe Hockey did not seem to realise the need to stimulate investment in the non-mining sectors.
CommSec chief equities economist Craig James said the big fall in capital spending had to be put in context.
Mr James said the fall was "from the Mt Everest" of investment and it was now heading back to normal.