Infrastructure to the rescue: Investment Monitor Q2 2019
28 August 2019
The
slowdown in the global economy is flowing through to Australian
investment conditions.
Releasing the latest edition of
Deloitte Access Economics’ quarterly
Investment Monitor, Deloitte Access Economics partner and report
lead author, Stephen Smith,
said: “Measures of global business confidence have fallen to their
lowest levels in almost five years amid trade tensions and political
uncertainty, prompting many businesses to delay their capital
expenditure plans.
“But there are a number of reasons why the outlook for investment in
Australia is better than it is elsewhere. State and federal governments
are continuing to deliver record amounts of
infrastructure investment,
the large
mining-related falls in activity are now in the past, while
some miners are investing in new or expanded mines to reach production
targets. And despite the slowdown in economic growth, business profits
continue to increase.
“But to be clear, the long-awaited recovery in business investment is
encountering some rising challenges For example, capacity utilisation, a
key leading indicator of investment, has faded alongside the pace of
Australian growth over the last year or so.
“Deloitte Access Economics is forecasting private business investment to
remain relatively flat in 2019, before recovering to grow at a faster
rate than overall real GDP in 2020 and 2021.”
The shift in project activity from the nation's north and west towards
the south and east is continuing.
New South Wales,
Victoria and
Queensland now account for more than three fifths of all definite
project investment (those projects under construction or committed), up
from a low of less than two fifths in late 2016.
The three states also account for three fifths of all planned project
activity, the highest share seen since Investment Monitor began keeping
records in March 2001. This is partly due to the large amount being
invested in infrastructure in Australia's eastern states, as well as the
end of construction at a number of major mining projects in other
states.
“Recent months have also seen a renewed focus on infrastructure
investment as a means of stimulating the Australian economy,” Smith
said.
“The federal government is investigating whether construction at
small-to-medium sized projects can be brought forward, while the
Governor of the Reserve Bank of Australia has called on both federal and
state governments to increase investment.
“But there are a number of challenges to overcome when adding to the
existing pipeline of infrastructure developments or fast-tracking
particular projects.
“Government finances are constrained, while the record amount of
infrastructure activity currently underway has led to anecdotal reports
of shortages in skilled labour and materials. These potential shortages
can lead to cost overruns and delays in delivering projects.”
The record pipeline of infrastructure projects is led by a number of
large road and rail developments, with major project activity expected
to reach a peak of around $22 billion in 2022.
Key figures for the June quarter include:
-
The value of projects in the database rose by $24.4 billion to $713.8 billion – a 3.5% increase from the previous quarter
-
The value of definite projects (those under construction or committed) increased by $8.6 billion over the quarter. This has largely been due to upwards cost revisions as well as a number of projects progressing through the planning stages – particularly in the mining, transport and utilities sectors.
-
The value of planned projects (those under consideration or possible) increased by $15.8 billion over the quarter. Planned work is now at its highest level since late 2014.
Deloitte Access Economics’ Investment Monitor is primarily a source of information for businesses and others about major engineering and commercial construction projects and their promoters. It is also a barometer of structural change in the Australian economy, and of the investment climate – now and in the future.
Purchase the full report or get a free sample, https://solutionsbydeloitte.com.au/product-dae-investment-monitor.html?_ga=2.25665976.404025260.1566644655-1925379482.1528920592
--ENDS--
Source: Deloitte - www2.deloitte.com
Contact: N/A
External Links: https://solutionsbydeloitte.com.au/product-dae-investment-monitor.html?_ga=2.25665976.404025260.1566644655-1925379482.1528920592
Recent news by: Deloitte