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Business Investment In Australia Is At Risk Of Derailment

Deloitte Access Economics has warned the recovery in business investment is at risk of derailment due to lockdown in the country.

CANBERRA, Australia — Prime Minister Scott Morrison said the government’s financial advice points to the need for short and sharp lockdowns to deal with the impacts of the pandemic.

Morrison’s comment came as a report by Deloitte Access Economics suggested lockdowns and restrictions around the country risk derailing the recovery in business investment.

Deloitte’s partner Stephen Smith said many of the elements that have seen private business investment growth since late 2020 remain in place to stand just 2.2 percent below their pre-Covid-19 levels.

“But when it comes to new investment, there is never a guarantee,” Smith said.

“Ongoing lockdowns or the threat of restrictions are kryptonite for investment. Businesses will want to see a clear path out of Covid-19 before committing to significant new investments.”

Morrison said targeted lockdowns were essential to limit economic damage and were at the core of the advice given to the government about dealing with the pandemic.

Prime Minister Scott Morrison said targeted lockdowns were essential to limit economic damage and were at the core of the advice given to the government about dealing with the pandemic. (Lukas Coch/AAP Image)

“It showed if you do not do those short, sharp lockdowns in this phase with the Delta variant, it ends up costing you even worse,” Morrison said.

“It is not just in the health interest; it is in the economic interest to get on top of this as fast as we can otherwise, the cost is far greater, as we see in New South Wales.”

Smith said that despite an expected increase in vaccine supply and the Delta outbreak, the problem is more significant, and vaccine hesitancy implies that the solution will be slower.

At the same time, some areas of the investment landscape have become more challenging due to Covid-19, with many offices, shopping centers, airports, and hotels suffering significantly lower usage.

Smith said that given the strength of public infrastructure investment, the high level of residential construction activity, and the lack of skilled migration to Australia, it also raises whether projects can be delivered on time and within budget.

Even so, Deloitte Access Economics is forecasting investment to grow in 2021 before accelerating in 2022.

“The outlook will depend on maintaining a high level of business confidence over the next year, as well as the speed at which Covid-19 restrictions are eased,” Smith said.

“The longer we appear to the world as a closed and risk-averse society, the more likely investment dollars will head to other countries instead.”

Morrison said that he expected the economy to “bounce back” because the basic settings were correct.

The value of investment projects rose by AU$25.1 billion ($18.45 billion) in the June quarter to AU$783.4 billion ($575.80 billion), a 3.3 percent increase from three months earlier. This was mainly due to additional infrastructure investment in recent government budgets and private investment in the mining and utilities industries.

The value of definite projects, those under construction or committed, increased by AU$18.8 billion ($13.82 billion) over the quarter to AU$323.4 billion ($237.70 billion).

The weekly ANZ-Roy Morgan consumer confidence index will also be released.

Edited by Saptak Datta and Ritaban Misra

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