Investment is expected to be among the hardest hit parts of the economy in 2020 and 2021.
Releasing the latest edition of Deloitte Access Economics’ quarterly Investment Monitor, Deloitte Access Economics partner and report lead author, Stephen Smith, said: “COVID-19 has led to a collapse in both demand and business confidence, and many businesses are responding by consolidating their operations and making savings where they can.
“That is likely to see an increase in the number of investment projects being cancelled or delayed, while there will also be fewer new projects announced, and private business investment is forecast to fall by 15% in 2020, reaching its lowest point as a share of the economy in almost two decades.
“When the recovery starts, business investment will certainly play an important role. Investment drives growth in the economy, and without growth fewer jobs are created.
“But the timing of the recovery remains highly uncertain, as does the question of whether conditions will get worse before they get better.
“The key here is the date at which production capacity starts to be threatened by rising sales, meaning that there’s an improving business case to invest. That date will differ from industry to industry, and from business to business, but may still be some time away.”
“Commercial construction may experience a particularly slow recovery due to the increased adoption of work-from-home arrangements and a smaller need for retail space because of the growth of e-commerce.
“More importantly still, this sector is increasingly working through the existing pipeline of work, without that pipeline being added to at a matching pace.
“Mining investment is likely to perform relatively well amid strong demand from China. Yet there’s an important caveat. Energy prices – including gas prices – have fallen sharply through 2020.
“Government spending to date has largely been focused on supporting Australian workers and the health care system. When the latest COVID-19 outbreak is contained, the focus of government efforts will shift to stimulating the economy, and infrastructure investment is set to play a fundamental role in this stimulus effort.”
There are currently 555 government infrastructure investment projects underway or in planning in Australia, worth a combined $314 billion. The transport industry accounts for less than half of the number of projects, but almost three quarters of total project value.
Current government infrastructure investment projects by industry