National infrastructure investment slowdown coming but SA hit ‘likely to be modest’
A new report from Deloitte heralds a national slowdown in infrastructure investment, but with a steady stream of work yet to be done South Australia is expected to ride out the storm.
FMG Engineering has worked on numerous major SA infrastructure projects including the South Rd Superway.
Released earlier this month, Deloitte’s quarterly Investment Monitor report found that business investment had a “stellar start to 2023”.
“That’s unusual, because when the economy begins to slow, business investment slows by even more,” lead author and Deloitte partner Stephen Smith said.
The report detailed how Australia’s infrastructure investment boom pushed definite project investment to its highest level since late-2014, driven by an increase in publicly funded infrastructure investment.
The report also explains that investments in renewable energy projects and a backlog of constructions projects now commencing drove the rise.
However, Smith said “total business investment isn’t expected to run ahead of the economy for long”.
“The slowing economy is weighing on demand for the products and services that businesses sell, while higher interest rates are making it more difficult for new investments to get the green light,” he said.
As such, Deloitte expects growth in business investments nationally to slow sharply in 2024 and remain soft in 2025 as the weaker economic outlook prompts businesses to pause or cancel planned investment.
This is expected to be more pronounced in the south-eastern states which are more exposed to higher interest rates and cost of living pressures. Western Australia and Queensland also have a “darkened” outlook given China’s “sluggish economic recovery”.
South Australia meanwhile is expected to fly under the radar according to Deloitte, with total infrastructure investment value in the state totalling $58.6 million as of June 2023.
The Investment Monitor found that engineering work done in SA grew by almost 10 per cent over the year to March 2023, “but the pace of gains has slowed sharply amid a fall in the transport industry”.
Deloitte says the value of work commenced in SA remained flat over the past year, but the state’s saving grace is the fact that the value of work yet to be done rose by almost 50 per cent in that same period.
“This suggests that any slowdown in activity in coming quarters is likely to be modest,” the report said.
Deloitte also reported that commercial work done in SA increased over 10 per cent, driven by growth in retail, office buildings, warehousing and accommodation industries.
“But the outlook is weak, with the value of work commenced falling by one quarter over the past year and the value of building approved falling by one third,” Deloitte said.
