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Investment in SA sluggish: report

Jul 31, 2014
The Superway project has been completed

The Superway project has been completed

Major project investment in the Australian economy is in a holding pattern, a report says.

The total value of all projects has barely budged since June 2013, data from Deloitte Access Economics’ Investment Monitor database shows.

In its state-by-state assessment, the Monitor notes that investment in South Australia is sluggish, dependent on State Government projects and with little private investment in prospect.

“South Australia’s commercial construction sector has been weighed down by the high $A and rising input costs,” the assessment says.

“Although low interests rates are beginning to flow through to improved retail sales, it remains to be seen whether investment levels will increase.

“Office vacancy rates remain elevated, which continues to stifle investment in new office space.”

Deloitte’s researchers repeated their previous observation that “engineering construction never really took off in South Australia during the resources boom”.

The only major private project on the horizon is the $4.5 billion Central Eyre Iron Project, recently given major-project status but still yet to make a transition to construction.

“Meanwhile, major transport and utilities projects are supporting current engineering construction activity, despite the $842 million South Road Superway project having recently reached completion,” the report says.

“Current projects include the $468 million Noarlunga Line electrification and station upgrade, the $408 million Southern Expressway duplication and the $443 million Goodwood and Torrens rail junctions upgrade.

“The State Government has provided some much-needed investment with a combined $2.1 billion in projects currently underway.

“These include the $1 billion redevelopment of Tonsley Park into an industrial precinct, the new Royal Adelaide Hospital, and the redevelopment of the Lyell McEwin and Queen Elizabeth hospitals.

“In the private sector, Woolworths’ $65 million project in Torrensville recently moved into construction.”

On the national front, there has been a continuing shift away from mining.

The resources sector share of the value of projects under construction slipped above
50 per cent at the end of 2011 and, on current trends, could be back below 50 per cent within the next year.

Non-resources projects will carry a larger burden of the investment agenda going forward, including work funded by the public sector.

“Indeed, public sector transport projects are shaping as a key driver of future investment activity,” Deloitte says.

“The value of transport projects under consideration increased by more than $16 billion in the June quarter, mainly due to State governments investment plans.

“State Budgets which have been released in recent months contained notable capital expenditure plans, particularly in New South Wales, which has announced infrastructure spending of more than $61 billion over the next four years.

“In total across State governments, capital expenditure of around $40 billion per annum is expected over the next four years.”

 

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