INSIGHT

Australian Infrastructure Investment report 2021

By David Donnelly
Infrastructure Renewables

Trends, issues and opportunities facing Australian infrastructure 5 min read

With governments laying out record spending on infrastructure as a source of stimulus, we are at a critical moment. Understanding how investors’ priorities have shifted and addressing barriers to investment will be crucial to leveraging private capital through Australia’s economic recovery from COVID-19.

Australia remains a compelling infrastructure investment market. However, the lack of opportunities, the cost and complexity of bidding and policy and regulatory instability are starting to bite. Australia also risks being left behind by other regions on ESG investment. We cannot afford to rest on our laurels given the growing competition for capital and the upside of getting it right. Understanding how to spread the spend and benefit more Australian's remains a priority.

We have partnered with Infrastructure Partnerships Australia surveying industry leaders and undertaking analysis to provide a clearer understanding of the industry and what the key priorities are that lie ahead.

Survey respondents told us

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Say Australia’s track record for infrastructure business draws them to Australian investment opportunities.

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Agree ESG will become more important over the next three years.

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Agree that core-plus infrastructure assets will be the strongest driver of growth over the next few years.

Key takeaways:

  • Investor appetite for Australian infrastructure is strong with 84% of surveyed investors ‘highly likely’ to invest in Australia.
  • The maturity and security of the Australian market continues to attract investors. 94% say economic stability makes Australia an attractive investment destination, up from 68% in 2019. 91% say Australia’s track record for infrastructure business draws them to Australian investment opportunities, up from 85% in 2019.
  • But investors see limited opportunities, competition and high costs of bidding. 44% see competition for assets as a key challenge to investing in Australia, with just 22% seeing the availability of stock as an attraction to the Australian market. And 76% say the cost of bidding hinders investment.
  • Investors are broadening their definitions of infrastructure and moving up the risk curve. 63% agree their definition of what constitutes infrastructure has broadened. And over 50% agree that core-plus infrastructure assets will be the strongest driver of growth over the next few years.
  • Capacity constraints and political or regulatory uncertainty continue to dampen investor confidence. 78% agree that Australia is facing capacity constraints in the delivery of projects. 73% agree that uncertainty in Australia’s policy and regulatory settings limits their willingness to invest.
  • ESG is a growing investment driver for traditional and emerging assets. Investors’ preference for renewable energy assets continued to grow to 72%. With 82% believing fossil fuel-powered energy assets have become less attractive over the past year. Over 50% agree that non-traditional renewable energy, such as hydrogen and grid-scale battery storage, are more attractive than a year ago. 93% agree ESG has become more important over the past two years, and 100% agreeing ESG will become more important over the next three years.

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