Lockdowns, Restrictions Creating Uncertainty for Business Investment: Report

By Rebecca Zhu
Rebecca Zhu
Rebecca Zhu
November 1, 2021 Updated: November 1, 2021

According to Deloitte’s latest quarterly investment monitor, the pace of business investment recovery will depend on the level of certainty provided by governments.

Deloitte partner and report lead author Stephen Smith said the threat of snap lockdowns present a challenging backdrop for new investment.

“As businesses continue to acclimatise to the new COVID-19 normal, their attention is turning from external risks to internal ones,” Smith said. “This includes securing and retaining key talent, executing strategies, and implementing new technologies.”

Smith said COVID-19 has dramatically changed where, when, and how people work.

“This is likely to shape the types of investments required over the coming decades,” he said. “The proportion of people working from home is expected to remain permanently above pre-COVID-19 levels, with flow-on effects for investment in transport networks and our CBDs.”

Deloitte also expects business investment to accelerate in 2022-23 after some growth during the current financial year, adding almost 1.5 percentage points to the GDP.

Public investment is anticipated to grow at double-digit rates in 2021-22, before slowing as the amount of infrastructure work in the pipeline hits its peak.

Meanwhile, government investment reached a record high as a share of the economy after its focus shifted from consumers to construction.

“The value of publicly-funded infrastructure projects underway has increased from a low of $131 billion in early-2015 to $202 billion in late-2021—a gain of more than 50 percent,” Smith said. “This compares to only $66 billion worth of non-infrastructure investment projects currently under construction.”

The disparity is forecasted to widen, with the value of infrastructure projects expected to grow to $285 billion in 2023.

“This will see the value of infrastructure investment surpass the peak in activity seen during the mining construction boom,” Smith said.

But Smith noted that Delta outbreaks have added pressure to an already stretched industry suffering from a shortage of workers. Usually, companies would source workers from overseas, which was not possible while international borders were shut.

In addition, he said the high level of global infrastructure investment means Australian contractors may not see immediate relief when borders reopen.

“To make matters worse, there have also been construction materials shortages, with prices increasing for key inputs such as timber, rebar, and steel,” he said. “While some prices have abated more recently, others remain high, and there may be further increases with supply chain issues set to extend into 2022.”

“Put simply, a lack of workers and materials is a noxious cocktail for the construction industry.”

Rebecca Zhu