Australia falling behind on built asset returns

Australia is lagging behind developing nations on the performance and returns of its built assets.

Australia’s performance was highlighted in the 2016 Global Built Asset Performance Index, released by Arcadis, a leading global design and consultancy for natural and built assets.

The index, developed in conjunction with the Centre for Economics and Business Research (Cebr), examined the income generated by buildings and infrastructure – homes, schools, roads, airports, power plants, malls, railways, ports and all other fixed assets – across 36 countries that collectively represent 78 per cent of global GDP.

Australia is ranked 21st on total returns from built assets and is below the global average on built asset performance, behind emerging nations such as the Philippines and Thailand.

In per-capita terms, Australia is ranked sixth overall. According to the Index, Australia will fall to 23rd by 2026 on total returns.

Gareth Robbins, Director, Built Asset Consultancy, Arcadis Australia Pacific, said, “In resource and manufacturing focused areas of Australia the emphasis will be on driving operational efficiency from existing assets, and effectively dealing with the legacy environmental issues created by those industries.

“Meanwhile in the cities the focus will be on creating sustainable and liveable urban centres, through the provision of high-quality transportation and housing assets, in order to create environments that can attract the jobs and people required to support economic growth.

“New South Wales and Victoria have a very strong pipeline of infrastructure projects planned for the next decade to address rapidly growing cities, however, more will need to be done to unlock the value and potential of built assets left over from the slowdown in mining, and replace the decline in manufacturing.”

The report reveals China’s economic growth is highly powered from its built assets – accounting for 52.9 per cent of GDP returns in 2016 – and is expected to peak as its economy gradually rebalances towards services and consumption, as opposed to manufacturing and investment.

This manufacturing intensity enables China to stand far ahead of the US, who are still experiencing a decline in the effectiveness of existing assets, reducing productivity, and pulling negatively against GDP’s return on assets at $5.4 trillion.

“By 2026, emerging markets will increase their dominance for high performing and sustainable built assets – India will overtake the US, Indonesia will leapfrog Mexico and Japan, and Brazil will edge ahead of Germany,” Mr Robbins said.

“Mature economies will have to do more with less as aging built assets cause depreciation to run faster than rebuilding in recent years.”

Top ten countries by overall built asset income (US$)

Country                   GDP from built assets – 2014                       GDP from built assets – 2016

  1. China                                 9.3tn                                                               10.4tn
  2. US                                      5.2tn                                                               5.4tn
  3. India                                   3.1tn                                                               3.6tn
  4. Japan                                1.9tn                                                                1.9tn
  5. Mexico                              1.2tn                                                                1.4tn
  6. Indonesia                          1.0tn                                                                1.2tn
  7. Germany                           978bn                                                              1tn
  8. Brazil                                 923bn                                                             966bn
  9. Turkey                               784bn                                                             807bn
  10. France                              760bn                                                              794bn

View the full findings of the Arcadis Global Built Asset Performance Index here.

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