Investors are increasingly reluctant to invest in Australian infrastructure due to greater market intervention and policy uncertainty, with Australia having gone from first to third as the preferred global destination for investment.
According to a new report from Infrastructure Partnerships Australia and Perpetual Corporate Trust, Australia is still the destination of choice for infrastructure investors, but that hard-won reputation is under material threat.
Key findings of the 2018 Australian Infrastructure Investment Report include:
- 90 per cent of investors remain “highly likely” to invest in Australia
- A record 87 per cent say the energy market is “full of uncertainty”, an increase of 15 per cent on last year’s findings
- 83 per cent agree that Australia’s policy and regulatory uncertainty limits their willingness to invest
This year’s report captures the views of 33 domestic and global investors, including sovereign wealth funds, pension funds, fund managers, developers, banks and other infrastructure professionals who collectively own or manage more than $380 billion of infrastructure assets across the globe.
“While Australia still performs well among its international peers as a leading destination for infrastructure investment, our reputation is hard won and easily lost,” said Infrastructure Partnerships Australia Chief Executive, Adrian Dwyer.
“Investors are increasingly alarmed by threats of market intervention, abrupt and recurring regulatory reviews, as well as frequent changes in Australia’s political landscape.
“It’s now abundantly clear that meddling in infrastructure markets and unpredictable energy policy is having a real and enduring impact on the willingness of investors to put their capital into energy assets.
“This is not an abstract debate; this is real people with real money, making real decisions.
“Governments should see this report as a canary in the coalmine. We have a clear warning that interventions and regulatory uncertainty are hurting investment and hurting Australians.
“We need to start heeding investors’ calls if we are to retain our status as a world-class infrastructure investment destination,” Mr Dwyer said.
Vicki Riggio, Perpetual Corporate Trust General Manager – Managed Fund Services, noted that despite the strong undercurrents of uncertainty, investors are continuing to express intent to invest in Australian infrastructure.
“It’s troubling to see increasing levels of caution around investing in our infrastructure markets; however, the strength of our reputation, our track record and stable economy continues to buoy investment intentions in our market, at least for now.
“This year, investor intentions are higher than ever, and they are expressing a willingness to invest larger amounts. Although technological change and policy uncertainty is undermining investment in energy, we’re seeing increasing focus on social infrastructure projects that meet environmental, social and governance objectives.
“As overseas destinations become more attractive to infrastructure investors, more work needs to be done to preserve our reputation by improving regulations, policies and accessibility to projects. We look forward to continuing to work with Infrastructure Partnerships Australia in this area,” Ms Riggio said.