Increased market intervention and policy uncertainty could threaten Australia’s ‘hard won’ status as a top destination for infrastructure spending, a new Infrastructure Partnerships Australia report has warned.
IPA chief executive Adrian Dwyer says the advocacy group’s latest Australian Infrastructure Investment Report suggests Australia’s hard-won reputation as an ideal destination for investment is “under material threat”.
90 percent of respondents to the IPA/Perpetual survey said they were ‘highly likely’ to invest in Australia, up from 70 percent in 2017. 71 percent said they would be comfortable investing more than $2 billion, up from 50 percent in 2017.
But 84 percent of respondents agreed that uncertainty in Australia’s policy and regulatory settings is limiting their willingness to invest.
Meanwhile, 50 percent of respondents said Australia’s political landscape is below average, or one of the worst.
“While Australia still performs well among its international peers as a leading destination for infrastructure investment, our reputation is hard won and easily lost,” Dwyer says.
“Investors are increasingly alarmed by threats of market intervention, abrupt and recurring regulatory reviews, as well as frequent changes in Australia’s political landscape.”
There was sentiment from some investors that regulated infrastructure assets had shifted from being preferable to undesireable.
“People used to say, ‘I like regulated assets because it gives me certainty, stability,’” an unnamed debt bank said in its response to the survey. “Now if you are on a regulated assets there is a lot of uncertainty because the regulator is really hammering down on returns.”
Another respondent, a fund manager, added: “You are at the mercy of the regulator and they are influenced by the political climate.”
Investor appetite rose in the 2018 survey for passenger rail, with 61 percent listing it as a preferred asset type, up from 38 percent in 2017.
Freight rail also saw an approval spike, with 58 percent of respondents expressing interest, compared to just 35% a year ago.