Key points:
Christopher Voyce Executive Director, Co-Head Infrastructure, Utilities & Renewables, ANZ, Macquarie Capital Macquarie is extremely optimistic about infrastructure. Today, I am going to cover three topics: the global economy, financial markets and recent infrastructure themes. In the global economy, we’re seeing weakness in emerging economies being offset by slightly moderate recoveries in advanced economies. There are various economies in different states of transition, making it very difficult to forecast economic performance even on a short-term basis. Forecasts are reflecting that we are seeing a tail off in the United States, a tail off in Europe and also stronger growth coming through in Australia. That backdrop of uncertainty is against a very strong growth of profile across the world, where we’ve seen average growth in gross domestic product (GDP) per capita across the world of about 3.5 per cent per annum. That gives us great confidence as we look to the future, and we’re actually seeing it come through now, with global indicators showing very positive signs. For the first time in quite a while, both the manufacturing sector and the services sector in all the major economies are in expansionary territory. That gives us some indication that the world is becoming a better place, and we’re likely to see more growth in future. 34
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• Australia’s urban infrastructure will need to grow because of population growth. • Recurrent service costs will be forced to change because the public sector will need operating efficiencies to fund capital investment needs. • The need for competition and innovation in service value will see major changes to the role of government in service sectors.
Turning now to the regions, and the big issue in Europe is Brexit. The impact of Brexit can be observed via Macquarie’s Composite Volatility Index – a measure of volatility across financial markets, whether it’s stocks, bonds, currencies or commodities – shows the performance through the global financial crisis, the United States losing its AAA rating, and a small dip for Brexit in the context of Europe. It’s very important in the context of Britain, but in the context of the global economy, Brexit really hasn’t had much of an impact; it has been relatively contained. In the markets around Brexit, there was a very significant impact on the value of the pound, but that seems to have absorbed most of the damage from the fallout from Brexit, with the domestic sectors having rebounded strongly since the initial fall and global indices doing the same. In the longer term, the International Monetary Fund (IMF) is saying that the spillover to the rest of Europe will be limited. Given the United Kingdom’s limited contribution to global growth over the last 20 or 30 years, it’s unlikely to be a big drag on global growth into the future. Similarly, as the United Kingdom’s share of Australian exports has fallen over time, and as economies like China and the United States have
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