Jim Miller Investor demand remains strong, and yet Australia’s infrastructure gap continues to grow. The problem is not a lack of capital; it’s a lack of projects, according to Macquarie Capital’s Jim Miller.
Everyone is in unanimous agreement about the need for nation building and the need for big developments, but how do we take that next step? There are three key points. Firstly, our infrastructure gap is growing, and I think it’s particularly pronounced because of the concerns in the resources sector, which really has been a significant contributor to Australia’s overall growth. Clearly, as that moves through its cycle, there is a challenge to the impetus that it can give our economic situation. The second point is that investor demand has never been stronger. Everyone’s got a sense of that, and hopefully we can make sure that message is clear. The third point is looking at how we can reframe the debate with government. The key point – it’s been mentioned before and I’ll emphasise it again – is that there is not a lack of capital; there’s a lack of projects. So how do we address that project issue? If we look at the delay in addressing the infrastructure backlog, the unfortunate situation is that the government sees spending on infrastructure as a cost. It’s not seen as an investment, even though it creates its own revenue stream for government and therefore should be looked at through those eyes. Looking at the backlog, in 2011 it was estimated at $750 billion, but now, according to Deloitte, it is $920 billion. Irrespective of how it’s calculated, it is growing, and we’re not getting on top of this issue as an industry, and as a country. The productivity issue gets talked about a lot, but what does it mean? What is the cost of that lost productivity? McKinsey have done some work, saying that it will cost the government $90 billion per annum in revenue by 2017. And each year, the shortfall between our current level of productivity and our long-term historical average keeps compounding. The gap that we are 22
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Volume 3 Number 2
3/25/13 12:45 PM
