John Pickhaver Executive Director, Co-Head of Infrastructure, Utilities & Renewables, Australia and New Zealand, Macquarie Capital Key points: • The demand for new infrastructure corresponds with a heightened appetite for investment in Australian infrastructure. • The historically very low cost of debt offers a rare opportunity for enlarged infrastructure funding. • Superannuation and other investors enjoy a growing pool of greenfield and brownfield investment opportunities, but there remains substantially more capital than there are investment opportunities.
It would be useful to begin with a quick tour around the world, for an Australian and global economic snapshot, to provide some context for the current themes in infrastructure financing. Let’s start off in the United States, which has seen economic recovery, with jobs recovering to their preGFC levels. This recovery has taken longer than in previous recessions, and it is happening without the traditional matching increase in wages. The result is that consumer spending in the United States is still slow, while the lack of inflationary pressures means that the prospect of an interest rate rise continues to be pushed out further into the future. Consequently, interest rates are going to stay lower for longer in the United States. In the United Kingdom, we’re seeing a very similar theme, with unemployment recovering faster than in the United States, again without the wage increases and corresponding inflationary pressures. The result: the Bank of England still has rates on hold at 0.5 per cent. 50
futurebuilding
Volume 6 Number 1
In Europe, we are starting to see signs of hope. Unemployment rates, which were much higher at the end of the GFC, have started to turn down, and some of the leading indicators in the eurozone are now turning positive. Things like new manufacturing orders and consumer sentiment are ticking up. Canada, which, given its resources-driven economy, can be seen as a cautionary tale for Australia, has had significant falls in revenues and commodity prices, leading to a severe downturn in its economy. This has been despite the parallel growth in residential building activity. Canada has announced that it is now in recession, with 0.5 per cent drop in gross domestic product (GDP) following the 0.8 per cent drop in GDP last quarter. It is also worth noting that Brazil, another resource-dependent economy, is also now in recession. China, which has been garnering significant global attention recently, has seen slightly lower than expected growth, and our economists are forecasting a 6.8 per cent growth rate for the third quarter
