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Australia business investments to witness a 5% jump: Deloitte Report

News • 19th Jan 2022 • 3 Min Read

Australia business investments to witness a 5% jump: Deloitte Report

Entrepreneurship#COVID-19

Author: Bhavna Sarin Bhavna Sarin
1.4K Reads
"For all its challenges, 2021 recorded the fastest growth in the Australian economy since 2007, making it the second fastest growth seen in the past two decades. Deloitte Access Economics sees 2022 as a similar story, with Australia’s growth remaining above average as pandemic damage to the economy continues to be repaired," the report states.

All is not lost for Australia. Shortly after the country reopened its borders and made way for travel and migration opportunities, the nation, like the rest of the world, found itself amidst chaos as the next wave of the pandemic unleashed itself. As Australia continues to navigate the crisis and sustain businesses along with ensuring people safety, a new report shines a light on the prospects that offer an optimistic outlook in the upcoming months.

Deloitte Access Economics in its latest Business Outlook report has projected a 3.6% jump for the Australian economy, with a faster expected growth for NSW (5.2%) following the reopening of borders, and the Northern Territory (6.9%) owing to commodity exports.

The report has also forecasted a 5.2% growth in Australia’s business investments, a 6.4% rise in household spending and 100,000 people returning to the labour force bringing down the unemployment rate to about 4%.

"Business investment has finally crawled its way back to being above its pre-COVID levels. And the good news is that, despite this being the most forward looking component of spending in the national economy, it never dropped more than 5% below where it was when the pandemic hit,” the report said. 

"In part that’s thanks to the specific incentives for investment that were rushed into place by the government (such as accelerated depreciation), and in part its thanks to the relative success of the wider Australian economy amid good health outcomes and a rapid and effective response from economic policy (notably including JobKeeper)."

Other positive highlights from the report include low interest rates and the strength of the sharemarket, which makes raising capital for expansion more affordable for listed companies. Analysts also noted that tax breaks in Australia will continue to change the timing of investment spending than to add to its volume, meaning they'll leave a "rainshadow effect down the track".

However, beyond the investment uptick, the report does indicate a prolonged impact of the pandemic. “The resultant uncertainty – and the banner headlines that always accompany any potential bad news on the virus front – will continue to weigh on business decision makers as they decide the ‘when’ and the ‘what’ of any future expansion plans. Other things equal, that says there’s a pandemic ‘tax’ on investment expectations that may be slow to dissipate."

In fact, post recent lockdowns in NSW, business investments have witnessed a dip, calling for a cautious approach. "Overall, NSW faces a raft of challenges, yet its underlying fundamentals remain promising. For the meantime, all attention is on the latest wave of cases as Omicron takes its toll.

"In turn, hospitalisation numbers will be the best leading indicator for the state over the next few months, because they’ll tell the tale of whether NSW (and Australia more widely) can see off Omicron’s challenges without heading back into long and lengthy lockdowns."

The forecasts put forward by Deloitte Access Economics are based on the assumption there are no lengthy or large-scale lockdowns, that COVID treatments continue to improve with growing supply, and that migrant, student and tourist numbers rise throughout the course of 2022 and get closer to pre-pandemic rates by 2023 or 2024.

Explaining the tug-of-war between vaccinations and mutations, Deloitte emphasised that the lack of vaccinations among poor nations is compounding risks and success lies ahead for those that are in fact triple vaxxed.

“Progress against COVID – or the lack of it – remains central to the global economy, and it will for a while. Yet vaccinations and other treatments are still the likely winners, aided by the fact that families and businesses are getting better at living with COVID. That will leave global growth patchy in 2022, with the greatest success likely to go to those nations whose populations are triple vaxxed.”

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