Business investment is still expected to be among the hardest hit parts of the broader Australian economy for the next year or two, even though the outlook has improved in recent months.
Deloitte Access Economics estimates business investment will fall in the 2020/21 financial year before accelerating at double-digit rates in both 2021/22 and 2022/23.
In its quarterly investment monitor it predicts this will add three percentage points to economic growth over this period.
Public investment is set to grow by 20 per cent this financial year before moderating.
"Relative to what we feared, the business investment outlook is excellent," Deloitte Access Economics partner Stephen Smith says.
"But relative to what it was prior to the pandemic, the business investment outlook remains weak."
Business investment is the most sensitive part of the economy during a downturn as confidence falls and firms stockpile cash rather than invest, he said.
"However, the outlook has improved in recent months."
Local COVID-19 cases remain small, the vaccine rollout has begun, business confidence is near decade highs and the Reserve Bank has promised to keep interest rates low for the next three years.
A surge in investment spending by state governments also requires - either directly or indirectly - some private investment input.
Public infrastructure spending is expected to drive activity over the coming years with more than $180 billion worth of projects underway across Australia - a 40 per cent increase from the trough seen six years ago.
The transport industry in NSW and Victoria is expected to account for more than 60 per cent of all infrastructure projects under construction in 2023.
"The record pipeline of transport infrastructure investment has raised questions around the capacity of the construction industry to deliver projects on-time and on-budget," Mr Smith said.
"International border restrictions have exacerbated the issue of skills shortages. Many specialised skills, required on the largest engineering construction projects, are imported from overseas."
The report estimates the value of outstanding projects rose by $7.7 billion to $758.3 billion in the March quarter compared to three months earlier.
The value of definite projects - those under construction or committed - increased by $37.4 billion for a total of $304.6 billion.
However, the value of planned projects - those under consideration or possible - fell by $29.7 billion over the quarter to $453.7 billion.
This was driven by projects progressing through the planning stages and several projects falling over, leaving planned investment around nine per cent below the peak seen in late 2019.
Australian Associated Press
