Investors wary as politics trumps projects

From

Andrew Cannane

Australia remains attractive to investors, but that reputation is now under material pressure, with investors spooked by rapid and unpredictable political interventions – say the findings of Infrastructure Partnerships Australia and Perpetual’s annual Australian Infrastructure Investment Report.

Key findings:

  • 70 per cent of investors remain ‘highly likely’ to invest in Australia; but
  • 62 per cent say ‘political risk’ now a major concern;
  • 66 per cent ‘not optimistic’ about national government infrastructure policies; and
  •  72 per cent say energy market ‘full of uncertainty’.

“Political interventions on projects and unpredictable rule changes see Australia now receiving the type of investor commentary that’s more usually associated with emerging economies,” said IPA Chief Executive, Brendan Lyon.

“Two thirds of investors are spooked by the Federal Government’s unpredictable policies on energy and other market interventions planned or under consideration.

“The appetite to invest in South Australia has tumbled by 75 per cent to just four per cent of investors, showing investors will punish jurisdictions who act in poor faith.

“Given the increasingly urgent need for major investments in electricity, it’s very worrying three in four investors are badly spooked by energy policy uncertainty.

“This shows an urgent need for the Federal Government and Opposition to stop the political games and agree the rules on electricity.”

The report captures the views of 26 domestic and global investors including sovereign wealth funds, pension funds, fund managers, developers, banks and insurance companies who collectively own or manage more than $220 billion of infrastructure assets across the globe.

Despite the significant headwinds, Perpetual Corporate Trust General Manager Managed Funds Services, Andrew Cannane, noted Australia has made progress in a number of key areas and still remains an attractive investment destination.

Mr Cannane highlighted: “Seventy eight per cent of investors said the visibility of transactions and projects has improved in Australia in the last year, while 69 per cent said Australia’s track record of infrastructure business makes Australia attractive for investment.

“Australia remains one of the world’s most attractive and sophisticated infrastructure markets. But like any industry, that hard-won reputation will erode if we don’t continue to improve what we do, why we do it, and how we do it.

“Infrastructure investors continue to scan the globe for relative value. With less investment opportunities emerging and tighter pricing, Australia cannot afford to rest on its laurels as an infrastructure investment destination,” said Mr Cannane.

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