Economists across the globe agree that growth in an economy, as well as societal upliftment, depends on the level of infrastructure in the economy. Currently, Australia is exposed to numerous risks across several sectors, including infrastructure with the spread of Covid-19 that has led to slowdown in the progressing economies.
Prior to the coronavirus outbreak, the Australian economy was subject to heat from the bushfire crisis. Also, in 2019, it witnessed floods and continued droughts in some regions. In the wake of such crisis, there is a dire need for a fresh wave of infrastructure investment, aiding to rebuild affected communities.
As it is clear from the events in the recent past, infrastructure ecosystem faces unparalleled risks like climate change amplifying higher temperatures, unpredictable seasonal rainfall and water availability, more intense winds, extreme weather events and bushfire seasons the likes of which Australia has never seen.
During February 2020, Infrastructure Australia, the Country’s independent infrastructure advisor to governments, industry and the community, rolled out Infrastructure Priority List 2020, highlighting priority infrastructure investments that the country requires in order to secure a sustainable as well as prosperous future.
The list included new infrastructure proposals (37) and updated proposals (11), in addition to nationally significant infrastructure proposals (147), with 88 priority initiatives, 36 high priority initiatives, 17 priority projects and 6 high priority projects.
Infrastructure Australia CEO Romilly Madew commented on the Infrastructure Priority List -
This stands true for any and every economy. However, the already declared pandemic, Covid-19, with likeliness to persist till June 2020 might result in the slow progress towards implementation and expansion of infrastructure.
Businesses operating in the infrastructure sector of Australia have already been taken a hit due to several restrictions imposed in the wake of the pandemic. Elements of national infrastructure are given below:
The social infrastructure encompasses essential elements like:
- Health and Aged Care
- Green Space, Blue Space and Recreation
- Arts and Culture
- Social Housing
- Justice and Emergency Services
The classification of Infrastructure Australia’s proposal is given below:
Australia needs a strong and significant investment in infrastructure to secure a sustainable and prosperous future. Already, a lot has been pulled down due to the coronavirus outbreak. The market is filled with panic creating news of collapsing infrastructure sector and struggling businesses.
Seven significant and interconnected influences identified for the future by Infrastructure Australia are as follows:
- Quality of Life and Equity: Quality of life is high, but not everyone benefits equally;
- Cost of Living and Incomes: The cost of living is rising for some people, while incomes have not grown substantially;
- Community Preferences and Expectations: Communities are expecting more customised, real-time and interactive services and products from governments and businesses;
- Economy and Productivity: Economic growth is slowing, while economy is shifting towards service and knowledge-based future, which is increasingly located in cities;
- Population and Participation: Population is growing and urbanising, and participation in the workforce is increasing for women and older people;
- Technology and Data: Technology is transforming the way we live, but not everyone benefits equally;
- Environment and Resilience: Environment is increasingly vulnerable to the effects of climate change, and the response to reducing emissions is falling behind international progress;
The world has never been more dependent as it is now, and the interaction between these connected elements gives rise to a unique period of uncertainty for Australia, especially the infrastructure sector.
Other than this, the decline in interest rates by the RBA and the fiscal stimulus package announced by the Morrison Government is expected to boost investment in high return projects to increase immediate inflationary pressure to the economy and lift productivity in the longer term.
Global equity markets have witnessed trillions of dollars being wiped off the market in the recent past, and the markets are still struggling to gain investor confidence. Stocks have plunged to their 52-weeks low and have started to withdraw their earnings guidance.
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Government is increasingly cautious and is placing advisories and regulations to contain the influence of Covid-19 and save the most important element in its development, the human resource. More importantly, the fiscal stimulus package announced is expected to save the businesses and create a momentum in the economy.
The current worsening market situation has taken a toll over every sector of the economy that is reflected in equity markets, including stocks constituting the infrastructural ecosystem.
Telecommunication giant TPG Telecom Limited (ASX:TPM) has declined by -10.45% in the last one month till 18 March 2020. One of the world’s largest toll-road operators and industrials stock on ASX, Transurban Group (ASX:TCL) has reduced by 35.95% during the same time frame.
Sydney Airport Limited (ASX:SYD) stock has fallen by 41.48% during the last one month and has experienced a significant fall of 9.3% in total traffic in the month of February 2020. As a result of Covid-19, SYD has experienced a 25% decrease in international passenger traffic for the initial nine days of March 2020.
With businesses coming to a halt as an impact of Covid-19 spread, several companies have withdrawn their FY20 guidance due to the economy-wide slowdown. To name some,
- Building products and construction material company Boral Limited (ASX:BLD)
- Infrastructure company Vicinity Centres (ASX:VCX)
- Metals and mining player BlueScope Steel Limited (ASX:BSL)
- Real estate company GPT Group (ASX:GPT)
Moreover, aviation sector player, Qantas Airways Limited (ASX:QAN) finds it impossible to declare meaningful guidance at this time of deteriorating market conditions. The company has already unveiled plans to cut 90% of its international flights.
With the deceleration in individual businesses, growth in the Australian infrastructural ecosystem looks misty and prone to some heat from the current crisis.
Australia is currently exposed to a plethora of uncertainties that are likely to bring in challenges as well as opportunities.