Home' Future Building: The Australian Infrastructure Review : December 2011 Contents COMPANY FOCUS
The third global ‘super cycle’ – after
industrialisation and the post-World War II
booms – has the potential to last for decades,
according to economists.
Earth, Fire, Wind and Water, a report
commissioned by ANZ, proposes that this
super cycle has the potential to transform
our economy, create hundreds of thousands
of jobs and lead to the emergence of world-
class services companies.
The direct export opportunity is
unparalleled in Australian history and if
Australia can expand capacity fast enough,
export revenues from hard and soft
commodities could reach about $482 billion
per annum in real terms by 2030 (see graph).
Despite opportunities for high levels of
project investment and revenue streams, it
will also present some significant challenges
for Australia’s infrastructure industry.
The major one will be the
unprecedented scale of the investment
required – up to $1.8 trillion over the next
20 years. Australia’s civil engineering
design and construction market has grown
enormously since 2000; from $25 billion
to an annualised $94 billion by Q2 2011.
ANZ expects that the domestic contractors
will require up to $15 billion in additional
capital to build the capacity to service the
construction peak in three to four years’
The requirement to build out commodity
and related infrastructure will likely impact
on other economic infrastructure projects
competing for scarce resources in both
financial and human capital.
Development of the country’s future
social infrastructure projects both in existing
centres and key growth communities will not
be immune to this competition.
How will the industry respond?
Finding capital solutions to finance the
infrastructure and equipment required to
export Australia’s commodity endowment
to Asia requires some innovative thinking.
David Byrne, Head of Utilities &
Infrastructure and appointee to Infrastructure
Australia’s Infrastructure Finance Working
Group, says, ‘Whether it’s multi-user models
to finance port and rail infrastructure, or
joint ventures to fund equipment, financiers
will need to work closely with industry to
develop robust financial solutions.’
Energy and mining majors have
overtaken Government as the largest
providers of funding of infrastructure in
this country. With funding largely secured
from the industry’s major corporates, via
strong earnings and robust appetite from
debt capital markets and banks, the majors’
capital is largely ready to go.
Doubts over capital adequacy do,
however, arise elsewhere.
It is unclear whether the supply chain
can attract the capital required quickly
enough to expand capacity to serve the
investment boom. Mid-cap miners and junior
miners – which collectively own significant
resources – need large investments to
transport their product to market.
Byrne says, ‘In the current capital
constrained world, only a limited number
of projects can be completed. Portfolio
management is therefore crucial in order
to select and schedule projects to optimise
Companies holding surplus liquidity
appear well placed to prosper. With debt
capital and equity markets extremely
volatile, having surplus liquidity means firms
BIG oPPorTUNITy IN A CAPITAl
An unprecedented opportunity is available for infrastructure developers and contractors to
support Australia’s resource boom as fast-growing economies in Asia continue to urbanise and
industrialise. The scale of investment raises a capital sourcing challenge for the industry and its
domestic supply chain.
capital to build
to service the
in three to four
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