Insights into public investment

Released
1/09/2021

In recent years, there have been record levels of public investment by Australian governments.¹ Despite the COVID-19 pandemic and associated lockdowns and restrictions, public investment continued to grow, reaching $29.2b in June quarter 2021, its highest level recorded in this series. Public investment accounted for 5.8% of GDP in the quarter. The key driver of growth was investment by state and local general government, reflecting increases in public infrastructure and non-dwelling construction projects across the country.

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New investment

State and local general government investment in new assets (which remove one-off impacts of asset sales, donations and other transfers), increased for six consecutive quarters and was the main contributor to quarterly public investment growth in the three most recent quarters (figure 2). Investment by public corporations and national general government were relatively subdued over the same period.

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State and local general government new investment

Since 2016-17, State and local general government investment has grown faster than population in most states and territories. In 2020-21, total State and local general government investment rose to $2,406 per capita (figure 3).

In 2020-21, seven out of eight states recorded rises in investment per capita with Victoria and South Australia showing the largest increases. The Northern Territory had the highest level of investment per capita at $3,097 per capita which in part reflects their low population density. Investment per capita in New South Wales, Victoria, and Queensland are also above the level for all States, reflecting elevated levels of public sector projects in those states.   

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State and local general government investment: asset breakdown

Increased investment by State and local general government was most evident in buildings and engineering construction, particularly in hospital, school, road, and rail projects.

In 2020-21:

  • Investment in new buildings increased 13.4%
  • Investment in new engineering construction increased 10.7%
  • Investment in new equipment increased 10.9%
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Other data sources: Public new engineering construction by type of construction

Additional insights into the composition of public investment can be seen in the ABS Construction Work Done publication. This includes engineering construction work done split by construction type.

In 2020-21:

  • Roads, highways, and bridges had the largest proportion (34%) of public engineering construction investment.
  • Railways had the second highest proportion (26%).
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Future investment

There is a significant amount of public investment work in the pipeline that is expected to continue to contribute to GDP growth, as shown by public sector construction work yet to be done (figure 6). Public sector building approvals are also reliable indicators for tracking future public investment in the National Accounts (figure 7).

In March quarter 2021, public sector engineering construction work yet to be done increased 4.1% and is at its highest level ever at $35b.²

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In 2020-21, public sector building approvals increased 23.8% and is at its highest level since 2010.

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*Building approvals data, the sum of the three relevant months for each quarter

Forward estimates reported in State and Territory Government budgets also indicate that growth in public investment across most states is expected to continue (figure 8). For 2021-22, State and Territory governments are estimating purchases in non-financial assets to increase 29% ($13b) driven by investment in Victoria and New South Wales

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*Estimates taken from latest publicly available budget information. For most states this is their 2021-22 budget. WA and ACT are based on their 2020-21 Mid-year financial projects statement.

** Budget and National Accounts investment estimates will not directly align due to conceptual differences between accounting and economic standards.

Footnotes

1. Public Investment is defined as Gross Fixed Capital Formation by General Government and Public Corporations.

2. The June quarter 21 Engineering Construction Activity publication will be released on the 29/09/21.