Browse the complete Report on: Australia Infrastructure Report Q4 2010

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BMI View: Australia’s infrastructure sector is our top pick of the developed markets we cover, due to strong fundamentals for long-term opportunities and a high level of sophistication in terms of project finance operations and business environment. However, we believe a near-term Chinese slowdown will put a damper on Australia’s real infrastructure and construction industry value growth for the remaining of 2010 and the whole of 2011. Consequently, we have revised down our construction industry forecast for 2011, with real growth of 1.4% now anticipated year-on-year (y-o-y), to reflect this slowdown, but expect upside potential during the latter stage of our forecast period, with annual average construction industry real growth of 3.8% anticipated between 2013 and 2018.
Key factors influencing growth for the next quarter included:
Two factors driving new transportation infrastructure investments are China’s insatiable demand for mining exports and the subsequent demand for freight transport services. However BMI’s anticipation of a slowdown in Chinese economic growth is likely to impact Australian raw materials exports, thereby decreasing the demand for infrastructure. As such we have revised our transport infrastructure forecasts downwards to reflect this deceleration.
The Australian government’s plans to privatise and lease a number of freight transport assets is gaining interest – eg the bidding for the Port of Brisbane. Besides public assets, infrastructure funds have also shown interest in purchasing private infrastructure assets – eg Canada Pension Plan Investment Board (CPPIB)’s takeover offer of Intoll Group. We believe these major infrastructure funds are looking to gain from the long term potential of Australia’s infrastructure sector.
BMI's new data series for Australia's residential and non-residential building industry value indicate that real growth for the sector's value will moderate significantly in 2011 following a tentative recovery in 2010. Combined with our view that the Australian economy is due for a period of underperformance over the coming year, especially on the back of a correction in real estate valuations, we are raising our concern for industry players in the residential and nonresidential building industry over the shorter term.
Australia was one of the first countries to embark on the public private partnership (PPP) scheme and use private funding to develop infrastructure projects. As a result, it has the most sophisticated market for PPP schemes in the world, according to BMI’s Project Finance Ratings. Australia’s score of 77.2 out of 100 reflects a stable and well organised political system, sophisticated financial infrastructure, a competitive operating environment and a transparent and coherent regulatory environment. For BMI’s Infrastructure Business Environment Ratings, Australia achieved a score of 73.8 out of 100, gaining the top spot in the regional table for developed states. The combination of the country’s sizable growth potential in the infrastructure industry, low risks in its operating environment, and coherent strategy for infrastructure investment gives Australia the best risk/rewards profile for investors among the developed states.

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