BUSINESS INVESTMENT

Despite the most pronounced global recession since the 1930s and volatile financial conditions, business investment in Queensland rose 10.1% in 2008-09, the fifth consecutive year of double-digit growth. The real level of business investment more than tripled over the eight years between 2000-01 and 2008-09, to reach almost $40 billion. As a consequence, business investment’s share of GSP more than doubled over the period, from 8.3% in 2000-01 to 18.6% in 2008-09, the highest recorded in the 24-year history of the Queensland State Accounts.

While the deepening in the global financial crisis since September 2008 has seen commercial lending dry up and businesses re-evaluate investment plans, the large amount of project work already under construction supported significant momentum in construction activity, especially in the first half of the financial year. Private sector construction work on mining and related infrastructure, energy, and roads resulted in the real value of engineering construction investment rising 29.0% in the year. The ongoing strength in this sector also reflects the long construction timeframes associated with large-scale infrastructure projects.

Conversely, non-residential construction investment (such as offices, shops and factories) rose a modest 1.7% in 2008-09. Restricted credit for commercial developments took its toll on this type of construction, particularly in the second half of 2008-09. Overall, investment in non-dwelling buildings and structures in Queensland increased 16.7% in 2008-09, to total more than $18 billion.

Machinery and equipment investment rose a more modest 5.0% in 2008-09, reflecting the more responsive nature of this type of investment to changing economic conditions. The rapid deterioration in the global economy, combined with a considerable depreciation in the A$ in late 2008, discouraged spending on relatively more expensive imported capital goods, particularly in early 2009. However, these effects were unwound somewhat late in the financial year, with the A$ rebounding from its low in February 2009 and expanded Federal Government tax incentives supporting investment.

www.treasury.qld.gov.au.