Australia must urgently lift business investment

20 March 2023

New research from the Business Council shows that Australia’s capacity to prosper from big economic shifts like decarbonisation and digitisation is at risk of being hobbled by record low investment.

“Australia is in the grip of an investment drought,” Business Council chief executive Jennifer Westacott said.

“Business investment matters because it fuels innovation and expansion, it’s what gives businesses the capacity to do new things, pay workers more and prepare for the future.

“But right now we’re staring down the barrel at huge economic change and opportunities but we don’t have the crucial tool we’ll need to face them – booming business investment.

“In fact, since 2019 Australia has been exporting capital on a scale not seen since after World War II.

“This is a global battle. Global businesses can invest anywhere in the world, and they’re responding to the actions of our competitors.

“In the United States the Inflation Reduction Act and tax cuts in 2017 have helped suck investment away from the rest of the world.

“Today more Australian investment flows abroad to America than stays at home. The investment equation just isn’t working.

“The rest of the world is facing similar challenges, and they’re acting to attract the investment they’ll need to secure their people for the future.

“Meeting this challenge is an urgent priority and we’re recommending some practical steps to reverse the decline:

  • Introduce a broad-based, permanent investment allowance that would apply to all investment depreciable under current tax law.
    • Modelling suggests a 20 per cent investment allowance would lift GDP by around $17 billion in a decade and see wages grow more than $750 for the average full-time worker. 
  • Extend immediate expensing beyond this year’s expiry. Investment growth could significantly slow when the measure expires. Immediate expensing measures were introduced during the pandemic, and they worked to keep investment ticking over. 
  • Extend the Skills and Training Boost and Technology Investment Boost to 30 June 2025 to provide more time for businesses to plan, make their investments and deliver suitable training.

“As we face the challenges of decarbonisation, of taking advantage of huge opportunities of the AUKUS deal and preparing for the future we simply can’t afford to do nothing.”

Read Australia's investment drought here.


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