COVID recovery needs private investment, says Macquarie’s Shemara Wikramanayake

Macquarie CEO Shemara Wikramanayake says governments are going to need private money to help recover from the pandemic and to fund the projects needed to prevent a repeat.

Macquarie Group CEO Shemara Wikramanayake. Picture: Britta Campion

The coronavirus pandemic will accelerate private investment in public infrastructure, Macquarie managing director and chief executive Shemara Wikramanayake has suggested, with investment in renewables, health and digital infrastructure just some of the areas the private sector is eyeing up in a post-COVID-19 world.

Speaking at an Infrastructure Partnerships Australia event on Friday, Ms Wikramanayake said the level of fiscal debt taken on by both state and federal governments through the crisis, as well as the need to keep infrastructure projects going, would push the government to bring in more private capital to support jobs and the economy in the coming years.

“The immediate response has been very good in terms of helping the economy and keeping it active through the pandemic but as we come out of this there’s going to be even more need for the government to bring capital to infrastructure projects to keep driving jobs and stimulate the economy.

“They’re going to come out of this with much greater fiscal debt at all levels. So they’re going to need more private sector money coming in for things like the ongoing transition to renewables. Renewables in 2012 were providing 10 per cent of our capacity, by 2019 it was 22 per cent and now at times we’re relying 50 per cent on renewables. So all of these transitions are going to need support.”

Treasurer Josh Frydenberg is expected to unveil a major infrastructure program when he hands down the Federal budget early next month.

As the nation’s debt balloons through the COVID-19 pandemic, Ms Wikramanayake suggested the government may also look at its asset recycling program to ease some of the pressure.

“As well as new projects, there’s obviously the recycling program going on, in which Australia has been a leader, where the government could potentially look at exiting assets off its balance sheet.

“There are many (assets) still on the public balance sheet in energy, housing and defence that would be conducive to the sort of assets private sector savings and pension funds want to access, and that are defensive, capital-protected yielding assets.”

On new projects, Ms Wikramanayake said there were opportunities across the spectrum.

“If people move to smaller urban areas, then there’ll be transportation investment needed there. Public transport probably needs greater investment now. And I think all of the social infrastructure will also come to the fore a lot more, (such as) hospitals, schools, housing as well as areas like defence.”

Structural global trends, such as mounting private sector savings, ageing populations needing to fund their retirement and looking for capital protected-yielding investments, as well as the public purse being constrained are driving the need for more private investment in public infrastructure, Ms Wikramanayake said.

The skill-set that can be brought together from private and public sector to derive community outcomes, as well as growing urbanisation, decarbonisation and changes to health services were also playing a part in accelerating the need for private capital in public infrastructure, she added as she cautioned of the need to invest in making Australia’s assets more resilient.

“This is a short-term health-driven issue but you should never waste a crisis. One of the things we can learn from this is we should make infrastructure and communities more resilient to future pandemics.

“We could have this happen again. So things like investing in resilience in the health system, the need for climate change resilience is going to continue to grow.

“As investors in infrastructure we’re going to need to accept the need to make our assets much more resilient to a whole range of exposures, be it health pandemics, climatic change or geopolitical issues. There’s a whole lot of changes going on to which we need to make our infrastructure more resilient and each crisis gives us an opportunity to learn new areas of resilience.”