Senate Economics Legislation Committee, , 30:48 to 36:30
The committee questions Treasury officials on the drivers of business investment, specifically the roles of AI data centres and the renewable energy transition.
Topics: Renewable energy, Manufacturing
Speakers: Jenny Wilkinson, Dr Angelia Grant, Senator Lisa Darmanin
Thank you very much, Ms. Wilkinson. I just might kick off with a couple and then we will rotate around in 10 minute blocks for all the senators in the room for your information. You talked in your opening statement about strong investment in AI domestically. I just wondered if you could make some further comments around whether this is the kind of main driver of business investment improvement and you know, outside of AI, you know, what else are you seeing in business investment increasing? Like what sectors.
Thank you, Chair. So perhaps if I step back, I think I would observe that the economy has been it's certainly evolved more strongly, it has operated more strongly than expected over the period since about the middle of 2025. This has largely been on account of the AI investment boom. I think it's also the case though that in the second half of 25 and early months of 26 we had stronger housing investment than we had expected, and the level of consumption was also probably a little stronger than we had expected. So what we saw through the second half of 25 and early 26 was a strengthening in private sector momentum in the economy and private demand contributed a very significant contribution to this growth. So that's broadly, that's broadly what we've seen. There's no question that the investment that we have seen in AI data centres and related investments was stronger than I think that I had seen any of the sort of economic forecasts project over the second half of 2025 and into early 26. So that's that's been a very significant element of the growth. I might just check whether Dr. Grant has got anything else to add in terms of investment outcomes, which were different from what we expected.
Hi, Senator Dr. Antela Grant, Deputy Secretary, Macroeconomic Group, good morning. All I will add is to say that we had the annual national accounts just a week ago, and that gave us a few revisions. Total business investment grew by 8.3% in year average terms in 2025-26, which was quite a bit stronger than we forecast at 4%. In terms of the mining and non-mining business investment sectors, both were stronger than our forecasts, but non-mining business investment grew by 10.1% in 2025-26. So as the Secretary said, very strong growth rates in non-mining business investment last financial year.
Thank you. And what role is the energy transition playing in any of this investment? Are you seeing that as a driver as well?
So, Senator, um the ongoing uh roll out of renewables and the transition of the energy sector is a structural uh change which has been occurring for some time. It's one of the things that we highlighted in the intergenerational report. The fact that this transition is one of the major forces which is impacting the evolution of the economy over the next 40 years. These investments have been occurring for some time and they've just continued in in most recent periods. I don't think I've got anything in particular to add, but Dr. Grant probably does.
Just to say that the Secretary is right. The level of renewable energy projects and investment in them remains fairly high in the economy. That means its contribution to growth has slowed down because the level is staying up, but continue to see strong investment in renewable energy projects across Australia.
And just finally from me, um, what what intentions, what do intentions suggest about private capital expenditure for 25-26 and then into 20627?
So again, we're now into uh 2627, so as Dr. Grant has said, um private business investment was certainly above previous expectations and our expectations to 20 through 2526. Um I think um well that they are now at a very high level, and sometimes when you get a very strong level of investment, you expect to have some correction. Um I think it remains the case that we have continued to be surprised on the upside in terms of uh investment expectations. Dr. Grant?
Yeah, that's correct, Senator. So in the latest CapEx survey, which does give us a Ford estimate for what business views as the increase in capital investment in 2026-27. We received the third estimate as the last one, and that was another lift up. So that suggests growth of 3.6% in 2026-27. This is a slightly different uh translation to the national accounts, so we have to take a little bit of care. But non-mining CapEx is expected to grow according to this survey by 5.5% in 2026-27. So continuing strong growth.
Thank you. I will hand to my colleague, Senator Hume.