Deloitte Access Economics’ Investment Monitor: Cost blowouts arrive
Australia is navigating an increasingly complex investment environment – one where the structural drivers of investment have strengthened, while at the same time, the costs of publicly funded projects rise dramatically.
According to Deloitte Access Economics’ latest Investment Monitor report, the Australian investment outlook is being shaped by three powerful structural forces: the transition to net zero, ongoing public infrastructure investment, and the rapid expansion of the digital economy. The total value of projects in the Investment Monitor database rose to $1.14 trillion in the December 2025 quarter, growing by 1.3% over the quarter.
The Investment Monitor database contains more than $415 billion of definite public infrastructure projects, with a further $160 billion in planning. After a decade dominated by large transport and social infrastructure projects, fewer new publicly funded megaprojects are entering the pipeline, with state governments shifting focus to delivering existing commitments. More broadly, capacity constraints, elevated construction costs and tight budgets mean the scope for renewed growth in public investment is limited.
A special focus of this edition has been the rising cost of delivering public infrastructure projects. Across 13 publicly funded projects valued at $10 billion or more, the latest cost estimates have blown out by approximately $130 billion, equivalent to more than the entire value of residential construction work done across Australia in the past year.
While cost revisions in major construction projects are nothing new, the frequency and magnitude of recent upward cost revisions are likely to place additional pressure on already-stretched state government finances. When major project costs rise, governments are forced to make trade-offs across the pipeline. These can include narrowing scope, deferring lower-priority projects, or funding overruns through additional borrowing. These choices are becoming more consequential as state balance sheets tighten and debt levels rise, and further large overruns would erode the already-limited budget headroom.
Recent overruns are due to a handful of key factors: early budgets before scope and risks are fully defined; delivery capacity and construction cost pressures; governance and contract settings; and the increasing size and complexity of projects. The increasing scale of projects means that even small percentage changes result in large dollar impacts. Taken together, recent cost revisions may require a change in the operating environment for major projects. The scale of overruns being recorded at the top end of the pipeline is increasingly influencing what can be delivered, how projects are sequenced, and how governments manage their finances.
Trends in the private sector have been more promising. Total business investment is expanding at its fastest pace in more than four years, supported largely by energy infrastructure and digital investment. Forward-looking indicators, including the latest ABS capital expenditure survey and NAB Business Survey, point to stronger non-mining investment ahead, with firms upgrading their investment plans and business conditions and confidence above long-run averages.
In the wake of the Reserve Bank of Australia’s decision to raise the cash rate by 25 basis points last week, much commentary has focused on the role of government spending in driving price growth. In the long-term, however, it is precisely this increased productive capacity that Australia needs in order for productivity to lift. With the RBA’s two-year growth forecast now at its lowest in 36 years, boosting productivity is essential.
This newsletter was distributed on 13th February 2026. For any questions/comments on this week's newsletter, please contact our authors:
This blog was co-authored by Gautham Gopinath (Graduate Economist, Deloitte Access Economics).
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