The boom in data centres and the renewable energy projects needed to power them will boost investment forecasts in the federal budget, the treasurer will reveal in the mid-year economic and fiscal outlook.
Budget forecasts for business investment this financial year are expected to be revised up to five per cent in the December update, from 2.5 per cent in May, Jim Chalmers will say in a speech on Friday.
Combined with an upward revision from four per cent to 7.4 per cent in 2025/26, it represents $50 billion in additional business investment over three years, Dr Chalmers will tell the Citi A50 Economic Forum in Sydney.
Despite the failed Firmus IPO and a slew of high-profile cancellations due to community pushback raising a few jitters among data centre investors, the outlook is still strong.
Economists at Commonwealth Bank recently revised up their projections for Australia's potential data centre pipeline.
But stronger investment is not expected to outweigh the negative impact of higher interest rates and high inflation, with the treasurer flagging the update will book in softer growth and slightly higher unemployment.
The May budget had forecast unemployment to peak at 4.5 per cent in 2026/27, but the jobless rate has already climbed to 4.7 per cent.
"Higher inflation is putting people under pressure, tighter monetary policy is weighing on domestic activity, and we can see that in the softening of the labour market," Dr Chalmers will say, according to an excerpt of his speech.
"We’re not immune from the consequences of two wars, both impacting almost every economy in one way or another, posing risks to global growth, pushing up global inflation, and pushing up borrowing costs."
Attracting more foreign investment is key to driving up weak productivity, and changes to foreign investment approvals were already bearing fruit, the treasurer will say.
Last quarter, the Foreign Investment Review Board approved $87 billion in additional foreign investment, bringing total approved investment for the year up to $278 billion - a 60 per cent increase from Labor's first year in office.
