Businesses are putting off spending on major projects because of uncertainty surrounding the economy.
The value of planned projects fell by almost three per cent to $601 billion in the last three months of 2024, Deloitte Access Economics found in its latest Investment Monitor.
With the outlook for economic growth and consumer spending uncertain, businesses are more likely to put off investment as they become more uncertain about the level of future demand for the products and services they provide, lead author Sheraan Underwood said.
Business revenues have been hit by the slowdown in the Australian economy while operating costs - including labour, energy and insurance - continue to increase.
"Businesses are now responding by implementing cost-cutting measures," Mr Underwood said.
"Against this backdrop, many businesses will find it prudent to shore-up their balance sheets and wait for greater certainty around the broader macroeconomic environment before investing."
In the long term, the outlook for investment is still strong.
Population growth will continue to drive up demand for infrastructure, while the decarbonisation of the energy sector is contributing to a healthy pipeline of renewable electricity and transmission projects.
Economic growth is also expected to recover modestly from its current low.
"The longer-run outlook for business investment is supported by several opportunities," Mr Underwood said.
"Significant investment will be required as Australia transitions toward net zero emissions, while technology trends are promoting investment in generative AI, software, as well as physical infrastructure such as data centres.
"These investments, should they be realised, will drive faster rates of productivity growth over time."
Transport infrastructure still makes up the single largest share of investments but this is declining as major projects wind up and resources shift towards housing and energy.
Sydney's Metro City and Southwest rail project and Perth's Metronet are winding down, while the $9 billion CopperString 2032 project - the largest expansion to the national electricity grid - is ramping up.
Despite the slowdown in investment in recent months, the value of projects on Deloitte's database increased 15 per in 2025.
