Australia has spent much of the past decade facing a stubborn problem: productivity growth has slowed, even as demands on the economy have increased. Since the mid-2010s, multifactor productivity has barely improved, holding back income growth and living standards. At the same time, pressure on public finances has intensified, with rising demand for healthcare, aged care, and disability leaving governments with less room to respond through spending alone.
Australia has capital but struggles to mobilize it where needed most
Australia has a large pool of investable capital, including a superannuation system worth around A$4.5 trillion, alongside significant venture capital and private equity activity. Yet funding is not reaching the sectors that will drive productivity growth.
Australia’s public infrastructure pipeline alone is estimated at around A$242 billion through to 2029, with total requirements exceeding A$1 trillion when private investment is included. The transition to a low-emissions economy, requiring investment in renewables, electrical grid infrastructure, and other low-emissions technologies, will create additional pressure, as will growth in defense spending, which is projected to exceed A$425 billion over the next decade.
Rather than relying on fragmented interventions or public funding alone, Australia needs to make it easier for private capital to flow into priority sectors like infrastructure, energy, and innovation. This means creating opportunities that are large and reliable enough for institutional investors, while using public funding to reduce risk and support private investment.
Despite this demand, capital is not consistently flowing into these areas. Institutional investors need scale and a degree of certainty around returns, but too often projects fall short. Pipelines are often fragmented, with risks that are not clearly defined and settings that can change over time, which makes it harder for investors to commit even when the need is clear.
Better structure and coordination can unlock private capital in Australia
Australia has developed a relatively extensive ecosystem of Specialist Investment Vehicles such as the Clean Energy Finance Corporation, ARENA, and the National Reconstruction Fund, which help develop projects and support early investment, but the system remains fragmented, with multiple entry points and inconsistent processes limiting investment at scale.
The case for capital mobilization is most visible when applied to specific sectors where investment gaps are both material and present. In Australia, three sectors stand out:
- Start-ups and scale-ups that generally perform well at the early stages but struggle when companies need larger amounts of funding to grow
- Infrastructure and the energy transition, where the pipeline is large but often difficult to invest in because projects are complex, long-term, and not always structured in a way that gives investors enough certainty
- Defense, where rising long-term spending creates room for private investment, but this depends on stronger alignment between public priorities and investor expectations
Five principles to design an effective capital mobilization model
Successful capital mobilization is not achieved through isolated interventions, but through coherent models that align policy, institutions, and investment structures. The challenge is to develop an approach that is scalable, repeatable, and capable of operating across sectors. Five design principles emerge consistently across successful models.
Engage private investors early in project design
A common mistake is to assume private sector models are homogenous; in practice, they operate across the risk-return curve. Given this heterogeneity, the private sector should be engaged from an early stage, so project design reflects market realities and improves the likelihood of successful execution.
Structure projects to allocate risk effectively
Private capital is sensitive to specific types of risk in sectors such as infrastructure, innovation, and defense that are difficult to price or manage. Effective mobilization models do not eliminate these risks but allocate them more efficiently.
Design capital mobilization models for ease of execution
Private sector investors are seeking predictable and repeatable opportunities with clear revenue streams, stable regulatory environment, and transparent project pipelines – these criteria make it easier for them to justify investing in the required capabilities.
Coordinate project delivery across institutions
A defining feature of successful capital mobilization is the shift from singular transaction-based approaches to coordinated delivery.
Bundle opportunities to meet institutional scale
By grouping smaller opportunities into larger portfolios or vehicles, governments and intermediaries can create investable propositions that meet institutional requirements.
Australia must address the productivity challenge and investment gap
At the center of this capital mobilization challenge is the need to align two sets of requirements that do not naturally coincide. From a government perspective, investment decisions are shaped by policy objectives, fiscal constraints, and considerations of public value. An investor, on the other hand, makes decisions by risk-adjusted returns, predictability of cash flows, and governance structures.
Mobilization is most successful where these two perspectives intersect, where investments are both strategically important and commercially viable. Bridging the gap between available capital and investment needs will require coordinated, predictable, repeatable, and ultimately scalable models that can boost Australia’s productivity growth in the years to come.
Across these areas, capital is available, but opportunities to scale are not always presented in a way that investors can act on. The focus now should be on coordination and more consistent pipelines so capital can move where it is needed. Australia already has the capital and the investment need. The task is to connect them so that private investment supports productivity and long-term growth.
