Global financial crisis? What global financial crisis?

The outlook is strong, not weak. But not for everyone. There will be major differences between the winners and losers, both by industry and by region.

The problem is that, apart from the resources sector, excessive caution at the beginning of the cycle leaves physical investment at levels insufficient to underwrite growth. Reductions in government expenditure will impact on the infrastructure side. And in the private sector, we face emerging capacity constraints.

We’re still stuck in the GFC logic, over-reacting to perceived risks and underinvesting. That creates anomalies and opportunities. But be careful – each sector faces its own issues. Under-investment and tightening capacity will, in turn, drive the income side of investment markets. But it will take time for investment decisions to come on stream as additions to capacity.

‘We need to look ahead at the strength of the Australian economy’

We need to look ahead at the strength of the Australian economy and the need for investment to service that strength. But we’re still looking backwards at the GFC, worried about risk. And anomalies remain in investment markets. We’ve had the yield/price correction triggered by the GFC, but we haven’t had the rise in rents and incomes to get us back to replacement cost levels sufficient to underwrite the next round of physical investment. The sooner we understand that, the better the logic underpinning our investment strategies.

Dr Frank Gelber is director and chief economist of BIS Shrapnel.