Delta strain could 'derail' Australia's Covid recovery, Deloitte report warns

Deloitte Access Economics' latest report says the persistent threat of lockdowns and restrictions posed by the highly infectious Delta strain of COVID-19 was "kryptonite" for new private investment.

"Many of the elements supporting higher levels of business investment remain in place," Deloitte partner and report lead author Stephen Smith said.

"But when it comes to new investment there is never a guarantee.

"Ongoing lockdowns or the threat of restrictions are kryptonite for investment. Businesses will want to see a clear path out of COVID-19 before committing to significant new investments."

The threat of lockdowns and border closures will remain a possibility for the foreseeable future, with national cabinet's roadmap out the pandemic only envisaging more freedoms once 70 per cent of the eligible population is fully vaccinated.

Lockdowns are still possible but "less likely" when the 70 per cent target is hit, while only "highly targeted" lockdowns would be imposed once 80 per cent of eligible Australians are inoculated, according to the new strategy.

Prime Minister Scott Morrison, who had initially praised NSW Premier Gladys Berejiklian for holding off on forcing Sydney into lockdown in the early stages of its latest outbreak, has now conceded that hard and fast shutdowns are the best approach to fighting the Delta strain.

South-east Queensland was on Saturday afternoon forced into a snap three-day lockdown in response to a new outbreak linked to Brisbane schools.

Despite the Delta threat, Deloitte believes that the strength of Australia's economic recovery thus far will see total investment grow this year, before "accelerating" in 2022.

Private business investment is now just 2.2 per cent below pre-Covid levels, despite the shock of the past 18 months.

The optimistic outlook hinges on high levels of business confidence, which itself is reliant on an easing of crippling Covid restrictions.

"The longer we appear to the world as a closed and risk-averse society, the more likely investment dollars will head off to other countries," Mr Smith said.

Locally, the report found construction activity in the ACT had slowed across a number of sectors, including on commercial projects.

Declines in work completed in retail, aged care, accommodation and entertainment had offset the gains made in other sectors, according to the report.

Deloitte noted that the value of projects now underway continued to increase, suggesting that construction activity might accelerate in the coming months.

The ACT has a number of major projects due to start in the next year, including work on the extension of light rail from Alinga Street to Commonwealth Park and the Canberra Hospital expansion.