Private equity is the fuel for Australia’s growth ambitions

Australia’s growth engine is spluttering. Private equity could fuel jobs, technology and resilience when our country needs it most.

In brief:

• Australia’s growth is stalling as investment, productivity and innovation lag. Government funding alone can’t meet the scale of change required.
• Private equity is emerging as a powerful catalyst - unlocking jobs, technology and resilience to revitalise key sectors and national capability.
• With the right tax and policy reform, private capital could deliver $144b in value and 600,000 jobs by 2030, strengthening Australia’s future. 

Australia, along with the rest of the world, is facing what feels like one of history’s most complex and unforgiving times, with no shortage of challenges to long-term economic growth. Investment and productivity have both stalled. Add to the equation innovation bottlenecks and ageing infrastructure, and it’s clear that the scale of investment required can’t be met by government funding alone. Private capital can fill the gap and move us beyond short-term fixes.

At the “What Not to Ignore in 2026” EY event, Australian business leaders discussed how private capital can be the catalyst to fuelling jobs, technology and resilience when our country needs it most. Navleen Prasad, Chief Executive Officer of the Australian Investment Council, gave her assessment on how to lift Australia’s innovation report card to an A+.

In Navleen’s words: “If we’re serious about innovation, we need to be the clever country and the capital country. To turn ideas into industries, capital must be deployed efficiently. And Australia has some structural hurdles to efficiency.”

The numbers show the power that private capital could deliver for Australia. Lift private equity investment to 4 per cent of GDP by 2030 and EY modelling shows that $144 billion is unlocked in economic value and around 600,000 jobs created, to turbocharge start-ups and nationwide innovation.

Private equity has quietly become a powerhouse for transformation with funds under management in Australia surging 131 per cent in a decade. Total capital deployed in 2025 reached US$33.1b across 76 deals, led by technology-related deals at 29 per cent of volume, up from 12 per cent in 2023.

Why does this matter? Because long-term capital drives momentum. It accelerates tech adoption and powers sectors shaping Australia’s future, including healthcare, infrastructure, and energy. Private equity also brings active ownership and expertise to help businesses scale, modernise and compete globally.

Defence is another sector that could benefit from private capital and is critical to Australia’s long-term stability. EY Australia’s latest Defence Industry Report, based on insights from nearly 500 industry participants, shows strong policy and workforce foundations. But a persistent gap remains. While large direct suppliers are well- positioned, indirect suppliers that underpin national capability often face barriers to investment and expansion.

Private capital is emerging as a game-changer as global calls for increased defence spending grow louder. Nearly half of direct suppliers believe private capital should help uplift the industry. Yet only about a third of indirect suppliers agree, a gap that may reflect limited exposure to capital markets or concerns about independence.

Mobilising private capital can do more than fill funding gaps in the defence supply chain. It can tackle ageing infrastructure and equipment - the top risk for both direct and indirect suppliers - and open doors to overseas markets. Consider Advanced Navigation, a Sydney robotics firm that attracted $108 million in Australian and US investment after Sweden adopted its tech to upgrade defence capability. That’s the power of private capital.

Australia’s current settings make that reform urgent. A 30 per cent corporate tax rate, well above the OECD average of 21 per cent, combined with a complex R&D tax system and heavy compliance burdens, risks deterring investment in strategic sectors.

To compete, Australia needs permanent incentives that send a clear signal to local and global investors, and reinforce its position as the region’s lower risk bet, built on stability and maturity. That means lowering corporate tax rates for priority industries, introducing investment allowances or bonus deductions, and delivering a refundable R&D tax offset with at least a 10 per cent additional offset.

These measures aren’t just tweaks; they’re levers to economic growth, capital and innovation. Defence companies echo this view, with tax incentives and policy certainty topping their list for attracting private investment.

Money moves fast and so does the risks. From geopolitical tensions to supply chain shocks, the ground is shifting under our feet. To attract our share of private equity, we need bold reforms that cut red tape, modernise our tax system and create an investment framework that signals confidence.