Insight Series RACV Club 4 September 2014 Opportunity Asia Phil Ruthven AM, Chairman WHERE KNOWLEDGE IS POWER
Topics 1. Global Perspective 2. Regional Perspective 3. Some Australian Perspective 4. International Investment 5. Australia the food bowl?
1. Global Perspective
The World s Economic Regions In 2014 Share of World GDP (ppp basis) North America 21.9% C&S America 6.3% W&C Europe 18.3% Africa 3.9% ME 5.3% Indian S-C 7.3% Eastern Europe 4.0% Asia Pacific 33.0% 2014 World GDP, $US 92.5 trillion IMF/IBISWorld 09/02/14
Importance of World Regions GDP (ppp terms) 2014 Economy Population Middle East % Africa Asia Pacific 33.0% 5.3% 4.0% North America 21.9% Western Europe 18.9% Indian S/C 23.1% Africa 11.5% Asia Pacific 33.6% $US ppp 92.5 trillion 7.2 billion IBISWorld: 28/02/14
World Regions Importance Changing importance, % of World GDP (ppp terms) 1870 1913 1950 1998 2025 Year 12.7% 2.0% 33.6% 7.6% 3.6% 12.2% 26.1% 22.8% 30.5% 3.5% 6.7% 35.5% 27.3% 8.6% 9.6% 2.7% 7.6% 3.6% 4.2% 17.0% 16.3% 24.0% 6.8% 23.5% 3.5% 3.1% 5.0% 32.1% 18.0% 7.0% 14.5% 4.5% 5.0% 4.5% 10.5% 36.0% Nth America C & S America Western Europe Eastern Europe Middle East Africa Indian S-C Asia Pacific 1.1 2.7 5.3 33.7 190.0 GDP (trillion) 1870 1913 1950 1998 2025 Source: OECD 20/02/13
2. Regional Perspective
Asia Economy Asia Pacific + Indian S-C 2017 (F) Singapore 1.0% Vietnam 1.1% Philipp 1.3% Malaysia 1.5%. Thailand 2.0% Other A-P 0.3% Other Indian S-C 3.0% India 16.9% Greater China 47.9% 45.3% China 11.9% Japan NZ 0.4% 2.8% H/K 1.1% $US 44.9 trillion (40.8% of world GDP) Source: Wikipedia/ IBISWorld 11/09/12
Asia Growth 2014 (E) Major Asia Pacific and Indian S-C nations (ppp ranking) Laos China Sri Lanka Cambodia Myanmar Philippines Asia India Bangladesh Vietnam Malaysia Indonesia Pakistan5.4 Nepal Singapore S Korea Taiwan NZ Australia Thailand Japan 1.9 1.4 3.2 3.0 3.0 4.5 4.2 3.8 6.2 6.0 5.8 5.8 5.4 5.4 5.4 7.3 7.2 7.2 6.8 6.7 8.0 Regions Growth Asia 6.3% E. Europe 2.9% World (8 regions) 3.1% N. America 2.9% EU 1.0% 0 1 2 3 4 5 6 7 8 9 10 11 12 Growth % (GDP) IMF/IBISWorld: 19/08/14
Asia, the place to be Australia has integrated its economy and society into Asia at large and China in particular. Asia is a mega-region consisting of the Asia Pacific and Indian sub-continent. It is the most powerful region (36% of world GDP) and the fastest growing (6-7% pa, almost double the global average). Over 75% of our export of goods & services now go to Asia, less than 7% of our GDP is exposed to troubled nations, and two-thirds of our inbound tourists and immigrants come from Asia.
3. Some Australian Perspective
Australia s Industry Mix Shares of GDP, in F2012 price terms Year to March 2014 Hospitality Pers. & Other Serv. Cult & Rec. Serv. 0.8% Agriculture Mining 2.2% Utilities 10.3% 2.4% Govt. Adm. 5.2% 2.9% 7.6% Construction Admin. & Support Services Rental, Hiring & Real Estate 8.2% Finance & Insurance GDP $1558 billion 2.7% Info Media & Communications Sectors Primary Secondary Tertiary Quaternary Quinary Note 1 : includes stat. discrepancy (0.15%) ABS 5206-26 IBISWorld 05/06/14
Australia s Export Market Year 2013 Business Services Other Services 1.1% Services 17% Agriculture Resources 57% Freight/Postal 1.2% Tourism 10.8% 8.0% 49.3% Minerals Manufacturing 26% $319 billion IBISWorld: 11/09/12
Australia s Export Market Merchandise goods 2014 Asia Pacific 78% Asia 82% Other A-P 5.4% Other 5.8% 40.3% Greater China China 36.6% Taiwan 2.7% H/K 1.0% 17.9% Japan Indonesia 1.8% $274 billion (year to March 2014) IBISWorld: 22/05/14
4. International Investment
Who owns who, and how much? Total foreign investment in Australia is around $2.6 trillion (via direct, debt and portfolio forms) So, some 20% of the nation s total assets of over $12 trillion are owned or mortgaged by other nations, 3% of which is Asia Australia has c. $1.7 trillion of the world s assets. In net terms, foreign ownership and indebtedness is about 8% of our the nation s assets
Foreign Investment By Type 2014 Outward Inward 28.2% 3.8% 18.4% 8.2% Direct Debt 38.9% 55.4% Portfolio 6.4% 4.5% 19.0% 13.5% 3.7% $1.66 trillion $ 2.51 trillion Derivatives Other Reserve assets Source: ABS 5302.27A & 5302 26F 22.08.14
Australia s Global Investment Position 2014* % of total basis 100% World Investment Inward GDP Abroad Investment 90% 80% 70% 60% 50% North America 21.9% C & S America 6.3% W & C Europe 18.3% E Europe 4.0% North America 27.9% W & C Europe 24.8% North America 27.9% W&C Europe 29.1%% 40% 30% 20% 10% 0% Asia Pacific 33.0% Indian S-C 7.3% ME 5.3% Africa 3.9% Asia Pacific 16.8% Unspecified 21.1% $US92.5 trillion $1.63 trillion $2.46 trillion *(2013) India 0.4% Asia Pacific 14.3% Unspecified 27.1% *(2013) Source: ABS 5352.0
International Investment Shares of Total Investment (Direct, portfolio & debt) Foreign (inwards) Abroad (outwards) 2001 2013 2001 2013 E. Europe 0.2% 26.0% 28.0% North America 42.2% 32.5% North America 33.2% 17.0% 24.4% 29.1% 17.0% 27.1% C&S America W&C Europe E. Europe (0.2%) Asia India Subcontinent Middle East Africa Unspecified 24.8% 16.5% 16.1% 27.9% 16.8% 27.1% C&S America W& Europe Eastern Europe Asia India Subcontinent Middle East Africa Unspecified $ 0.89 trillion $2.46 trillion $0.54 trillion $1.63 trillion ME 0.9% Africa 0.1% Source: ABS BOP
Inward Foreign Investment - Australia Asia Mega-Region 2001-2013 400 50 350 300 250 200 150 100 Investment $ billion Asia Region (Asia Pacific & Indian sub-continent) Percentage of all countries 45 40 35 30 25 20 15 10 50 5 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: ABS 52520 17/08/14
Inward Foreign Investment - Australia China 2001-2013 50 10 9 40 8 30 20 10 Investment $ billion China Percentage of all countries 7 6 5 4 3 2 1 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: ABS 52520 17/08/14
Australian Outward Foreign Investment Asia Mega-region 2001-2013 400 50 350 300 250 200 150 100 Investment $ billion Asia (Asia Pacific & Indian sub-continent) Percentage of all countries 45 40 35 30 25 20 15 10 50 5 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: ABS 52520 17/08/14
Australian Outward Foreign Investment China 2001-2013 50 10 9 40 8 30 20 10 Investment $ billion China Percentage of all countries 7 6 5 4 3 2 1 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: ABS 52520 17/08/14
5. Australia: Asia s Food Bowl?
What can we do? We are currently feeding our population of 24 million and another 20-25 million with our exports; say 45 million or so, all up. This is 2% of the Asia Pacific population. With a changing product mix, new technology, continuing productivity, and changes to the industry s structure (finances and ownership style) we could conceivably increase output five-fold over this 21 st Century, supporting 200-225 million local and O/S people. This would represent 4.5% of the Asia Pacific population of 5 billion at that time, or around 3% of Greater Asia s population. If the increase was to be 10-fold rather than 5-fold, we would be supporting just under a tenth of our region s citizens. But what an opportunity, either way!
What can we do? So, Australia needs to become increasingly a more- specialized niche player in terms of products and customer nations; almost certainly focused on the Asia Pacific, although with some ultra-niche products that stretch across to other of the world s 8 regions In the process, it can produce far better returns on equity than the levels of recent decades; but change and adaptation will be required to achieve this