WHERE KNOWLEDGE IS POWER
Phil Ruthven AM, Chairman
Insight SeriesRACV Club
4 September 2014
Opportunity Asia
1. Global Perspective
2. Regional Perspective
3. Some Australian Perspective
4. International Investment
5. Australia the food bowl?
Topics
1. Global Perspective
The World’s Economic Regions In 2014Share of World GDP (ppp basis)
2014 World GDP, $US 92.5 trillion
C&SAmerica
6.3%
North America
21.9%
W&C Europe18.3%
EasternEurope
4.0%
Asia Pacific
33.0%Africa3.9%
ME5.3%
IndianS-C7.3%
IMF/IBISWorld 09/02/14
Importance of World Regions GDP (ppp terms) 2014
$US ppp 92.5 trillionIBISWorld: 28/02/14
Asia Pacific
33.0%
North America
21.9%
AfricaMiddle East %
WesternEurope
18.9%
Economy Population
7.2 billion
Africa11.5%
IndianS/C23.1%
Asia Pacific
33.6%
5.3% 4.0%
World Regions ImportanceChanging importance, % of World GDP (ppp terms)
Source: OECD 20/02/13
26.1%17.0% 16.3%
32.1% 36.0%4.2%
5.0%10.5%
2.7%3.6%
3.1%
4.5%
3.5%
5.0%7.6%
8.6%9.6%
4.5%
33.6%
35.5%27.3%
23.5%
14.5%
2.0%
3.5%
6.7%6.8%
7.0%
12.7%22.8%
30.5% 24.0% 18.0%
1870 1913 1950 1998 20251.1 2.7 5.3 33.7 190.0 GDP (trillion)
1870 1913 1950 1998 2025 Year
Nth America
C & S America
Western EuropeEastern EuropeMiddle EastAfricaIndian S-C
Asia Pacific
12.2%
7.6%
3.6%
2. Regional Perspective
Asia EconomyAsia Pacific + Indian S-C
2017 (F)
$US 44.9 trillion(40.8% of world GDP)
Source: Wikipedia/ IBISWorld 11/09/12
India16.9%
Other A-P0.3%
NZ0.4%
H/K 1.1%
Singapore 1.0%Vietnam 1.1%Philipp 1.3%Malaysia 1.5%.Thailand 2.0%
Greater China47.9%
45.3% China
11.9%Japan
Other Indian S-C
3.0%
2.8%
1.41.9
3.03.0
3.23.8
4.24.5
5.45.45.4
5.85.8
6.06.2
6.76.8
7.27.2
7.38.0
0 1 2 3 4 5 6 7 8 9 10 11 12
JapanThailandAustralia
NZTaiwan
S KoreaSingapore
NepalPakistan5.4
IndonesiaMalaysiaVietnam
BangladeshIndiaAsia
PhilippinesMyanmar
CambodiaSri Lanka
ChinaLaos
Asia Growth 2014 (E)Major Asia Pacific and Indian S-C nations (ppp ranking)
IMF/IBISWorld: 19/08/14
Regions GrowthAsia 6.3%E. Europe 2.9%World (8 regions) 3.1%N. America 2.9%EU 1.0%
Growth % (GDP)
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 MixShares of GDP, in F2012 price terms Year to March 2014
ABS 5206-26 IBISWorld 05/06/14
Agriculture
2.2% Utilities2.4%
GDP $1558 billion
Finance & Insurance
Mining
10.3%
Govt. Adm. 5.2% 7.6% Construction
2.7%
8.2%
Info Media & Communications
Cult & Rec. Serv.0.8%
Pers. & Other Serv.
Hospitality
SectorsPrimarySecondaryTertiaryQuaternaryQuinary
Admin. & Support Services
Note 1: includes stat. discrepancy (0.15%)
Rental, Hiring &
Real Estate
2.9%
Australia’s Export MarketYear 2013
IBISWorld: 11/09/12
$319 billion
Tourism 10.8%
Agriculture
8.0%
OtherServices
1.1%
49.3% Minerals
Freight/Postal1.2%
BusinessServices
Manufacturing26%
Resources57%
Services17%
Australia’s Export MarketMerchandise goods 2014
IBISWorld: 22/05/14
$274 billion(year to March 2014)
Other5.8%
40.3% Greater China China 36.6%
Taiwan 2.7%H/K 1.0%
17.9% Japan
Asia Pacific 78%Asia 82%
Other A-P 5.4%
Indonesia 1.8%
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 Type2014
$1.66 trillion $ 2.51 trillion
Direct
Debt
Portfolio
Derivatives
OtherReserve assets
Outward
28.2%
3.8%
38.9%
6.4%
19.0%
3.7%
18.4%
8.2%
55.4%
4.5%
13.5%
Inward
Source: ABS 5302.27A & 5302 26F 22.08.14
Australia’s Global Investment Position2014* % of total basis
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$US92.5 trillion $1.63 trillion $2.46 trillion
World Investment InwardGDP Abroad Investment
Source: ABS 5352.0*(2013)
Indian S-C 7.3%ME 5.3%Africa 3.9%
C & S America 6.3%
E Europe 4.0%
Asia Pacific33.0%
W & C Europe18.3%
North America 21.9%
*(2013)
Asia Pacific16.8%
Unspecified21.1%
North America27.9%
India0.4%
W & C Europe24.8%
W&C Europe29.1%%
North America27.9%
Asia Pacific14.3%
Unspecified27.1%
$ 0.89trillion
$2.46trillion
$0.54trillion
$1.63trillion
Source: ABS BOP
Foreign (inwards) Abroad (outwards)2001 2013 2001 2013
North America
C&S America
W&Europe
Eastern Europe
Asia
India SubcontinentMiddle East Africa
Unspecified
International InvestmentShares of Total Investment (Direct, portfolio & debt)
26.0%
33.2%
17.0%
24.4%
28.0%
29.1%
17.0%
27.1%
ME 0.9%Africa 0.1%
E. Europe 0.2%
42.2%
24.8%
16.5%
16.1%
32.5%
27.9%
16.8%
27.1%
North America
C&S America
W&C Europe
E. Europe (0.2%)
AsiaIndia SubcontinentMiddle East Africa
Unspecified
0
5
10
15
20
25
30
35
40
45
50
0
50
100
150
200
250
300
350
400
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Percentage of all countries
Inward Foreign Investment - AustraliaAsia Mega-Region 2001-2013
Inve
stm
ent
$ b
illio
nAsia Region
(Asia Pacific & Indian sub-continent)
Source: ABS 52520 17/08/14
0
1
2
3
4
5
6
7
8
9
10
0
10
20
30
40
50
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Percentage of all countries
Inward Foreign Investment - AustraliaChina 2001-2013
China
Source: ABS 52520 17/08/14
Inve
stm
ent
$ b
illio
n
0
5
10
15
20
25
30
35
40
45
50
0
50
100
150
200
250
300
350
400
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Percentage of all countries
Australian Outward Foreign Investment Asia Mega-region 2001-2013
Inve
stm
ent
$ b
illio
n
Source: ABS 52520 17/08/14
Asia (Asia Pacific & Indian sub-continent)
0
1
2
3
4
5
6
7
8
9
10
0
10
20
30
40
50
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Percentage of all countries
Australian Outward Foreign Investment China 2001-2013
Inve
stm
ent
$ b
illio
n China
Source: ABS 52520 17/08/14
5. Australia: Asia’s Food Bowl?
• 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 21st 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
What can we do?