Strong ties with Asia and investment in new industries are laying the foundation for Australia’s continued growth and success.
Three experts tackle the question: What facts make you most optimistic about the Australian economy over the next 10 years?
Chief economist at HSBC Australia and New Zealand
Australia’s increasing links to the fast-growing Asian economies remain a key reason for our continued optimism about the country’s economic outlook.
While China’s demand for hard commodities has fallen, rapidly rising Asian middle-class incomes are seeing increasing demand for Australian services. China’s services industries have already overtaken secondary industries such as manufacturing, infrastructure and utilities as a share of China’s GDP and its growth.
As China’s economy shifts, Australia’s economy has been re-balancing. Tourism, education and business services exports are rising strongly, and financial linkages to China are also growing quickly, albeit off a low base. Net services exports have gone from being a drag on Australia’s growth five years ago to contributing about 0.5 percentage point to GDP growth over the past year.
“The rise of Australia’s services sector...will drive strong GDP growth over coming years.” Paul Bloxham
Chinese visitor arrivals have risen from 350,000 in 2009 to 1.1 million over the past year, while arrivals from the rest of Asia have increased from 1.7 million to 2.4 million for the same period. International enrolments in Australia’s educational facilities rose to a record high in the first half of 2016, driven by an increase in the number of Asian students.
The pick-up in both international students and visitors has also supported rising complementary capital inflows, some part of which is supporting investment in housing.
I remain optimistic and expect that the rise of Australia’s services sector, supported by its ongoing strong ties to Asia, will drive strong GDP growth over coming years.
Division director at Macquarie Wealth Management
As a rational optimist, I believe the future for Australia looks positive over the next decade. Now that the mining investment boom has waned, Australia’s GDP is still being driven by the resources sector as record shipments of iron ore and LNG [liquefied natural gas] leave our shores, largely bound for Asia – a clear end benefit from the investment made that will continue for many years to come.
China’s economy has grown in size from US$1.7 trillion in 2000 to US$11 trillion this year, driven by investment and the new emerging consumers now enjoying a higher standard of living with increased disposable income.
Chinese authorities will drive urbanisation of another 300 million people to improve their living standards, and Australia will be an ongoing beneficiary, delivering large volumes of high-quality commodities.
"The upside for the next decade will be the economy’s technology catch-up.” Martin Lakos
The real opportunity is in the key services sectors that are becoming larger contributors to Australia’s GDP. Education, healthcare, tourism, financial and property services are our growth exports and are benefiting from the AUD’s ongoing depreciation.
What seems to be underestimated – and underinvested in – is Australian businesses embracing technology. Australian consumers are in the top 10 in the world for adopting new technologies, yet Australian businesses rank between 16th and 22nd positions.
In a low-growth environment, Australian business can’t expect the tailwinds of a strong economy to drive growth. However, the upside for the next decade will be the economy’s technology catch-up.
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Deputy chief executive and chief investments officer at AustralianSuper
Our ability to withstand the worst of the global financial crisis and the recent transition from the mining investment boom demonstrate clearly that the fundamentals of the economy are pretty sound.
We are in a good position to deal with the changing circumstances that will emerge in the next 10 years.
The key to our success in the next decade is going to be largely based on continuing the transition of the economy toward growth areas, such as the services sector, and in areas where we have the potential to be world-leading, such as education and tourism.
We have an outstanding national retirement savings system that invests in the nation, provides people with confidence in their retirement and acts as a bulwark to unexpected and significant economic shocks. The system is A$2 trillion in size at the moment and projected to grow to A$4 trillion in the next 10 years, giving us a significant pool of savings to draw from to invest in Australian businesses, infrastructure and property.
"The key to our success...is going to be largely based on continuing the transition of the economy.” Mark Delaney
We also have a strong regulatory framework that supports our economy and is focused on the sustainability of the financial system.
Looking forward, compared to the rest of the world our budgetary position is relatively strong, and the Reserve Bank of Australia has spare capacity to counter any downturn.
All of these are reasons to be upbeat about the outlook for the next decade.
Paul Bloxham is chief economist for HSBC in Australia and New Zealand. He is chief spokesperson for HSBC on forecasts and trends for the Australian and New Zealand economies and their interaction with global financial markets and international economies. Bloxham previously spent 12 years as an economist at the Reserve Bank of Australia. He is an adjunct professor at Curtin University and a member of the Australian National University’s shadow reserve bank board.
Paul Bloxham will speak at CPA Congress in Sydney, Melbourne, Brisbane and Perth.
Martin Lakos’s financial career spans more than 35 years, having started on the Australian Stock Exchange trading floor in 1979. He has held roles in Macquarie since 1994, including heading up its Asia institutional sales desk. He was appointed a division director of Macquarie Wealth Management in 2006. Lakos has also been one of Macquarie’s leading spokespeople over the past 12 years and is a regular market commentator on several media outlets.
Mark Delaney is the deputy chief executive and chief investments officer of AustralianSuper. He is also a director of Industry Superannuation Property Trust and IFM Investor Advisory Board. Delaney was the chief executive of the Superannuation Trust of Australia for three years prior to the merger with Australian Retirement Fund to form AustralianSuper.
He worked for 14 years at National Mutual/AXA, moving his way through the company from economist to senior manager of investment services. He also spent four years working as an economist in the federal Treasury.