ASPAC CEO CONFERENCE. AMORA Hotel, Sydney 19 June Economic Outlook. Global perspective, the Asian Century, China, Australia and its prospects

Transcription

1 ASPAC CEO CONFERENCE AMORA Hotel, Sydney 19 June 2014 Economic Outlook Global perspective, the Asian Century, China, Australia and its prospects Phil Ruthven AM, Chairman WHERE KNOWLEDGE IS POWER

2 Topics 1. Global Perspective 2. Asia & Asia Pacific Perspective 3. Developing Australia s North 4. Our Key industries For Asia 5. The Economic Outlook 6. Risks Confronting Business

3 1. Global Perspective

4 Poland 0.9% Argentina 0.9% Thailand 0.8% Netherlands 0.8% Thailand 0.8% S. Africa 0.7% Egypt 0.6% Pakistan 0.6% Colombia 0.6% Malaysia 0.6% World s 30 Largest Economies 11 th 20 th Nations 14.6% 2014 (E) Purchasing Power Parity (PPP) terms Rest of World (200 nations) 15.2% 18.1% USA 2.1% Japan 3.7% 5.3% Italy 2.0% S. Korea 1.9% Canada 1.7% Spain 1.6% Indonesia 1.5% Turkey 1.4% Australia 1.2% 17th Iran 1.1% Saudi Arabia 1.1% Taiwan 1.1% World s 230 nations US$ 92.5 trillion IMF/IBISWorld 09/02/14

5 Economic Growth: 2015(F) 20 Largest Economies (ppp ranking) China India Indonesia Mexico S Korea Poland World Iran Taiwan Australia USA UK Canada Brazil Germany Spain Russia Japan France Italy World Growth 2014(F), 3.4% Economist/IBISWorld 08/06/14

6 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

7 World Regions Importance Changing importance, % of World GDP (ppp terms) 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% 2.0% 3.1% 5.0% 32.1% 18.0% 7.0% 13.5% 4.0% 4.5% 4.5% 11.0% 37.5% Nth America C & S America Western Europe Eastern Europe Middle East Africa Indian S-C Asia Pacific GDP (trillion) Source: OECD 29/10/13

8 2. Asia & Asia Pacific Perspective

9 Laos China Sri Lanka Cambodia Myanmar Philippin Asia India Banglad Vietnam Indonesia Malaysia Nepal Singapore Pakistan S Korea Taiwan NZ Thailand Australia Japan 1.2 Asia Growth 2014(E) Major Asia Pacific and Indian S-C nations (ppp ranking) Growth % (GDP) 8.0 Regions Growth Asia 6.2% E. Europe 2.9% World (8 regions) 3.1% N. America 2.9% EU 1.0% IMF/IBISWorld: 10/05/14

10 Per cent Economic Growth India Real GDP growth (F) SSBC/IBISWorld: 28/05/14

11 Asia Pacific Economy 2014 (F) Singapore 1.3% Vietnam 1.3% NZ 0.5% Myanmar 0.4% Cambodia 0.1% Laos 0.1% PNG 0.1% Other 0.1% Others 3.9% Construction & Engineering companies (Australian-based) derive revenues of over $10 billion in the Asia Pacific *Korea 6.8% 52.4% China *North Korea 0.2% South Korea 6.6% 25+ nations $US 30.5 trillion GDP (ppp terms) Wikipedia/IBISWorld 29/09/12

12 24 Economic Growth: China Real growth (F) Per cent % pa average, past 35 years 8.2% average Actually -27.3% in SSBC/National Bureau of Statistics of China 028/05;/14

13 Per cent Economic Growth Korea S Real GDP growth (F) SSBC/IBISWorld: 28/05/14

14 Per cent Economic Growth Japan Real GDP growth (F) % pa % pa % pa SSBC/IBISWorld: 28/05/14

15 Australia s Exports Market By Category share of total (%) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Fiscal years 35.1% 37.8% 23.7% 29.6% 18.8% 35.2% 11.0% 3.4% 4.3% 16.1% 25.9% 36.8% 8.3% 9.1% 55.0% 18.9% 5.2% 11.3% 10.6% Rural Mining Manufactures Freight Other Services Tourism $ billion Source: ABS & IBISWorld 2014 Note: 1 Year ending March 2014

16 Australia s Exports Market Merchandise goods 2014 Asia Pacific 78% Asia 82% UK 1.4% 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

17 3. Developing Australia s North

18 Australia s Lateral Zones (population in three equal land mass zones ) 1.0 million people 5.4% of state 82.9% of state 12.5% of state Top ⅓ 4.4% of population (7.5% of GDP) 4.1 million people 1.3% of state 17.1% of state 0.3% of state 86.3% of state Middle ⅓ 17.9% of population (18.7% of GDP) 17.9 million people 93.3% of state 99.7% of state Bottom ⅓ 77.7% of population (73.8% of GDP) Source: IBISWorld, ABS and mapsnworld.com

19 Importance of Industries By Zones Shares of GSP by Industry Division, current prices F % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Australia Bottom 1/3 Middle 1/3 Top 1/ $1.478 trillion $1.09 trillion $277 billion $111 billion Agriculture Mining Manufacturing Utilities Construction Wholesale trade Retail trade Transport &storage Communication Finance &insurance Prop &business Dwelling O'Ship Govt admin Ind taxes et al Education Hospitality Health &community Cult &recreation Personal & Other IBISWorld & ABS 21/02/13

20 4. Our Key Industries for Asia

21 Minerals

22 Percent of GDP Mining Industry Division Lifecycle Value added as % of GDP (current price basis) 1stCycle Quarrying & Coal Year ended June 2 nd Cycle Gold rd Cycle Gold & Coal th Cycle Gold By the end/bottom of the 6 th cycle, 80% of the industry s output is expected to be energy minerals (LNG, seam gas, oil, uranium, coal) c or earlier 5th Cycle Energy, Iron ore & gold th Cycle Energy IBISWorld /ABS /05/14

23 Mining Share of revenue basis F2014 (E) Services 7.0% Energy Minerals 42.0% 19.3% Oil & Gas Uranium 0.4% Iron Ore 32.6% 22.3% Black Coal (& brown coal) Metallic Minerals 51.0% $249 billion (current prices) IBISWorld 28/05/14

24 Agriculture

25 Agriculture Industry Lifecycle Value added share of GDP (%) Share of GDP (%) Revenue (constant 2004 prices)

26 Agriculture, Fishing, Forestry & Services Shares of industry revenue F2014(F) Food Agriculture 73.6% 12.9% 4.5% Fishing & Aquaculture Forestry & Logging Non-food Agriculture Revenue $A 73.5 billion IBISWorld 20/01/12

27 Food Bowl of Asia? We are currently feeding our population of 24 million and, at best, another million with our exports; say 45 million 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 the next 100+ years (as we did in the 20 th Century) supporting million local and O/S people. This would represent <5% of the Asia Pacific s population of 4.5 billion at that time or less than 3% of Greater Asia s population (including the Indian subcontinent).

28 Construction (Engineering)

29 Engineering Construction Growth 4-qtr. moving change (%) current prices, to December 2013 Work done, year to December 2013, $131.4 billion months 18 months Year, ended June Source: ABS /06/14

30 Engineering Construction By Type Of Work Work Done Year to December 2013 Oil & Gas Coal Bauxite/ Alum. Other Minerals Other Heavy 1.0% Other 1.6% Recreation 4 3.2% 27.0% Transport Roads 13.0% Bridges 0.6% Railways 6.0% Harbours 3.7% Pipelines 3.7% Mining & Other 48.5% 4.4% 15.4% Utilities $ billion Source: DX /06/14

31 Engineering Construction By Type Of Work Work Yet to be Done As at December 2013 Oil & Gas Coal Bauxite/ Alum. Other Minerals Other Heavy Ind 0.5% Recreation 0.8% Other 0.1% 20.2% Transport Roads 7.9% Bridges 0.2% Railways 3.3% Harbours 4.0% Pipelines 4.8% Mining & Other 69.1% 8.2% Utilities $ billion Electricity 4.9% Water 1.9% Sewerage 1.4% Source: DX /06/14

32 Services

33 Professional & Technical Services Australia Revenue F2014 (F) % of total Scientific Research Architectural Services Surveying & mapping Computer Systems Design/Management 27.7% Engineering Consulting 23.2% $ 160 billion Source: IBISWorld 28/05/14

34 Business Services Exports Australia Revenue 2013 % of total Other Business Services 8.2% Computer Consulting (Hardware, Software, D/P) 12.4% Architectural Services 15.9% 17.8% Management Fees $ 11 billion Source: IBISWorld 28/05/14

35 Engineering Consulting Services M 6923 Australia F2014(E) Revenue $ 37.0 blliion Growth, F2014-F2019 (real) 1.1% p.a (plus inflation c. 3%) Value Added Businesses c. 31,250 Outlets c. 50,150 Employment c Wages Exports Imports $ 23.4 billion (1.5% of GDP) $ 14.7 billion $1.6 billion $2.7 billion Key Players (F2013 est.) Worley parsons 5.9% Bechtel 4.6% Sinclair Knight 2.9% Aurecon 2.3% AECOM 2.3% GHD Group 2.2%

36 Australia s International Tourism Inbound Numbers ( 000) to 2013 Number ('000) Inbound Potential

37 Inbound Tourists By Origin Short term arrivals Share of total basis Germany 2.7% France 1.7% Other 6,3% M East 1.5% Africa & Other 1.2% Asia 64% 18.8% NZ Other Oceania 2.5% 5.3% Singapore 16.1% C& S America 0.9% 6.5 million (Value $34.4 billion) Note 1 Year to February Source: ABS

38 5. The Economic Outlook

39 8 7 6 Australia s Economic Growth Annual real GDP growth (%) progressed in quarters to March 2014 (and forecast to March 2019) 3.5% pa (52 years) 3.2% pa (since 1987) Years, ended June Source: IBISWorld: 05/06/14

40 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 IBISWorld 05/06/14

41 Australian Industries Growth Aggregate growth (% p), 5 years to March 2014 (value added basis, constant prices) Mining Health Prof. & Tech. Servivces Rental & Real Estate Construction Public Adm & Safety ALL INDUSTRIES Arts & Recreation Wholesale Trade Finance & Ins Retail Trade Info media & Telcos Education Dwelling O'Ship Agricultur Ind Taxes less Subs Admin & Support Serbv Hospitality Personal & Other Info Media & Telcos Utilities Manufacturing Percent (2.6% pa) Incl. imports Source: IBISWorld 05/06/14

42 Capital Expenditure Growth 4 qtr moving average to March % pa (52 years) 5.3% pa (since 1987) Recessions occur when GFCE falls more than 8% Years, ended June Source: ABS /06/14

43 Capital Expenditure By Type Capital Expenditure + Increased Inventories Year to March 2014 Defence 1.3% IP & Other Intangibles R&D 4.5% Software 2.7% Mining 1.6% Biological 1.1% Art 0.4% Gen. Govt. 9.8% 9.2% Machinery & Equipment Dwellings 23.3% 10.0% Buildings 24.1% Note: 1 on $432.6 billion less $4 billion inventory reduction Investment (GFCF & increased inventory) $429 1 Source: ABS/IBISWorld 06/06/14

44 Capital Expenditure By Industry Shares of GFCF F2013 Cult & Rec. Serv. % Person. Serv. 0.5%. Inventory Increase 0.5% Private 83.7% Govt. GG 11.1% Govt. GBE 5.2% Agric. 4.0% 26.9% Mining Dwellings 21.3% Transport & Postal 8.0% 1.6% Construction 1.5% $430.1 billion (current prices) Source: ABS IBISWorld 18/11/13

45 6. Key Risks Confronting Business (Global & Domestic)

46 Some Key Risks Loss of confidence and global relapse? Over-strong $A? Emerging competition and low mineral prices China has difficulty in transitioning Political instability in Asia Pacific (and in other regions) Interest rate rise too quickly? Hostile senate in Australia Reform stalemate, especially in IR/productivity issues

47 1.60 Exchange Rate - $US To $A Monthly average, to June Source: Reserve Bank of Australia/IBISWorld forecasts 12/06/14

48 Australia s Senate % of total seats in upper house (Senate) 100% 90% 80% 70% 60% 50% 40% ALP in power for <17% of past 110 years (more with support of minor parties ) ALP 2013: Lib Nats 33 ALP 26 Green 9 DLP 1 Indep 7 Minorities Independents 30% 20% 10% 0% First two parliaments consisted of Protectionists and Free Traders, before coalition (Liberal, then Liberal & Country/Nats) Coalition Source: IBISWorld 22/10/13

49 Some Urgent Reform Priorities And are they now being addressed? (Yes/No) 1. Long range vision, especially our role in the Asia Pacific region Y/N 2. Balanced budgets, the first rule of good government Y/N 3. Tax reform that includes GST and shifts taxes more to spending N 4. Reduce subsidies going to yesterday s industries that won t survive Y 5. Privatization of low-productivity government activities. Y/N 6. IR reform that understands work and workers in the New Age Y 7. Rational energy policy that includes carbon, nuclear power. N 8. Innovation, IP and productivity; and how to get them. N 9. Developing the top half of our continent (especially top ⅓) Y/N 10. Fully embrace the digital era for international competitiveness. N

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