Transcript +6.4 - Governance Institute of Australia

The Economic and Financial Outlook
Darryl Gobbett
Managing Director
Chief Economist
Representative and Adviser
Prescott Securities Ltd
AFSL 228894
Adelaide – Thursday, 5 June 2014
© Governance Institute of Australia
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World Outlook Improving
But Bringing More Challenges
2014 will be 6th year of growth globally
•
•
•
•
Spending, Output and Profits higher than 2007 peaks
Portugal, Ireland and Greece now accessing capital markets
North America, China, Asia, Africa to grow strongly
Europe and Japan still slow, Australia slowing
Inflation alongside fears of Deflation
•
•
Interest rates to stay low
House and Commodity prices lifting
Public Sector deficits shrinking
Companies doing very well
•
Profits, Cash flows, Balance sheets
Another surge of change coming
The Big Issues and Trends
Structural Change is accelerating
• The world is changing
–
–
–
–
–
Urbanisation, Increasing Wealth, Ageing
Second Rise of Asia
Freeing up of markets
Climate change
Technology, Innovation
o Immediate and mobile infotainment and value exchange
o 3D printing; Drones to deliver parcels; driverless cars
o New energies
o Biosciences: gene technologies, growing human spare parts
o Meta data
• More researchers than ever before
Patents (PCT) Applied For, by Country of Applicant
Source: Organisation for Economic Cooperation and Development (OECD.statextracts)
180,000
United States
Japan
160,000
Germany
China
140,000
Korea
France
United Kingdom
Other
120,000
100,000
80,000
60,000
40,000
20,000
0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
The Big Issues and Trends
Structural Change is accelerating
• Issues specific to Australia
–
–
–
–
$A,
Costs
Change of Governments, Budget tightening
Demographics
o Ageing and more immigrant population
o Workforce, Health, Spending, Investments
• Australian Households still saving
• We spent the mining boom before it arrived
– Another one within a decade
• Tourism and Agricultural surges on their way
Global Growth and Inflation Divergences,
Low inflation and Interest Rates
Output Growth, Inflation Adjusted, % pa
2009
2010
2011
2012
2013e
2014F
2015F
United States
-2.6
+2.4
+1.8
+2.8
+1.9
+2.8
+3.0
Japan
-6.3
+4.5
-0.8
+1.4
+1.7
+1.4
+1.0
Euro Area
-4.1
+2.0
+1.4
-0.7
-0.4
+1.2
+1.5
China
+9.2
+10.4
+9.2
+7.7
+7.7
+7.5
+7.3
India
+6.8
+10.1
+6.8
+3.2
+4.4
+5.4
+6.4
Indonesia
+5.7
+6.2
+6.5
+6.2
+5.3
+5.5
+6.0
ASEAN 5
+1.7
+7.0
+4.5
+5.4
+5.8
+4.9
+5.4
Brazil
-0.6
+7.5
+2.7
+1.0
+2.3
+1.8
+2.7
-0.5
+5.1
+3.8
+3.1
+3.0
+3.6
+3.9
Inflation: Advanced
Emerging
+0.1
+5.2
+1.5
+6.1
+2.7
+7.2
+2.0
+6.1
+1.4
+5.8
+1.5
+5.5
+1.6
+5.2
$US 6mnth LIBOR
1.1%
0.5%
0.5%
0.7%
0.4%
+0.4%
+0.8%
World Output
Source: IMF, World Economic Outlook April 2014
US Growth back to Pre GFC levels
Household consumption, Housing, Business Investment, Exports
Budget Deficits falling in Most Major
Economies
Federal Reserve Board Taper Decisions
are good news
Based on more certainty of growth.
Cash rates staying at 0-0.25% well into 2015.
Declining US Budget deficits
- Cut supply of new Bonds to under monthly purchases.
Longer term US interest rates lifted from mid 2012 in anticipation
Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents,
Central Tendency
2014
2015
2016
Economic Growth (Real), % pa
2.8 – 3.0
3.0 – 3.2
2.5 – 3.0
Unemployment rate %
6.1 – 6.3
5.6 – 5.9
5.2 – 5.6
Consumer Inflation% pa
1.5 – 1.6
1.5 – 2.0
1.7 – 2.0
Source: US Federal Reserve Board 18-19 March 2014
Tapering well anticipated:
US Interest Rates up since mid 2012
Now easing
USA Labour Market Lifting Slowly
but on Right track
Unemployment at 6.7% in April, cf 10% 2009, 4.4% 2007
US Fraccing Gas Surplus now recognised
as Game Changer
Risks already apparent for Australian Gas and Coal Exporters, Farmers, Manufacturers.
Manufacturing shifting back to USA.
China is estimated to have a bigger resource than USA
USA defence positioning
US Corporates continue to increase
Profits and Cash Holdings
US Company Profits at Record Levels
(Dec Qtr 13) on National Accounts Basis
March qtr likely weather related.
Likely further rises in 2014 and 2015
For S&P500 companies, Forward Price to
Earnings Ratio now 15.7* vs 16.4 trailing ave
(since 1954)
“Cash” held by Non-Financial Corporates
 Dec 2013: $US1,581.1 billion
 Up 13% yoy
Dec 2007
Dec 2013
Cash/ Market Value of
Equities
7.2%
7.4%
Debt/Net Worth
42.8%
47.1%
* Birinyi and Associates, Wall Street Journal Market Data Centre, 28/4/2014
Further Growth in Earnings per Share
into 2014/15 is forecast
Source: Yardeni Research Inc, 28 April 2014
Forward P/Es OK for low Inflation
and Interest Rate Outlook
Source: Yardeni Research Inc, 28 April 2014
Europe a basket case but no longer in Crisis
Breakup of Eurozone and demise of Euro$ no longer issues
•
•
•
•
•
Populations generally in favour of keeping Euro & European Union
together
Germans realised low Euro$ helped their exports
Greeks recognised risks of being cast out
Concern is more with how the politicians messed up so badly
Recent elections indicate the depth of feelin
Integrity of Eurozone always more than economics and politics
•
•
•
Real fear of return of nationalism and war
Human and Economic costs of breakup are high and unknown
Status of individual countries in break-up would drop even further
–
Compared with USA, China, India, Russia
Europe a basket case but no longer in Crisis
•
•
Risks remain
– Still significant differences on work and business practices, productivity,
social support
• Contributing to horrendous unemployment, deflation
– Banks under undercapitalised, Private and Public Degearing
– Populations generally growing slowly and rapidly ageing
Bright Points
– Technologies, fashions, brands: What the Emerging economies want
• Capital goods, Design services, inputs to manufacturing
• High end consumer items: autos, airplanes, wine, foods, medicals
• Buy the company – eg Volvo, Saab, Jaguar, Lenovo, RM Williams,
Smithfield Foods,
– Services: Financial, Medical, Business, Tourism, Education
– Property as a possible bolt-hole from Asia and Middle East
Overseas Monetary Policies very Stimulatory
Aim is to Increase Inflation to 2%
Cash Rates:
•
•
•
Financial Repression
European Central Bank 0.25%, Bank of England 0.5%, USA 0.25%, Japan 0%
Keep retail deposit and loan interest rates very low: USA eg
– Mortgages: 30 Year fixed 4.25%, variable 3.26%; New car loan 5 yr 2.86%
– CMA 0.62% (>$50,000), 5 year CD 1.4%, 10 year Bonds 2.7%
Quantitative Easing
•
•
To continue in Europe and Japan.
o Buying long term public and private debt
o Additional offset to Budget deficit reductions
Pullback now in USA and UK with stronger economies
Growth Driven by Emerging Economies’
Urbanisation &
Middle Class Households
Major Changes for Humanity
Coming Down Out of the Trees
Fire
Agriculture
Urbanisation
Ageing
Spending by the Global Middle Class
$US billion, 2005 Purchasing Power Parity Exchange Rates
Source: OECD Development Centre Working Paper No 285,
The Emerging Middle Class in Developing Countries, Jan 2010
Global Motor Vehicle Market
Production of all motor
vehicles, million
Motor vehicle fleet 2011
2006
2013
Total, million
Per 1000 people
China
5.708
22.117
115
85
USA
11.980
11.045
253
812
Japan
10.800
9.630
75
589
Germany
5.758
5.718
52
634
South Korea
3.699
4.521
19
379
India
1.627
3.881
22
18
Brazil
2.528
3.740
50
259
The Rest
27.123
26.648
Total
69.223
87.300
Source: www.oica.net, wikipedia.org
Other sectors growing with
Rising Urban Middle Classes
Food
•
More, Greater Diversity, Better, More Western
–
–
–
Services
•
More Meat, Edible Oils, Dairy, Alcohol, Sugar, More take away
McDonalds aims to increase China stores by 50% to 2000 in 2013
Yum! Brands in China has 3,300 KFC & 651 Pizza Hut: aim is 20,000
Travel, Education, Children’s expenses, Communication and
Entertainment, Health Care, Aged Care, Financial Services
–
–
–
–
–
Chinese tourists biggest spenders globally and in Australia in 2011/12:
Indians likely to be next largest
More living past work
Diseases of the West and the Aged
More outsourcing of aged care
–
Motor vehicles, Pork, Dairy, Wine, Sugar, etc etc
Buying up Overseas Businesses, Farms and Resources
Focus on Brands, Quality, Authenticity
Interest in Australian Dairies is not to sell us
more Iced Coffee
$A now about right on current $US
Commodity Prices
$A now about right on current $US
Commodity Prices
China’s Growth on Target at 7.5 - 8.0% pa,
but changing
Spread benefits of growth
•Increasing wages
•Lift Value Add in Industry
•Rising consumption
•Better and more housing
• 10 million new homes pa
•Increased outbound tourism
•Better care for Aged
•Reduced pollution
•More Western & better quality food
Reduced regulation
•Finance
•Trade
Source: RBA Statement on Monetary Policy, May 2014
Source: China 2030, World Bank and Development Research Centre of the State Council, the People’s Republic of China, 2012
Some Indicative Numbers for China
2011 Constant value $US
2010
2020
2025
% change on 2010
GDP, $US billion
7,298
15,462
20,594
+182%
Investment, $US billion
3,386
5,876
7,414
+119%
Consumption, $US billion
3,547
9,278
12,975
+266%
Consumption per Head $US
2,630
6,650
9,200
250%
Sources:
China 2030, World Bank and Development Research Centre of the State Council,
the People’s Republic of China, 2012
International Monetary Fund,
Prescott Securities Ltd
Directions of Chinese Reforms
Some points from 3rd Plenary Session of 18th CPC Central Committee
–
Improve and develop socialism with Chinese characteristics
o
o
–
Set up Central Leading Team for comprehensively deepening reform
o
–
Public ownership remains dominant; More free trade zones, relax
investment restrictions
Allow people living outside cities to equally participate in modernisation
o
o
–
–
Accelerate reforms in education, employment, income distribution, social
security, public health
Markets’ decisive role in allocating resources
o
–
Build law-based and service oriented government
Modernise governing system 7 capabilities, Establish modern fiscal system
Changes to residency system – Hukou
Property rights for farmers; New agribusiness systems
Drawing red line for ecological protection
Relax one child policy
China Risks
Provincial, State Owned Enterprises and City debts and guarantees
•
•
•
•
•
High, but owed to each other. Very low personal mortgage debt.
Very regionalised SOE, not national as in the USA
Low Central Government budget deficits and debt
Very high foreign currency reserves and real assets
Revamp of income tax system to reduce reliance on property transactions
Overbuilding
•
•
Still another 300m people are planned to shift to urban centres by 2030
Rail and road system still only a fraction of that in the USA for 4X population
Wages costs showing strong growth
•
Necessary to boost consumption, reduce savings, limit social unrest
Pollution and Ecological damage
•
Remediation and prevention are now a big focus
The Budget and Commission of Audit
Budget Deficits need to be cut:
•
•
Not so much an issue now but will be chronic in the future
Income Tax and Interest Expense burden impacts
Sense of Entitlement needs to be wound back
•
•
•
•
Personal
Industrial
Business
State Governments
Productivity and Flexibility constraints have to be reduced
Risk of becoming the white trash of Asia
Focus of Policy:
“…the Budget we announce tonight is the first word and not the last word on Budget
repair. There is much work that still needs to be done.”
•
•
•
•
Cut some entitlements, including in superannuation but main impacts are years out
Increase taxes on high income earners
Infrastructure Spending to build prosperity
Seems to be underlying concerns about robustness of the Australian economy
Dodged the Productivity issue, as have most Governments
Dodged the reform of the tax system
Focus of Policy?:
“…the Budget we announce tonight is the first word and not the last word on Budget
repair. There is much work that still needs to be done.”
•
•
•
•
Cut some entitlements, including in superannuation but main impacts are years out
Increase taxes on high income earners
Infrastructure Spending to build prosperity
Seems to be underlying concerns about robustness of the Australian economy
Dodged the Productivity issue, as have most Governments
Dodged the reform of the tax system
Major Financial Projections
12/13f
13/14e
14/15f
15/16f
16/17f
17/18f
Payments
-% Growth
-% of GDP
-1.0
25.9
+11.8
25.3
+0.4
24.8
+2.8
24.7
+4.6
24.8
+5.2
24.8
Receipts
-% Growth
-% of GDP
+6.2
23.1
+3.5
23.0
+6.1
23.6
+6.4
24.0
+6.4
24.4
+7.1
24.9
Cash Balance
(Underlying)
- $ billion
-% of GDP
-18.8
-1.2
-49.9
-3.1
-29.8
-1.8
-17.1
-1.0
-10.6
-0.6
-2.8
-0.2
Source: Australian Government 2014/15 Budget Paper No. 1
Main Revenue Items
Bracket and Super
Creep Getting Worse
Cash Basis, $b and % change
12/13
13/14e
14/15e
15/16e
16/17p
17/18p
Individuals
156.3
+5.7%
163.8
+4.8%
178.8
+9.2%
193.6
+8.3%
208.3
+7.6
223.7
+7.4
Companies, FBT, RRTs
72.7
-0.3%
73.7
+1.4%
77.9
5.8%
82.2
+5.5%
87.1
+5.9%
91.7
+5.3%
Superannuation
7.7
+1.6%
33.6
+3.2%
49.8
+5.8%
3.6
(+4.2)
6.5
-14.8%
34.7
+3.5%
52.2
+4.9%
7.2
(+6.3)
7.7
+17.6%
35.6
+2.6%
55.1
+5.6%
1.7
(+6.4)
10.4
+35.1%
36.7
+3.1%
58.4
+6.0%
0
(+4.6)
11.3
+8.7
39.1
+6.4%
61.9
6.0%
11.8
+4.7
41.0
+4.8%
65.3
5.6%
326.4
341.6
360.4
385.3
411.7
437.6
Excises and Customs
Sales Taxes
Carbon Pricing
Mechanism
(2013/14 Budget est)
All Taxes
Source:
Australian
Budget Paper No. 1
Source: 2010/11
FederalGovernment
Budget Paper 2014/15
No 1
Not A Sustainable Personal Tax Situation
Company Tax Rates and Take also High
Company Tax
as % of GDP
Source:OECD.org /ctp/tax-policy/revenue-statistics-tables
Main Expense Items
Accrual Basis , $b
General Public Services
12/13
26.0
13/14e
34.2
14/15e
23.2
15/16e
22.8
16/17p
23.4
17/18p
23.1
Defence
21.1
22.8
24.2
25.2
25.7
27.6
Education
28.5
29.7
29.6
30.2
31.8
32.8
Health
61.3
64.5
66.9
68.2
71.8
74.9
Social Security and Welfare
131.9
140.6
145.8
149.3
158.4
169.6
General Revenue Assistance
to State and Local
Governments
51.5
53.2
57.1
60.5
63.9
67.3
Public Debt Interest
12.5
13.5
14.7
16.1
17.2
17.9
Other
49.8
56.8
53.3
58.8
61.6
62.2
Total
382.6
415.3
414.8
431.1
453.8
475.4
Source: Australian Government 2014/15 Budget Paper No. 1
Source: 2010/11 Federal Budget Paper No 1
The Australian Economy:
The Federal Government’s Forecasts
% change, inflation adjusted
10/11
11/12
12/13e
13/14f
14/15f
15/16f
3.1
3.2
2.0
2.5
3
3.25
1.001
1.03
1.10
1.13
1.2
1.25
3.0
-3.6
-0.1
3.5
7.5
5.5
No. of Private Dwellings Started
(‘000)*
154
141
156
165
175
185
- Non Dwell. Construction
8.8
37.6
13.9
-2.5
-9.5
-12.5
3
10.1
-4.3
-9.5
-2
7
Private Final Demand
3
6.2
2.8
1.25
1.5
2
Public Final Demand
3.4
2.3
-1.3
1.75
1.5
1
(Italicised are PSL forecasts)
Household Consumption
New Motor Vehicle Sales, m*
Private Investment Dwellings
- Equipment
Source: Australian Government 2014/15 Budget Paper No. 1
* PSL Forecasts
Consumer & Business Confidence Heading
in Different Directions
Net Worth Improving But Households
Likely to stay Big Savers
Source: RBA Chartpack June 2014
Private Investment Expected To Fall But
Likely Less Dire
Gross Investment by Major Industry Sector, $b, Current $
2010/11
11/12
12/13
13/14 5th
Est
14/15 1st Est
Mining
46.9
82.0
94.7
102.4
74.2
Manufacturing
12.3
13.2
9.4
8.9
6.3
Electricity, Gas & Water
6.2
5.4
5.4
5.9
5.0
Construction
5.4
4.7
4.2
3.3
1.7
Wholesale & Retail Trade
7.4
7.5
7.3
8.1
6.5
Transport, Post & Warehousing
11.6
13.7
10.7
11.6
8.4
Rental, Hiring & Real Estate
11.9
10.5
9.1
10.1
9.0
Other
17.6
17.9
24.1
16.8
13.7
Total
119.3
154.8
168.2
167.1
124.9
(121 – 156)
Source: ABS 5625.0 Private New Capital Expenditure and Expected Expenditure, Australia, Dec 2013
The Australian Economy:
The Federal Government’s Forecasts
10/11
11/12
12/13
e
Employment, % change to June qtr
2.2
0.5
1.2
0.75
1.5
1.5
Unemployment Rate, % June qtr
4.9
5.25
5.6
6
6.25
6.25
Labour Force Participation Rate, %
June qtr
65.5
65
65.1
64.75
64.5
64.5
Household Savings Ratio, % June
qtr, trend
11.4
11.5
10.5
10
9
9
(PSL)
(PSL)
(PSL)
Source: Australian Government 2014/15 Budget Paper No. 1
13/14f 14/15f 15/16f
The Australian Economy:
The Federal Government’s Forecasts
% change, inflation
adjusted
10/11
11/12
12/13e
13/14f
14/15f
15/16f
Exports
0.2
4.7
6
5.5
5.5
7
Imports
10.4
11.8
0.5
-3
2
2.5
-Net Contribution to
Growth
-2
-1.3
1.2
1.75
1
1.25
Gross Domestic
Product
2.0
3.4
2.6
2.75
2.5
3
Nominal GDP
8.3
5
2.5
4
3
4.75
Source: Australian Government 2014/15 Budget Paper No. 1
The Australian Economy:
The Federal Government’s Forecasts
10/11
11/12f
12/13e
13/14f
14/15f
15/16f
Consumer Prices, % change to June qtr
3.6
1.2
2.4
3.25
2.25
2.5
Wage Price Index, % change to June qtr
3.8
3.7
2.9
2.75
3
3
+20.6
+0.4
-9.8
-5
-6.75
-1.75
-$billion
33.0
44.3
55.3
51.5
65
64
-% of GDP
2.4
2.7
3.6
3.25
4
3.75
Terms of Trade, % change
Current Account Deficit
Source: Australian Government 2014/15 Budget Paper No. 1
RBA Forecasts for Inflation and Growth:
- $A higher than earlier expected
- Inflation in the 2-3% range
Source: RBA Statement on Monetary Policy, May 2010
Source: RBA May 2014 Statement on Monetary Policy
Domestic Inflation and Wages Slowing,
$A to again dampen Imported Inflation
Source: RBA Chartpack June 2014
Markets See Cash Rates on Hold to 2016
Longer Term Rates likely near cycle lows
Australian Profits Rising but
Investors stay Cautious
Australian Share Prices & Profits
Forward Price/Earnings Ratios Up since
May 2013 but Improved Earnings
Outlook
Australia
Late
80s
Now
Dividend Yields
4 - 5%
4.3%
Inflation
7–8%
2-3%
10 Year Govt Bonds
12–13%
4 - 4.25%
Source: RBA Chart Pack June 2014
Summary
Global Share markets should move higher in 2014
•
•
•
•
•
•
•
Profits growing strongly, huge cash holdings
US and European companies still technological leaders
New economies seeking brands and technologies
Emerging market turmoil will be short term and corralled
Western banks well capitalised and system liquidity is high
Financial markets regulation still poor, greed has not gone away
Interest rates remaining very low as Authorities err on side of caution
Australian share markets should also move higher
•
•
•
•
•
•
•
Investors still seeking income: Equities have attractions of franking credits
Retiring Baby Boomers will strengthen the demand for income generating equities
Cash Interest rates on hold at 2.5% but yield curve steepening
Broader economy to lift through 2014/15: Housing, Private Consumption, Public investment
Commodity prices should keep rising as global economy lifts
$A around $US0.90 - $US0.95
Continued rapid change makes stock selection very important
Some Issues for South Australia
Small, Regional Economy: 1.67 million people
•
•
•
•
•
•
Smaller than Western Sydney or Brisbane
Irrelevant nationally, Federal Focus elsewhere
Population older & ageing faster, sicker, less educated
– Housing, retail, tax base, attitudes, national representation
No Exports, No growth
Industry structure still adapting from 1960s, skills shortages
High $A, More international competition
Restricted public finances
•
•
•
•
Low per capita income, slower population growth
Large Public Sector, High Deficits & Growing Debt
Likely less support from Federal Govt
Don’t criticise the Government
Where we are headed
Metropolitan Home Prices Flat, Activity Up
Auction clearance rates
March 2014 63%
Jan-Feb 2014 51%
March 2013
55%
Jan- Feb 2013 58%
For 2014
•Employment flat, population to grow
•Interest Rates on hold to higher
•Vacancy rates should steady
•High land costs continue
•Funding constraints to ease further
•Dominance of the big banks
impacting competition
•First Home Buyer Affordability and
overall confidence are the big issues
Building Activity Starting to Recover
Food Turnover
Retail Turnover
Retail Turnover
Retail Turnover
Retail Turnover
SA New Motor Vehicle Sales
Business Confidence Down post elections
Sensis Small and Medium Business Index, March qtr 2014
But Individual Expectations in SA Improving?
Sensis Small and Medium Business Index, March qtr 2014
Economic Forecasts: South Australia
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14f
2014/15f
7.9
1.7
0.7
1
-0.4
3
5
11,676
11,061
10,058
8,653
8,367
9,000
10,500
59,400
66,080
62,836
65,340
70,268
70,000
73,000
0.1
7.4
6.6
11
-17.2
0
5
12.3
-8.5
19.1
6
13.8
0
5
-8.5
-2.2
11.1
7.6
9.3
8
8
27.3
56.9
-12.1
-7.1
-12.7
-10
-5
GSP(Total Output) % (Real)
2.3
1.2
2.3
1.8
1.3
+0.5 (2.5)
+2 (+2.5)
Employment Growth %
(Year to June, Trend)
0.7
1.2
1.6
-0.6
0.4
-2 (+1)
-1 (+1)
Unemployment Rate %
(June, Trend)
5.6
5.4
5.3
5.6
6.3
7
7.3
Private Avg Weekly Earn %
(FTAOT, (Yr to May)
7.4
0.7
4.5
3.2
4.6
4.5
4
Population Growth % (Yr to
June)
1.3
1.1
0.8
1
0.9
0.8
0.8
Retail Turnover %
(Nominal, year total)
Private Dwelling
Commencements
New Motor Vehicle Sales
(000)
Business Investment %
(Real, New)
Plant & Equipment, New
Non Residential
Construction, New
Cultivated Bio
Resources & Intel Property
Public Investment
Actuals ABS, forecasts ,
PSL, SA 2013/14 Budget
Forecasts in parantheses
South Australian Growth: Where?
Gross Value Added, ABS Cat 5220.0
2012/13 Share
1989/90 - 1999/00 - 2005/06 - of State Gross
1999/00 2005/06 2012/13 Value Added,
Current Prices
Average of Annual Rates, inflation
adjusted
Health care and social assistance
Manufacturing
3.1%
3.9%
-1.3%
3.4%
0.5%
9.8%
9.0%
Supportive Demographics
Tough, changing
2.9%
3.2%
5.1%
5.0%
5.0%
7.9%
7.6%
Stronger in 2014, Oligopoly
Housing and public infrastructure
Public administration and safety
Professional, scientific and technical services
3.6%
2.9%
3.2%
4.0%
2.3%
4.3%
6.8%
6.8%
Slower as cutbacks start
Stronger from 2015
Agriculture, forestry and fishing
Education and training
-0.5%
2.0%
7.3%
1.4%
4.5%
1.8%
6.3%
5.9%
Continue strong on overseas demand
Should lift on overseas demand
Retail trade
3.3%
-1.3%
4.5%
2.4%
5.6%
Better but changing
3.0%
4.4%
2.6%
1.3%
3.8%
5.4%
5.0%
Slower on regulatory issues
Tourism, online sales
2.8%
1.8%
3.4%
0.7%
3.7%
7.4%
4.7%
3.8%
Online sales, Outsourcing
Continue strong on overseas demand
Financial and insurance services
Construction
Electricity, gas, water and waste services
Transport, postal and warehousing
Wholesale trade
Mining
1.8%
3.7%
Total of Abov e
84.8%
Business, Credit and Governance Issues
Asian Middle Class Urbanisation offers opportunities of a scale not seen before
–
–
Quantitatively and Qualitatively
Issues of Skills, Infrastructure, Regulation, Costs
Ageing issues
Accelerating change means Demand and Revenue trends across sectors and
businesses will remain very mixed
Tax and Public sector charges high in SA for the foreseeable future
• Public sector “restraint” not enough to sufficiently reduce high deficits
• SA ALP Government support for small business is shrinking
–
–
–
•
•
•
Needs change of focus
Increased support and/or reduced costs for local and small business
Recognise State’s role in export infrastructure
The Liberals are not a small G government party
Federal/State relationship changes will likely be adverse
Poor Productivity performance is a big challenge
Multifactor Productivity Growth
Selected Countries and Regions,
Average annual growth rates, %
Sources:
The Conference Board Total Economy Database TM
Peter Harris, Chairman of the Productivity Commission, Speech to the May 2014 Conference of the Stock
Brokers Association of Australia, Melbourne, Australia
Likely facing Slower Growth
in Living Standards
Source: Australian Government 2014/15 Budget Paper No. 1
Business, Credit and Governance Issues
The changing world at a faster paces offers many and big opportunities
for adaptive businesses:
– Industries are Changing, Emerging, Disappearing
– Big established names being challenged and destroyed
– Labour and Government driven costs/regulatory load need to
be worked around
– Staff shortages, Turnover and Expectations are all increasing
– Be prepared to have various working relationships
– Being adaptable is likely to be more important than having a
detailed plan
– Getting the Productivity challenge right will be a big
advantage
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