Australia Country Risk Report

Published 25 February 2015 | Quarterly

  • 54 pages
  • Instant access to your report online and PDF format through your account library
  • Includes 3 free updated quarterly reports
 
$1,195.00
Australia Country Risk Report

Core Views

  • Real GDP growth is highly likely to slow over the coming years owing to a number of factors: slowing growth in the working age population; an increasing share of government spending relative to GDP; and a reversal in the country's terms of trade; and the growing risk of deflation. These impediments will result in real GDP growth averaging 2.3% over the next decade, down from 2.9% over the past decade.

  • Prime Minister Tony Abbott's leadership is looking increasingly precarious following the defeat of the Liberal National Party in the Queensland state elections. With approval ratings hitting new lows, the prospects of a turnaround look slim at present, and the Labor Party is in prime position ahead of next year's general election.

  • We remain bearish on the Australian dollar despite the large fall we have already seen in the currency. The trend remains very bearish, valuations are still a headwind to the unit, and real interest rate differentials no longer provide support to the currency.

  • The government's reform agenda is looking increasingly fragile following the recent election defeat in the state of Queensland, where voters stiffly rejected large-scale privatisation plans. This puts privatisation plans in other states in jeopardy, and suggests that the Labour Party is in prime position for a return to power in 2016, both of which are a setback for the country's fiscal accounts.

  • Australia's current account picture is gradually improving in spite of deteriorating terms of trade, thanks to higher export volumes and lower income outflows. Going forward, we maintain that a current account surplus is likely as the Australian dollar depreciates, but this will increasingly be driven by lower imports, to the detriment of the domestic economy.

  • The Reserve Bank of Australia (RBA) decision to cut interest rates to historic lows of 2.25% at its February meeting was in line with our view that the economy faces a growing risk of deflation. Falling commodity...

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Table of Contents

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
Our Take On The Budget Debate
8
TABLE: POLITICAL OVERVIEW
8
Long-Term Political Outlook
9
Three Key Challenges: Population, Climate Change, China
9
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Index
13
Economic Activity
14
Growth Downtrend Remains Intact
14
Table: Economic Activity
14
Fiscal Policy
15
Fiscal Tide Turning
15
Table: Fiscal Policy
15
Monetary Policy
17
Long Pause Ahead For The RBA
17
Table: Monetary Policy
17
FX Forecast
19
AUD: Bounce Likely, But More Downside Thereafter
19
TABLE: Exchange Rate
19
TABLE: BMI CURRENCY FORECAST
20
Chapter 3: 10-Year Forecast
23
The Australian Economy To 2023
23
Exports And Immigration Key For Long-term Growth
23
Table: Long-Term Macroeconomic Forecasts
23
Chapter 4: Operational Risk
27
Operational Risk Index
27
Operational Risk
28
Table: Developed States - Labour Market Risk
28
Table: Developed States - Logistics Risk
31
Table: Developed States - Crime And Security Risks
33
Table: Developed States - Trade And Investment Risk
36
Chapter 5: Key Sectors
39
Infrastructure
39
Table:Construction & Infrastructure Industry Data
40
Table: Construction And Infrastructure Industry Data
41
Oil & Gas
43
Table: Oil Production (2012-2017)
44
Table: Oil Production (2018-2023)
45
Table: Gas Production (2012-2017)
46
Table: Gas Production (2018-2023)
46
Other Key Sectors
47
table : Phar ma Sect or Key Indicat ors
47
table: Telecoms Sector Key Indicators
47
table: Defence & Security Sector Key Indicators
47
table: Food & Drink Sector Key Indicators
48
table: Autos Sector Key Indicators
48
table : Freight Key Indicat ors
48
Chapter 6: BMI Global Assumptions
49
Global Outlook
49
Reality Check: Uncertainty Reigns
49
Table: Global Assumptions
49
Table : Devel oped States , Real GDP Growth, %
50
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
50
Table : Emerging Markets , Real GDP Growth , %
51

The Australia Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Australia. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Australia's economic, political and financial prospects through end-2019, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of Australia's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Australia's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Australia, including currency volatility, the commodity price boom and protectionist policies.

The Australia Country Risk Report by Business Monitor International (BMI) includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the Australia' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Australia through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Australia Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Australia and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Australia, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Australia over the next 5-years?

BMI's Australia country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Australia Market - Political Strengths, Weaknesses, Opportunities and Threats facing Australia.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Australia's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Australia’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Australia's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in Australia?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Australia against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

Key Sector Outlook*

Which industry sectors in Australia will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in Australia's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express