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SEGRA 2012: The outlook –
and its regional
implications Chris Richardson
Deloitte Access Economics
20 November 2012
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The big picture
• The rise of Asia has already been a big benefit to
Australia. But – thanks to the associated strength in
exchange and interest rates – that benefit has been
more obvious in mining regions, and rather less so for
farm- and tourism-dependent parts of this nation.
• The next phase of Asia’s development should
even out some of those bumps. Slower
construction in mining regions will take pressure off
there. And interest rates and the $A should ease.
• Finally, Asia’s demand growth will start to swing
towards (such as protein rich foods) to services (such
as education, tourism and financial services).
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Oz – the underlying story remains beautiful
0% 1% 2% 3% 4% 5% 6% 7% 8%
Italy
Japan
Germany
France
United Kingdom
New Zealand
United States
Australia
Korea
Singapore
Taiwan
Thailand
Philippines
Indonesia
China
India
Projected average annual output growth: 2012 - 2022
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Yet China has slowed & iron ore prices down
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
Oct-04 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12
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$A high for a time further, though not forever
0.50
0.60
0.70
0.80
0.90
1.00
1.10
0
10
20
30
40
50
60
70
80
90
100
110
120
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
The exchange rate and commodity prices
World commodity export prices (index) $US per $A (RH axis)
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Still some downside in interest rates
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Australian interest rates
Standard variable mortgage rates
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Sectoral output growth 2012-13
Source: Deloitte Access Economics
-4% -2% 0% 2% 4% 6% 8%
Farm
Public administration
Manufacturing
Utilities
Transport & storage
Wholesale and retail trade
Recreational services
Finance and insurance
Property services
Education
Information services
Business services
Health
Construction
Mining
% change in output 2012-13
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State output growth 2012-13
Source: Deloitte Access Economics
0% 2% 4% 6%
Tas
SA
ACT
Vic
NSW
Australia
NT
QLD
WA
% change in output - 2012-13
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North West of Brisbane Line
20% of employment
53% of investment projects
South East of Brisbane Line:
80% of employment
47% of investment projects
The Brisbane Line – the skewing of
Australian investment
Source: Deloitte Access Economics, Investment Monitor, December 2011
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16%
18%
20%
22%
24%
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18
Real business investment to GDP
Real exports to GDP
Capex & exports key to ‘seizing the moment’
Is ‘the boom’ over? That depends on whether
you measure it by prices (yes, though they’ll
remain good), construction (set to peak in 2014),
or export volumes (where much of the dividend
is yet to be felt, and will last for decades)
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The regional population share
has held up since the early 1970s
0%
10%
20%
30%
40%
50%
60%
1921 1931 1941 1951 1961 1971 1981 1991 2001 2011
Regional share of total Australian population
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Though that hides some distinct cycles –
including some current tough times
-3%
-2%
-1%
0%
1%
1921 1931 1941 1951 1961 1971 1981 1991 2001 2011
Regions doing well
Regions doing poorly
Population growth in regional Australia less growth in the 8 capitals
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Albeit with different stories State by State
-3%
-2%
-1%
0%
1%
2%
1921 1931 1941 1951 1961 1971 1981 1991 2001 2011
Australia
NSW
Regions doing well
Regions doing poorly
Population growth in regional Australia less growth in the 8 capitals
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And within States, we’re moving from bush to
beach – creating regional winners and losers
Since the mid-1970s there has been a sharp move to the national coastline.
Driven by lifestyle choices, Australia is seeing a population shift from the bush to the beach.
That spells success for some regional areas, while others have and will face serious decline.
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‒The commodity price boom boosted the $A,
while the construction boom boosted our
interest rates.
But exchange and interest rates will ease in
coming years:
‒The ability of Australian businesses to sell into
world markets (or to protect themselves against
imports) will be bolstered by a relative easing in
interest and exchange rates.
‒These will fall over time alongside industrial
commodity prices, increasing the opportunities
available.
What will change?
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‒The rise of Asia saw an initial shift into a
‘commodity hungry’ phase: Australia was able
to benefit greatly from that.
‒But what will drive growth in coming decades?
‒The next phase of Asia’s rise will spawn
massive markets in everything from goods
(such as protein rich foods) to services (such
as education, tourism and financial services).
‒That’s a big bunch of opportunities, but
Australia’s comparative advantage will be less
dramatic than it was in resources – that is,
challenges will be greater.
The next opportunities
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The new story: farm recovery?
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But Australia’s ‘people power’ is falling short
40
60
80
100
120
140
0.0
0.4
0.8
1.2
1.6
2.0
1950 1960 1970 1980 1990 2000 2010
Migrants as a share of population (LH axis) Terms of Trade (RH axis)
% of Australia's population Index (2009-10 = 100)
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Gold watch time
40
60
80
100
1971 1981 1991 2001 2011 2021
Ratio of those turning 18 to those turning 65 years (%)
Forecast
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Did I mention the beautiful story?
0% 1% 2% 3% 4% 5% 6% 7% 8%
Italy
Japan
Germany
France
United Kingdom
New Zealand
United States
Australia
Korea
Singapore
Taiwan
Thailand
Philippines
Indonesia
China
India
Projected average annual output growth: 2012 - 2022
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