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Economic Overview Australia Sept 2010rev1
- 1. Economic Overview
AUSTRALIA
Kotan Australia © www.KotanAustralia.com “Elegant Simplicity” in Business & Life
- 2. General Information
Capital: Canberra Head of State::
Surface Area: 7,692 thousand sq km H.M Queen Elizabeth II, represented by the
Official Language: Australian (form of English) Governor General HE Ms Quentin Bryce
Population: 22.155 million (2010) Head of Government
Prime Minister The Hon Ms Julia Gillard (finally decided)
Australia Economic Overview 2010
Kotan Australia © www.KotanAustralia.com “Elegant Simplicity” in Business & Life
- 3. Recent Economic Indicators
2005 2006 2007 2008 2009(a) 2010(b) 2010(a)
Aug 2010
GDP (US$bn) (current prices): 738.3 784.5 951.4 1,038.6 982.1 1,193.0
GDP per capita (US$) 35,935 37,584 44,799 47,986 44,895 53,862
GDP per capita PPP (US$) 33,868 35,314 37,383 38,356 38,911 39,841
Real GDP Growth (% change yoy) 3.5 2.4 4.9 2.2 1.4 3.0 3.3
Current Account Balance (US$m) -41,482 -40,932 -57,727 -45,953 -40,634 -41,582 -16,551
Current Account Balance (% GDP) -5.6 -5.2 -6.1 -4.4 -4.1 -3.5
Goods & Services Exports (% to GDP) 19.7 20.1 19.1 22.4 19.8 20.3
Inflation (% change yoy) 2.8 3.3 3.0 3.7 2.1 2.4 3.1
Other Key Data: Unemployment 5.3%
Exchange Rate Range (US$): 0.8 -0.9
Interest Rates: 4.5%
Source: Australian Bureau Of Statistics (ABS)
Australia Economic Overview 2010
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- 4. Australia’s Trade & Investment Relationships
Major Australian exports, 2009 (A$m) (e): Major Australian Imports, 2009 (A$m) (e):
Coal 39, 397 Crude Petroleum 12,281
Iron ore % concentrates 29,960 Passenger motor vehicles 11,678
Gold 15,049 Refined Petroleum 10,281
Natural Gas 7,640 Gold 9,197
Crude Petroleum 7,180 Medicaments (incl. veterinary) 7,648
Australian Merchandise Trade, 2009
Exports (A$m) 196,239
Imports (A$m) 200,581
Total trade (exports + imports) (A$m) 396,820
Merchandise trade deficit (A$m) 4,342
Australia’s Main Export Destinations, 2009 (e): Australia’s Main Import Sources, 2009 (e):
1. China 21.6% 1. China 17.8%
2. Japan 19.5% 2. United States 11.1%
3. Republic of Korea 7.9% 3. Japan 8.3%
4. India 7.4% 4. Thailand 5.8%
5. United States 4.9% 5. Singapore 5.6%
Source: Australian Bureau Of Statistics (ABS)
Australia Economic Overview 2010
Kotan Australia © www.KotanAustralia.com “Elegant Simplicity” in Business & Life
- 5. Other Key Measures
Business Confidence Consumer Confidence
Business confidence has since Aug 2009, Consumer confidence has since Aug 2009,
continued to be positive in the economy’s followed the trend of business, however at a lower
outlook. It has dipped slightly with the election level. The impact of interest rate increases for
and also uncertainty with European debt. home loans has created volatility over this time.
Exports Imports
Exports have continued to grow, with the June 2010 quarter at 1.2% the fastest for the last 3 years,
on the back of China’s demand for iron ore. China’s demand is expected to continue which is
prompting companies such as BHP Billiton to expand production and mines and continue to grow
the economy.
Source: Australian Bureau Of Statistics (ABS)
Australia Economic Overview 2010
Kotan Australia © www.KotanAustralia.com “Elegant Simplicity” in Business & Life
- 6. Economic Forecasts - RBA
Period
RBA April 2010
Statement
Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec -12
GDP Growth 2.7 2.5 3.25 3.75 3.75 3.75 4.0
Non-farm GDP 2.5 2.5 3.25 3.75 3.75 3.75 4
Underlying CPI 3.25 2.75 2.75 2.75 2.75 3.0 3.0
Growth Comments:
• Growth in public demand is expected to slow as fiscal measures run their course, with this being offset by a pick up in
private sector demand
• The outlook is underpinned by the positive outlook for the resources sector, with increase in investments and demand
from Asia continuing, as well as increased domestic savings levels
Inflation Comments:
• Inflation is expected to be within the top end of the RBA’s acceptable band of 3 to 4%
Monetary Policy:
• After 6 interest rate increases from the end of 2009, the RBA has left the cash rate at 4.5% for the last quarter, and is
expected to remain at this level till the end of 2010, due to uncertainty in global growth due to European debt
concerns.
• Next increase in rates is speculated for Feb 2011, which should stimulate consumer spending over end of 2010
Source: Reserve Bank of Australia (RBA)
Australia Economic Overview 2010
Kotan Australia © www.KotanAustralia.com “Elegant Simplicity” in Business & Life
- 8. Industry Segments Overview
Manufacturing Industry Index
Growth
These index’s show industry trends based on orders,
inventories, capacity, input costs, etc. The base line
of 50 points represents the separation between
expansion(+50) from contraction(-50).
Service Industry Index Construction Industry Index
Contraction Moderating
Source: Australian Industry Group (AIG)
Australia Economic Overview 2010
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- 9. Compressor XXXX
Market Overview
Key Industry Figures 2009 Major Player
Industry Revenue *1,477.1 $ million Weir Group (Australian Holdings) Pty Limited
Revenue Growth *3.4 % GUD Holdings Limited
Industry Gross Product *449.6 $ million Gilbarco Australia Pty Ltd
Number of Establishments *587 Units
Number of Enterprises *245 Units
Employment *4,310 Units
Exports *377.3 $ million
Imports *1,425.3 $ million
O NLY
Total Wages *236 $ million IEW
V ERV
E TO
RK
C MA Item
IFI
S PEC Purchases
OF
Product/Services
LE Wages
MP
SA
Centrifugal Pumps
Depreciation
Air and Gas Compressors
Research and Development
Rotary Pumps
Utilities
Reciprocating Pumps
Rent
Submersible Pumps
Other
Profit
Source: IBIS Market Reports
Australia Economic Overview 2010
Kotan Australia © www.KotanAustralia.com “Elegant Simplicity” in Business & Life
- 11. Australian Business Insights
Structure
• Manufacturing in Australia is approximately 16% of GDP, and is continuing to decline
• Focus has shifted in many industries to importing, selling and servicing to meet industry demands
• Compressor market has few manufacturers left in Australia, most are imported from overseas sources
• Population base in Australia makes it difficult for local manufacturers to compete on commodity type
products, where overseas manufacturers have a lower cost base compared to Australia (A$18/hr)
• Majority of the population is based in the capital cities of Melbourne (5 M), Sydney (5M), Brisbane (2M),
Adelaide (1M), Perth (1M). To be able to support the Australian market for commodity type products
requires to be present in at least Melbourne and Sydney as a minimum.
• Expectation from customers is that an organization has as a minimum – Sales, Technical, Quality and
Customer support; Service, Repair and Parts replacement capability to support products sold within an
acceptable lead time, this can range from 24 hours (for breakdowns) to 1 week for remote sites
• Structure of organizations generally consist of head office with core functions and inventory with a
satellite network of service centres and / or agents to handle interstate and remote customers. This
network can be company owned or joint venture / license / service contract arrangements with small
owner operators through to larger service specialists.
Australia Economic Overview 2010
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- 12. Australian Business Insights
Market Penetration
• The core fundamentals for gaining a foot hold in the market is based around QCDS, i.e.:
Quality
Cost
Delivery
Service
• Product reliability is a key consideration to establishing creditability in the market place
• Cost or price needs to be competitive, but not necessarily the lowest. Many organizations use “Whole of
Life Calculations” for establishing the total cost to the organization and establishing savings potential.
Knowledge and approach varies widely, e.g. mining companies versus small residential supplier
• Relationships are important in Australia, they provide the entry conditions into customers and establishes
credentials for the product
• Buying decisions and approaches vary dependant on the type of organization being targeted, i.e.
small, medium or large. The key is always to develop trust with the key decision maker to ensure that the
price is competitive, product is reliable, service and support infrastructure is in place.
The bottom line is to ensure that no one in the decision tree will lose face, it operates at an unsaid level
but is alive and well
• The base operating culture is “Say what you do, and do what you say”
Australia Economic Overview 2010
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- 13. Australian Business Insights
Operations
• Start up of a operation in Australia can be through a number of options, i.e.:
Licencee – quickest entry and lowest cost base, limited flexibility and control
Joint Venture – quick entry, medium cost base, ability to control and monitor
Partnership – medium entry, medium + cost base, more ability to control, monitor and drive
Company Owned - longest entry, higher cost base, greatest flexibility
• Each of these options provide pro’s and con’s to growth and profit opportunities, depending on the
target market(s) and long term plans for revenue growth
• Distribution is costly due to the long distances between locations, especially in remote areas. Most
organizations use established distribution specialists and negotiate their specific needs and prices.
• Product range – the optimum approach is to have a core range of products and then alter /adjust to
the specific conditions and needs of customers, if technically possible. This reduces the overall inventory
levels needed to be held and reduces required working capital and infrastructure requirements
• Personnel – Australia is currently experiencing a skill shortage in a number of areas, mainly in the
tradesman and professional areas. Obtaining people with the required skill set could be a challenge
• Product – Brand Image
Indian manufactured products are seen similar to products from China in terms of quality and reliability.
There is limited knowledge and exposure to India as a source of products that are imported into Australia
Australia Economic Overview 2010
Kotan Australia © www.KotanAustralia.com “Elegant Simplicity” in Business & Life
- 15. Further Assistance or Enquires
For Further Assistance or Enquiries Contact:
Paul Mracek JP
CPEng, FAIM, GAICD
Chief Executive Officer,
Kotan Australia Pty Ltd
T : +61 3 9532 5476
M: + 61 (0)418 885 122
E: paul@kotanaustralia.com
Australia Economic Overview 2010
Kotan Australia © www.KotanAustralia.com “Elegant Simplicity” in Business & Life