Whilst acknowledging that we still need to retain our "competitive advantage" in the resources sector, "the thing that really stands out is the rebalancing of the Chinese economy toward services… and [Australia's] ability to access the growth in the middle class in Asia." This was the view of Bill Evans, Westpac's Chief Economist at Lander & Rogers' annual Economic Briefing in Sydney on Thursday last week.
Around 300 attendees heard Bill Evans, Westpac's Chief Economist; Rob Coombe, CEO, Quick Service Restaurants Holdings; Michael Dwyer AM, CEO, First State Super; and Tania Jollie, Retail and Consumer Packaged Goods Industry Leader, IBM; discuss the new "normal" for the Australian economy and the outlook for their respective sectors.
Bill acknowledged that one of the major challenges facing the Australian economy was how to strengthen non-mining investment, commenting that the rebalancing of the Chinese economy will create a "real opportunity for Australia to take advantage of the lift in services exports". He also identified tourism, retail, health and education as the sectors most likely to benefit from this shift.
Giving his views on the outlook for the housing market, Bill said that whilst the Melbourne and Sydney markets were particularly high, he did not think they were overvalued and "would be surprised if they collapsed." "People often talk about how house prices are running ahead of incomes… but what you should be looking at is the serviceability of the debt." Interest rates are at an all-time low in Australia which makes the serviceability of the loan very achievable. "Price to income ratios can be misleading," he said.
Fellow panellist Rob Coombe was very optimistic about the state of the economy from a food retail perspective. Speaking about growth in the quick service sector, Rob commented that the sector had seen fairly consistent growth at 5% and he expected this to continue next year. "Even in difficult times, people still want to eat out" he said and he listed convenience, affordability and quality as the three drivers of growth for the food retail industry.
Speaking of challenges facing the food retail industry, Rob said that there were considerable challenges, particularly for small businesses, in navigating the complexities of Australia's current labour laws. "The system of laws, awards, agreements, allowances, and penalties…. have created an amazingly complex environment which is fraught with error," he said. Citing the cost of compliance as "untenable", Rob commented that labour laws were a definite area for reform.
Giving his outlook for the Super industry, Michael Dwyer AM agreed with Bill's projections about where the Australian economy was heading. Commenting on Bill's point about anticipated growth of the health and education sector, Michael noted that 66% of the members in his fund, which is about the third largest in Australia, work in this sector and "with an aging population it is an extremely fast growing sector".
Michael said that one of the growth sectors for the superannuation industry was that of financial advice. "You are watching big super funds play in spaces that traditionally they haven't played in before and which have traditionally been dominated by the banks," he said. Michael cited the increasingly complex financial system as one of the reasons for this growth.
Tania Jolie agreed with Rob's statistics on the rate of growth in the retail sector, adding that in order to maintain this growth, we need to be innovative. "Giving consumers what they want, before they know they need it, is what we need to look at," she said. Jollie cited artificial intelligence, also known as cognitive computing in tech circles, as the way forward. "This technology, the ability for retailers to predict by behaviour how and when to advertise is crucial to the future of retail," she said.