Australia A Global Financial Services Centre

Transcription

1 Australia A Global Financial Services Centre Benchmark Report 2010

2 AUSTRALIA A Global Financial Services Centre Australia has emerged from the Global Financial Crisis with its standing as a financial centre in the region enhanced. Australia weathered the worst of the global financial crisis. Australia s financial sector remains in robust good health, underpinned by a world best practice regulatory system. The World Economic Forum s Financial Development Report 2009 has also ranked Australia second out of 55 of the world s leading financial systems and capital markets. Australia is home to the world s fourth largest pool of contestable funds under management, which is also the largest in the region. The funds management sector has grown five-fold since 1995, at a compound annual growth rate of 12 per cent, and now has A$ 1.7 trillion in funds under management. Australia s impressive record of sustained economic and employment growth is expected to continue. The IMF forecasts Australian economic growth of 3.0 per cent in 2010 and 3.5 per cent for This compares favourably with those of other advanced economies. Australia s unemployment rate is also relatively low at 5.3 per cent. The 2010 IMD World Competitiveness Yearbook has rated Australia s economy as the second most resilient in the world. These core economic strengths, our robust institutional framework, the openness of our economy and the size, depth and sophistication of our markets will underpin the future growth of the financial services sector. The Australian Government has continued to take important steps to support the internationalisation of the financial sector and to enhance Australia s attractiveness as a global financial services centre. ABN Date: September 2010 ISBN: DISCLAIMER This report has been prepared as a general overview. It is not intended to provide an exhaustive coverage of the topic. The information is made available on the understanding that the Australian Trade Commission (Austrade) is not providing professional advice. Therefore, while all care has been taken in the preparation of this report, Austrade does not accept responsibility for any losses suffered by persons relying on the information contained in this report or arising from any error or omission in the report. Any person relying on this information does so entirely at their own discretion and Austrade strongly recommends the reader obtain independent professional advice prior to acting on this information. Austrade s role includes to facilitate engagement by Australian financial services exporters in markets outside Australia. Austrade is not a promoter of any financial services products or investments and does not provide investment advice. Austrade assumes no responsibility for any company, product or service mentioned in this document, for any materials provided in relation to such products, nor for any act or omission of any business connected with such products. Investors should always consider whether an investment is appropriate for their needs and seek out independent advice as appropriate.

3 SECTION 1 Strong Economy Australia s performance through the Global Financial Crisis confirms its standing as one of the world s most resilient economies. World s 20 Largest Economies 2 Real GDP Growth by Country 3 Resilience of the Economy to Economic Cycles 4 Unemployment Rates by Country 5 Australia s Real Gross Value Added by Industry 6 Australia s Real Gross Value Added Growth by Industry 7 Gross Fixed Capital Formation as a Percentage of GDP 8 Inward Foreign Direct Investment Stocks by Country 9 Australia s Exports of Goods and Services 10 Australia s Exports of Education Services 11 The Prosperity Index World Ranking by Country 12 Net Government Debt 13 Percentage of Nonperforming Bank Loans to Total Bank Loans 14 Strong Economy

4 World s 20 Largest Economies 2010 F Percentage share of total world nominal GDP in US$ Rest of World 19.17% 14. Mexico 1.61% 15. South Korea 1.60% 16. Netherlands 1.29% 17. Turkey 1.15% 18. Indonesia 1.09% 19. Switzerland 0.87% 20. Belgium 0.78% 8.39% 1. USA 23.96% 13. Australia 1.93% 12. India 2.21% 11. Spain 2.31% 10. Russia 2.44% 9. Canada 2.52% 8. Brazil 3.09% 7. Italy 3.43% 2. China 8.69% 3. Japan 8.54% 4. Germany 5.40% 6. UK 3.60% 5. France 4.32% GDP of the world s 183 economies: US$61,767 billion GDP of Asia Pacific Economic Cooperation s 21 member economies: US$34,483 billion (55.83%) F = Forecast Sources: International Monetary Fund, World Economic Outlook Database, April 2010; Austrade Although Australia s population is less than half a per cent of the global total, its economy ranks the 13th largest in the world, rivalling countries such as India, South Korea and Netherlands. Australia s GDP is now estimated at around US$1.2 trillion, the fourth largest economy in the Asia-Pacific region. Section 1. Strong Economy 2

5 Real GDP Growth by Country 2002 to 2010 F Average Growth Rate Country 1998 to F China India Vietnam UAE Singapore Korea Philippines Malaysia Taiwan Indonesia Hong Kong Australia Thailand Brazil Greece Spain Canada New Zealand USA UK Netherlands Switzerland France Germany Italy Japan World Average F = Forecast; UAE = United Arab Emirates 1. Based on market exchange rates Sources: International Monetary Fund, World Economic Outlook (WEO) Database, April 2009; WEO Update July 2009; Austrade In the July 2010 Update of the International Monetary Fund s (IMF) World Economic Outlook, the IMF has forecast that the Australian economy will grow by 3.0 per cent in 2010 and 3.5 per cent in 2011, giving it a brighter outlook than that of the advanced economies as a whole. A timely response to the financial crisis, a healthy banking sector, rigorous regulatory environment, flexible exchange rate and sustained demand from China for Australian commodities helped to avoid the worst of the financial turbulence that other economies experienced. Section 1. Strong Economy 3

6 Resilience of the Economy to Economic Cycles 2006 to 2010 The higher the score the better 1 Rank Country 2006 Score Country 2007 Score Country 2008 Score Country 2009 Score Country 2010 Score 1 Australia 7.39 Denmark 7.45 Australia 6.78 Qatar 6.16 Israel USA 7.22 USA 6.90 Denmark 6.73 Norway 5.96 Australia Denmark 7.16 Israel 6.82 Switzerland 6.43 Australia 5.83 India Hong Kong 7.09 Austria 6.67 Israel 6.14 Chile 5.83 Qatar India 6.84 Malaysia 6.64 Austria 6.00 Denmark 5.79 Malaysia Israel 6.80 Switzerland 6.43 Norway 5.96 India 5.78 Chile Ireland 6.68 Australia 6.38 Chile 5.89 Brazil 5.54 Switzerland Norway 6.68 India 6.33 India 5.87 Israel 5.53 Norway Chile 6.41 Hong Kong 6.33 Brazil 5.83 Switzerland 5.38 Taiwan Canada 6.38 Singapore 6.19 Finland 5.80 China 5.05 China Switzerland 6.34 China 6.17 Singapore 5.78 Malaysia 5.04 Poland Malaysia 6.34 Norway 6.08 Sweden 5.66 Finland 5.00 Singapore Japan 6.32 UK 6.02 Netherlands 5.66 Austria 4.98 Sweden Qatar 6.31 Chile 6.00 Malaysia 5.66 Singapore 4.96 Indonesia Singapore 6.30 Taiwan 5.79 Hong Kong 5.61 Hong Kong 4.94 South Korea Estonia 6.19 Japan 5.79 Taiwan 5.52 Taiwan 4.91 Canada Finland 6.02 Ireland 5.76 Czech Republic 5.41 South Africa 4.84 Brazil Iceland 6.00 Luxembourg 5.73 Canada 5.36 Netherlands 4.83 Philippines China 5.90 Estonia 5.72 Germany 5.34 Germany 4.79 Austria Thailand 5.82 Netherlands 5.66 Slovenia 5.29 Sweden 4.77 Hong Kong UK 5.82 Slovenia 5.66 USA 5.29 Philippines 4.73 Thailand South Africa 5.75 Sweden 5.61 Estonia 5.27 Slovenia 4.63 Denmark Sweden 5.72 Czech Republic 5.60 Jordan 5.15 Lithuania 4.60 Netherlands Jordan 5.67 Jordan 5.50 China 5.15 Jordan 4.60 Germany Taiwan 5.65 Iceland 5.44 Ireland 5.02 New Zealand 4.49 Turkey 4.87 Surveyed question: Resilience of the economy to economic cycles is strong. 1. IMD World Competitiveness Yearbook Executive Opinion Survey based on an index from 0 to 10. The IMD included 58 economies in the 2010 survey. Sources: IMD World Competitiveness Online (Updated: May 2010); Austrade The Australian economy has recorded 19 years of uninterrupted growth to 2010, despite two global downturns. The strength of the Australian economy is well recognised. The 2010 Institute for Management Development (IMD) World Competitiveness Yearbook rated Australia s economy the second most resilient in the world. For countries with populations greater than 20 million, Australia ranked first in 2009 and 2010, and has topped this category in eight of the previous nine years. Section 1. Strong Economy 4

7 Unemployment Rates by Country 2007 to 2010 Unemployment Rate Percentage of Labour Force Annual Latest Rate 1 Country Spain Ireland Turkey Greece Portugal France Sweden USA Belgium Chile Italy Canada UK Germany Brazil Russia New Zealand Netherlands Australia Japan China South Korea Switzerland Norway Latest unemployment rate for each country annual rates not yet available. Sources: 2007 to 2009 data extracted on 18 August 2010 from OECD.Stat, and 2010 latest figures sourced from Bloomberg; Austrade Australia s unemployment rate has eased to just over 5 per cent after peaking at 5.8 per cent in the middle of Australia s latest unemployment rate is almost half that of the Euro area and the United States. Australia is also ranked second globally in terms of economic resilience which in part reflects the openness of the economy and sustained economic reforms over recent decades. Over the past year, employment in Australia rose by a strong 300,000. Section 1. Strong Economy 5

8 Australia s Real Gross Value Added by Industry Manufacturing 9.1% Finance/Insurance 10.8% Generated $A121 billion Mining 7.3% Professional/Scientific/ Technical Services 6.5% Agriculture/Forestry/Fishing 2.8% Healthcare/Social Assistance 6.3% Construction 7.5% Public Administration/Safety 5.5% Utilities 2.6% Transport/Postal/Warehousing 5.4% Other Services % Wholesale Trade 4.9% Information Media/Telecommunications 3.0% Rental/Hiring/Real Estate Services 3.3% Retail Trade 4.9% Education/Training 4.4% Service Industries 80.8% 1. Annual total to March Including Accommodation/Food Services, Administrative/Support Services, and Arts/Recreation Services. Sources: Australian Bureau of Statistics, cat. no , National Income, Expenditure and Product, Time Series Workbook (released 2 June 2010), Table 6; Austrade The financial sector is the largest contributor to Australia s national output, directly generating 10.8 per cent or A$121 billion of real gross value added in This contribution is up from 8.9 per cent or A$53 billion two decades ago. Australia s financial sector continues to grow more rapidly than most other sectors of the economy, benefiting from significant structural reforms and strong and resilient economic growth over the past two decades. The financial services industry is a major driver of Australia s economic growth, contributing almost four times that of agriculture, forestry and fishing (A$32 billion), and nearly 50 per cent more than mining (A$82 billion). The increasing significance of finance and insurance over the past two decades has also aided growth in related sectors such as information, media and telecommunications, and other business services. Section 1. Strong Economy 6

9 Australia s Real Gross Value Added Growth by Industry 1999 to Construction Administrative/Support Services Professional/Scientific/Technical Services Financial/Insurance Services 4.7 Healthcare/Social Assistance 4.4 Retail Trade Arts/Recreation Services Information Media/Telecommunications Transport/Postal/Warehousing Agriculture/Forestry/Fishing Wholesale Trade Mining 2.7 Accommodation/Food Services 2.6 Public Administration/Safety Rental/Hiring/Real Estate Services All Industry Average Growth: 3.3% Per Annum Utilities 1.9 Education/Training 1.9 Manufacturing Average Annual % Change 1. Annual total to March each year. Sources: Australian Bureau of Statistics, cat. no , National Income, Expenditure and Product, Time Series Workbook, Table 6 (released 2 June 2010); Austrade Australia s finance and insurance sector has been one of the country s highest performing industries, achieving an average annual growth rate of 4.7 per cent a year between 1999 and This is well above the combined average for all industries (3.3 per cent) and reflects the strength of Australia s service-based economy. Section 1. Strong Economy 7

10 Gross Fixed Capital Formation as a Percentage of GDP Australia South Korea Spain Slovak Republic Iceland Czech Republic Japan Canada % of GDP Belgium Mexico New Zealand Poland France Austria Ireland Portugal Switzerland EU27 total Denmark Hungary Italy Norway Finland OECD total Netherlands Turkey Sweden Greece Luxembourg Germany USA UK Sources: OECD Factbook 2010: Economic, Environmental and Social Statistics (released 26 May 2010); Austrade The share of total GDP devoted to investment in fixed assets is an important determinant of future economic growth. Higher capital investment tends to increase productivity and contribute to higher GDP growth. Australia s fixed capital investment as a percentage of GDP was 29.4 per cent in 2008, the highest of all OECD countries. This rate is also well above the average of EU27 (21.1 per cent) and OECD (20.6 per cent). Section 1. Strong Economy 8

11 Inward Foreign Direct Investment Stocks by Country Country Inward FDI Stock as a Percentage of GDP (%) (US$ Billion) Switzerland Netherlands UK ,125 Spain France ,133 Canada Malaysia Thailand Australia Brazil USA ,121 Germany Russia Italy Philippines Greece Indonesia South Korea India Taiwan China Japan World ,743 Developed Economies ,353 Developing Economies ,893 Sources: United Nations Conference in Trade and Development Database ( Annex Tables 7 and 3; Austrade Australia s Foreign Direct Investment (FDI) stocks rose almost 350 per cent to US$328 billion between 1990 and This represents a compound annual growth rate of 8.2 per cent since As a percentage of GDP, FDI in Australia rose from 23.2 per cent in 1990 to 33.5 per cent in Section 1. Strong Economy 9

12 Australia s Exports of Goods and Services (US$ Billion) 1 Financial year ending 30 June 240 Merchandise Goods Commercial Services Compound Annual Growth Rate since 1990: 7.8% US$ Billion Australia s exports in A$ were converted to US$ values, using US$/A$ exchange rate at the end of June each year from the Reserve Bank of Australia Statistics. Sources: Australian Bureau of Statistics, cat. no , International Trade in Goods and Services, Australia, Table 1 (released 4 August 2010); Austrade Australia s annual export value of goods and services in US dollar terms fell 5.9 per cent to US$217 billion in Nevertheless, Australia has experienced strong export growth for 16 of the last 20 years, and export value has increased by a compound annual growth rate of around 8 per cent. The overall growth in the country s external sector can be attributed to ongoing economic reform, Australia s strong competitiveness, continued trade openness, and diversified export markets. Section 1. Strong Economy 10

13 Australia s Exports of Education Services 1. Includes international students on student visas only. Share of 2009 Change Total 2008 to 09 (A$ Million) % Education Related Travel Services 1 12,177 15,002 17, China 2,738 3,432 4, India 1,618 2,413 3, South Korea 964 1,082 1, Malaysia Thailand Vietnam Nepal Indonesia Hong Kong Brazil Other countries 3,904 4,419 5, Other Educational Services Education Consultancy Services Correspondence Courses Services through Educational Institutions Other Education Services Royalties on Education Services Total Education Related Services Exports 12,189 15,115 18, Export income does not include income generated by the operations of offshore campuses of Australian institutions. Sources: Australian Education International, Research Snapshot, June 2009; Austrade International education activity contributed A$18.6 billion in export income to the Australian economy in 2009, up 22.9 per cent from Education services remain Australia s fourth largest export, behind coal (A$39.4 billion), iron ore and concentrates (A$30.0 billion), and tourism (A$23.5 billion in ). Of the total export income generated by education services, A$18 billion was from spending on fees and goods and services onshore by foreign students, with a further A$556 million from education consultancy and other services. Section 1. Strong Economy 11

14 The Prosperity Index 1 World Ranking by Country Scores (1 = the best, 0 = the worst) Finland (1) Switzerland (2) Sweden (3) Denmark (4) Norway (5) Australia (6) Canada (7) Netherlands (8) USA (9) New Zealand (10) Ireland (11) UK (12) Germany (14) Japan (16) France (17) Hong Kong (18) Spain (19) Italy (21) Singapore (23) Taiwan (24) South Korea (26) Malaysia (39) Brazil (41) Thailand (44) India (45) UAE (47) Philippines (55) Indonesia (61) China (75) Vietnam (77) The Prosperity Index ranks 104 nations according to nine building blocks of prosperity. A country s position in the overall Prosperity Index is produced by equally weighting and averaging its nine sub-index scores. The scores are then ranked to produce the overall ranking. The Index measures prosperity across nine areas that have an established empirical relationship with either national wealth or wellbeing: economic fundamentals, entrepreneurship and innovation, democratic institutions, education, health, safety and security, governance, personal freedom, and social capital. Sources: The 2009 Legatum Prosperity Index Report; Austrade Australia has been ranked sixth in the world and first in the Asia-Pacific region in the Legatum Institute s 2009 Prosperity Index of more than 100 countries. Countries were rated on the following: democratic institutions, economic fundamentals, education, entrepreneurship and innovation, governance, health, personal freedom, safety and security, and social capital. Australia achieved the following top ten rankings: personal freedom (4th), social capital (4th), democratic institutions (5th), education (6th), economic fundamentals (7th), and governance (10th). Section 1. Strong Economy 12

15 Net Government Debt (% of GDP) % of GDP Denmark New Zealand Australia 1 Canada Switzerland Netherlands Ireland Spain 2 Austria USA Germany UK France Iceland Portugal 2 Belgium Italy Japan Does not reflect the latest federal government budget released 11 May Does not reflect additional deficit reduction plans announced 10 May Sources: IMF World Economic and Financial Surveys, Fiscal Monitor 14 May 2010, Table 3; Austrade Australia s net debt is estimated to be around 5 per cent of GDP, according to the IMF 2010 World Economic and Financial Surveys. The ratio is well below the average of 69.9 per cent of GDP for advanced economies. The relatively low level of public sector debt reinforces Australia s strong financial position and sound economic credentials. Section 1. Strong Economy 13

16 Percentage of Nonperforming Bank Loans to Total Bank Loans 2004 to Latest Average Thailand NA Dec 8.6 Philippines Sep 7.8 Malaysia Nov 7.5 China Dec 6.5 UAE Nov 6.2 Greece Sep 5.9 Italy Jun 5.4 Indonesia Sep 4.9 India Mar 3.8 Germany NA Dec 3.5 Brazil Oct 3.4 France NA Dec 3.2 Singapore Sep 2.9 Ireland Sep 2.2 USA Dec 2.0 Spain Dec 2.0 Japan Sep 1.8 Portugal Jun 1.8 UK Jun 1.6 Hong Kong Sep 1.4 South Korea Sep 1.2 Netherlands NA NA NA Dec 1.2 Canada Sep 0.8 Switzerland NA Dec 0.5 Australia Sep 0.5 Note: Due to differences in national accounting, taxation, and supervisory regimes, the data is not strictly comparable across countries. 1. The data excludes interbank loans. 2. Break in 2005; data started to cover all commercial banks. Previous years data covered major commercial banks (comprising state-owned commercial banks and joint stock commercial banks). 3. Data for national banks only. 4. Exposure to borrowers in a state of insolvency (even when not recognized in the court of law) plus exposure to borrowers in a temporary situation of difficulty. 5. Commercial banks. 6. Unless otherwise indicated, data refers to the end of the fiscal year, i.e., March of the indicated calendar year. 7. Gross doubtful debts. Break in series in Covers all licensed banks (49 as of Q3 2009). 9. All FDIC-insured institutions. 10. Doubtful exposures to other resident sectors over total lending to other resident sectors. 11. Unless otherwise indicated, data refers to the end of the fiscal year, i.e., March of the next calendar year; for major banks. 12. For the figures are for the sample of institutions that are already complying with IFRS, accounting as of December 2004 for about 87 per cent of the usual aggregate considered. From 2007 onward, the sample of banking institutions under analysis was expanded to include the institutions that adopted IFRS in 2006; On a consolidated basis. Nonperforming loans are defined as credit to customers overdue. Data for 2008 is preliminary. 13. Loans classified as substandard, doubtful, and loss. 14. Impaired assets to total assets. Figures exclude loans in arrears that are covered by collateral. Sources: International Monetary Fund, Global Financial Stability Report, April 2010, Statistical Appendix, Table 24; Austrade. Australian banks have one of the lowest non-performing loans ratios of all 97 surveyed economies. Only 1.1 per cent of Australian bank loans are nonperforming. This ratio reflects Australia s strong financial system, sound regulatory framework and the resilience of the economy. Section 1. Strong Economy 14

17 SECTION 2 Liquid Markets Australia s financial markets are amongst the largest, fastest growing and most sophisticated in Asia. Financial Development Index 2009 Global Ranking by Country 16 World s 100 Largest Banks Credit Rating 17 Australia s Financial Services Industry: Global Footprint 18 Assets of Australia s Financial Institutions 19 Global Significance of Australia s Investment Fund Assets Pool 20 Australia s Managed Funds Assets 21 Australian Investment Managers Asset Allocation 22 Global Pension Assets 23 World s 25 Largest Sovereign Wealth Funds by 24 Assets Under Management Size of Key Stock Markets in the Asia-Pacific Region 25 International and Domestic Debt Securities 26 Real Estate Investment Trust Market Capitalisation 27 Asia-Pacific Hedge Fund Assets Under Management 28 Australian Residential Mortgage-Backed Security Issuance 29 World Insurance Markets 30 High Net Worth Individuals by Country 31 Worldwide Announced Mergers and Acquisitions by Target Nation 32 Liquid Markets

18 Financial Development Index 2009 Global Ranking by Country UK Australia USA Singapore Hong Kong Japan China India Overall Index (out of 55) Financial Access Non-Banking Financial Services Banking Financial Services Financial Markets Financial Stability Business Environment Institutional Environment Sources: World Economic Forum, The Financial Development Report 2009 (released 8 October 2009); Austrade The World Economic Forum s The Financial Development Report 2009 has ranked Australia second of 55 of the world s leading financial systems and capital markets, ahead of the United States, Singapore and Hong Kong. Australia leads the Asia-Pacific region as a result of its solid performance in both banking (5th in the world) and non-banking financial services (3rd in the world). The report stressed that the efficiency of Australia s banks (a key component of banking financial services) is a key strength. Section 2. Liquid Markets 16

19 World s 100 Largest Banks Credit Rating 3,000 Australia s four major banks Assets US$ Billion (as of 31 December 2009) 2,500 2,000 1,500 1, AAA AA AA- A+ A A- BBB+ BBB BBB- NR Sources: The chart was sourced from the Reserve Bank of Australia Financial Stability Report March 2009, page 25, Graph 38, and updated with the 2009 data of banks assets from The Banker 1000 World Banks 2010 and Standard and Poor s Credit Ratings (downloaded 27 July 2010) from Bloomberg; Austrade Among the world s 100 largest banks by assets, nine banks are rated AA or above and four of these are Australian. Australian banks dealt with the Global Financial Crisis better than banks in many other countries. This can be attributed to Australia s high prudential standards, and Australian banks focus on mainstream domestic activity and limited exposure to exotic derivatives. Section 2. Liquid Markets 17

20 Australia s Financial Services Industry: Global Footprint 2010 UNITED KINGDOM IRELAND FRANCE NETHERLANDS GERMANY LUXEMBOURG SWITZERLAND CANADA MALTA SOUTH KOREA JAPAN UNITED STATES OF AMERICA UNITED ARAB EMIRATES CHINA OMAN INDIA TAIWAN HONG KONG CAYMAN ISLANDS THAILAND VIETNAM MALAYSIA PHILIPPINES SINGAPORE INDONESIA BRAZIL SAMOA FIJI SOUTH AFRICA Banking Banking (Branch Office) Banking (Rep Office) Funds Management Property / Infrastructure Fund Financial Planning & Advisory Services General Insurance Health Insurance Life Insurance Investment Administration Mortgage Broking Services Stock Broking Services EUROPE France Germany Ireland Luxembourg Malta Netherlands Switzerland United Kingdom AFRICA & MIDDLE EAST South Africa Africa Non-Specified Oman United Arab Emirates Middle East Non-Specified China Fiji Hong Kong India Indonesia Japan Korea Malaysia NEW ZEALAND ASIA PACIFIC New Zealand Philippines Singapore Samoa Taiwan Thailand Vietnam Non-Specified Canada Cayman Islands USA Brazil Non-Specified AMERICAS Source: Based on survey responses from a sample of Financial Services Council members Australia s financial services companies have rapidly expanded their operations around the globe. Australia has arguably the most efficient and competitive financial sector in the Asia-Pacific region. The range of Australia s financial companies activities extends to North America, Europe and throughout the Asia-Pacific region, and reflects Australia s comparative strengths in funds management and investment banking. Section 2. Liquid Markets 18

21 Assets of Australia s Financial Institutions (A$ Billion) 1995 to 2010 Authorised Deposit- Taking Institutions (ADIs) Funds Under Management (FUM) Collective Investment Institutions (CIIs) Investment Managers Sourced from Other Financial Institutions 4 All Registered Life Offices Other Entities Financial Banks (other Other Financial and Managed Other than At the End of Systems (AFS) 1 than RBA) ADIs 2 Corporations Superannuation Funds 3 Clls Overseas Total March March , March ,900 1, March ,772 2, , % of AFS Assets % of GDP CAGR % Since RBA = Reserve Bank of Australia. CAGR = Compound annual growth rates. Note: The US$/A$ exchange rate was US$ as at 30 June 2010 (sourced from RBA statistics); the nominal value of Australia s GDP in the year to 31 March 2010 was A$1,268 billion. 1. The sum may not add up due to rounding. 2. The combined assets of building societies and credit unions. 3. The combined assets of public unit trusts, cash management trusts, common funds and friendly societies. 4. The combined assets of general insurance offices and securitisation vehicles. Sources: Reserve Bank of Australia Statistics, B01 Assets of Financial Institutions (downloaded 15 June 2010); Australian Bureau of Statistics, cat. no , National Income, Expenditure and Product, Times Series Workbook (released 2 June 2009), Table 3; Austrade Australia s large, expanding and mature financial services sector has assets of almost A$4.8 trillion, which is equivalent to around four times nominal GDP. This sector has benefited from almost two decades of stable economic growth, with favourable macroeconomic conditions and sound institutional frameworks reflecting the benefits of wide ranging structural reforms and sound economic policies. Section 2. Liquid Markets 19

22 Global Significance of Australia s Investment Fund Assets Pool Investment Fund Assets 1, US$, December Quarter 2009 $18bn $58bn $130bn $265bn $381bn $661bn $861bn $870bn Largest in Asia New Zealand Taiwan India South Korea China Japan ASIA Singapore Hong Kong Australia $1,979bn AUSTRALIA 2015 $1,199bn $157bn 1990 $235bn 1995 $342bn 2000 Current Value Australia s Projected Growth $11,121bn $565bn $661bn $729bn $784bn $861bn $861bn $870bn 4th Largest in the World $1,806bn $2,294bn Canada Japan UK Brazil Ireland Singapore Hong Kong Australia France Luxembourg USA GLOBAL Note: Circles are not to scale. Data between countries is not strictly comparable. 1. Refers to home-domiciled funds, except Hong Kong, South Korea and New Zealand, which include home- and foreign-domiciled funds. Fund of funds are not included. In this statistical release investment fund refers to a publicly offered, open-end fund investing in transferable securities and money market funds. It is equivalent to mutual fund in the US and UCITS (Undertakings for the Collective Investment of Transferable Securities) in the European Fund and Asset Management Association s statistics on the European investment fund industry. Australia s investment funds in the ICI survey only include consolidated assets of collective investment institutions. 2. Standard & Poor s Investment Consulting have assumed: A$1 = US$0.80. Sources: Investment Company Institute, Worldwide Mutual Fund Assets and Flows, December Quarter 2009; Hong Kong s data, December 2009, sourced from Securities and Futures Commission, Fund Management Activities Survey 2009 (released July 2010); Singapore s data sourced from the Monetary Authority of Singapore, 2009 Singapore Asset Management Industry Survey; the projected figures of Australia s investment fund assets were provided by Standard & Poor s Investment Consulting; Austrade The size of Australia s investment fund assets pool and its prospects for substantial growth continue to attract global firms seeking to establish and expand operations in Australia. The growth in assets has been sustained by the Australian Government s mandatory retirement income scheme and favourable tax treatment of superannuation. This, together with the ready availability of finance skills and expertise, strengthens Australia s position as a major funds management hub in the Asia-Pacific region. Section 2. Liquid Markets 20

23 Australia s Managed Funds Assets (A$ Billion) 1995 to 2010 FUNDS UNDER MANAGEMENT (FUM) TOTAL Collective Investment Institutions (CIIs) Consolidated Assets FUM of Investment Managers Sourced from Total Public Australian (less) other Superannuation Life Insurance Unit Entities other Investment Consolidated At the End of Funds Offices 1 Trusts Other 2 Total 3 than Clls Overseas Managers Assets 3 March March March ,095 March , ,729 % of Total FUM % of GDP % CAGR Since N/A 11.9 CAGR = Compound Annual Growth Rate Note: The US$/A$ exchange rate was US$ as at 30 June 2010 (sourced from RBA statistics); the nominal value of Australia s GDP in the year to 31 March 2010 was A$1,268 billion. 1. Figures include superannuation funds held in statutory funds for life insurance offices. 2. The combined assets of cash management trusts, common funds and friendly societies. 3. Total may not add up due to rounding. Sources: Australian Bureau of Statistics (ABS), cat. no Managed Funds, Australia, Time Series Workbook (released 27 May 2010), Table 1. Managed Funds, Table 8. Investment Managers; ABS, cat. no , National Income, Expenditure and Product, Times Series Workbook (released 2 June 2009), Table 3; Austrade Total investment fund assets in Australia have increased more than five-fold since 1995, with a compound annual growth rate of 12 per cent. Consolidated assets under management are around A$1.7 trillion (US$1.5bn). Superannuation (pension) funds dominate the Australian investment management industry, representing around 50 per cent of the market. Since March 1995, superannuation funds under management have increased by 14 per cent (compounded annually) to A$878 billion (US$750bn). The total market share of superannuation fund assets, including funds held by Australia s life insurance offices, represents more than 60 per cent of Australia s total investment funds. Section 2. Liquid Markets 21

24 Australian Investment Managers Asset Allocation % Share 32 Australian Equity Overseas Equity & Fixed Interest Other (including Cash, Currency/TAA) Australian Fixed Interest Property and Mortgage 8 4 Alternatives 0 Dec 07 Mar 08 Jun 08 Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Source: Morningstar InvestorSupermarket, Market Wrap, December 2009, Data File, Worksheet 4; Austrade. The portfolio allocations of Australia s investment managers continue to see significant exposures to global assets and to alternatives. Over 22 per cent of fund manager assets are allocated to global markets, comprising 16.9 per cent to international shares and 5.7 per cent to international fixed interest in Allocations to alternatives exceeded 5 per cent. Section 2. Liquid Markets 22

25 Global Pension Assets Total Assets Growth Rates (local currency) (US$ Billion) Market Share % As %of GDP 1-year % 10-year CAGR % End End End End End End (31/12/08- (31/12/99- Market e e e 31/12/09) 31/12/09) USA 1 10,195 13, Japan 2,630 3, UK 2 1,385 1, Canada 652 1, Australia Netherlands Switzerland Germany Brazil South Africa France Ireland Hong Kong Total 16,318 23, Includes Individual Retirement Arrangements (IRAs) 2. Excludes Personal and Stakeholder defined contribution (DC) assets CAGR = Compound annual growth rates. e = Estimates. Sources: Towers Watson, 2010 Global Pension Asset Study January 2010; Austrade Australia has the world s fifth largest pension fund market, with total assets of around US$1 trillion under management. Australia has one of the most developed pension markets in the world, underpinned by its mandatory retirement income scheme. Section 2. Liquid Markets 23

26 World s 25 Largest Sovereign Wealth Funds by Assets Under Management 1 Rank Country Fund Name Assets (US$ Billion) 1 UAE Abu Dhabi Abu Dhabi Investment Authority Norway Government Pension Fund Global Saudi Arabia SAMA Foreign Holdings China SAFE Investment Company China China Investment Corporation Singapore Government of Singapore Investment Corporation Hong Kong Hong Kong Monetary Authority Investment Portfolio Kuwait Kuwait Investment Authority China National Social Security Fund Russia National Welfare Fund Singapore Temasek Holdings Australia Future Fund, QIC and VFMC Libya Libyan Investment Authority Qatar Qatar Investment Authority Algeria Revenue Regulation Fund Kazakhstan Kazakhstan National Fund US Alaska Alaska Permanent Fund Ireland National Pensions Reserve Fund South Korea Korea Investment Corporation Brunei Brunei Investment Agency France Strategic Investment Fund Malaysia Khazanah Nasional Iran Oil Stabilisation Fund Chile Social and Economic Stabilization Fund UAE Dubai Investment Corporation of Dubai All figures quoted are from official sources, or where the institutions concerned do not issue statistics of their assets, from other publicly available sources. Some of these figures are best estimates as market values change day to day. 2. This number is a best guess estimation. 3. This includes the oil stabilisation fund of Russia. 4. Australian number includes total assets under management of the Future Fund (US$59.1bn), Queensland Investment Corporation (QIC, A$51.6bn or US$44.0bn) and Victorian Funds Management Corporation (VFMC, A$31.1bn or US$26.5bn). QIC has a number of funding sources with the majority sovereign in nature. Sources: Sovereign Wealth Fund Institute (Data updated June 2010); Austrade Sovereign Wealth Funds (SWFs) have existed for decades, but their total size worldwide has increased dramatically over the past 10 years. Most of the growth has been the result of a surge in current account surpluses from exports of oil and other commodities, fiscal surpluses, accumulated public savings, large privatisation receipts or pension reserves. Australia s SWFs, which include the Future Fund and State Government managed SWFs, are among the largest in the world. Section 2. Liquid Markets 24

27 Size of Key Stock Markets in the Asia-Pacific Region Market Capitalisation of Floating Stocks (US$ Billion, 30 July 2010) 1, USA 12, Japan 2,495 UK 2,362 US$ Billion Canada 1,275 France 1,059 Switzerland 860 Germany Australia China South Taiwan Hong Korea Kong India Singapore Malaysia Indonesia Thailand Philippines New Zealand Sources: Standard & Poor s, Global Broad Market Index, July 2010; Austrade With 2,050 listed companies, the Australian stock market is currently the largest liquid stock market in the Asia Pacific ex-japan at US$936 billion. The market capitalisation of floating stocks in Australia is more than double that of Hong Kong (US$361 billion) and more than four times larger than that of Singapore. Australia s strong, liquid, transparent and efficient stock market further strengthens its position as a leading financial services centre. Section 2. Liquid Markets 25

28 International and Domestic Debt Securities Amount Outstanding Residence of Issuer, US$ Billion 2, ,565 2,200 Domestic Securities (Dec 2009) International Securities (Mar 2010) 2,000 1,800 1,600 US$ Billion 1,400 1,200 1, ,085 USA 25,065 6,140 Japan 11, Germany 2,806 2,052 UK 1,559 3, France 3,156 1,814 Italy 3,688 1,098 Canada 1, China Australia South India Taiwan Malaysia Thailand Singapore Hong Korea Kong Indonesia Philippines New Zealand Sources: Bank for International Settlements, Quarterly Review, June 2010, Table 11 and Table 16A; Austrade Australia has US$1.4 trillion debt securities outstanding the region s second largest amount (ex Japan), and is a regional leader in the issuance of both international and domestic debt securities. Section 2. Liquid Markets 26

29 Real Estate Investment Trust (REIT) Market Capitalisation December 2009, US$ Billion USA Australia France UK Japan Singapore Canada Netherlands Hong Kong Belgium South Africa New Zealand Turkey Malaysia Germany South Korea US$ Billion Note: Insufficient data for Germany, the Netherlands and Turkey Sources: Ernst & Young, Global Real Estate Investment Trust Report 2010, Against All Odds, p.12; Austrade Australia is recognised as having the world s largest Real Estate Investment Trusts market outside the United States. Its total market capitalisation is estimated at more than US$70 billion, which is significantly larger than the total market capitalisation of the United Kingdom (US$37.2 billion) and more than the combined value (US$63.8 billion) of Japan, Singapore, Hong Kong, Malaysia and South Korea. Section 2. Liquid Markets 27

30 Asia-Pacific Hedge Fund Assets Under Management December 2009, US$ Billion Other Asia 3 $5.6 (4.2%) Japan $10.2 (7.7%) Hong Kong $31.1 (23.5%) UK 1 $11.9 (9.0%) Singapore $17.6 (13.3%) Australia 2 $29.3 (22.1%) USA 1 $26.7 (20.2%) 1. Deploying hedge fund strategies in Asian markets. 2. Manager assets only, excluding fund of hedge funds and Australian investor allocations to offshore managers. 3. Other countries deploying hedge fund strategies in Asian markets. Sources: Asiahedge; Austrade Australia s hedge fund assets under management reached US$29.3 billion in December 2009, the second largest market in the region. More than 80 per cent of Australia s hedge fund assets are deployed in markets outside the country demonstrating the industry s international sophistication. Section 2. Liquid Markets 28

31 Australian Residential Mortgage-Backed Security Issuance Financial year ending 30 June, A$ Billion 80 Domestic (non-aofm) Offshore Purchases by AOFM A$ Billion AOFM = The Australian Office of Financial Management, a specialised agency responsible for the management of Australian Government debt, the Government s cash balances and selected investments in financial assets. Sources: Reserve Bank of Australia; Austrade Between June 2007 and March 2010 the Australian assets of residential mortgage-backed securities (RMBs) contracted 42 per cent, from A$204 billion to A$117 billion, as few primary issues were released and existing portfolios were in run-off. RMBS issuance reduced substantially following the on-set of the Global Financial Crisis because overseas sources of funding were no longer available. The primary market issuance of Australian RMBS reduced by 89 per cent to $A7.8 billion in As global financial markets recover, the Australian market has begun to show signs of improvement and RMBS issuance recovered to A$12.4 billion in , and rose again to A$16.6 billion in This will continue to be underpinned by the strength of the Australian economy, improved residential property markets, the quality of mortgages and origination practices, and a robust institutional and regulatory environment. Section 2. Liquid Markets 29

32 World Insurance Markets 2009 Penetration: Density: World Premium Volume % Share of % of Per Capita Ranking 1 Country US$ Billion World Market Country s GDP US$ Americas 1 USA 1, ,710 9 Canada , Brazil Europe 3 UK ,579 4 France ,269 5 Germany ,878 6 Italy ,729 8 Netherlands , Spain , Switzerland , Ireland , Belgium ,494 Asia-Pacific 2 Japan ,979 7 China South Korea , India Taiwan , Australia , Hong Kong , Singapore , Thailand Malaysia Indonesia New Zealand , UAE , Philippines Other Countries NA NA World 4, Countries are ranked by the US$ value of premium volume in NA = Not Applicable Sources: Swiss Re, Sigma No 2/2010, World Insurance in 2009, Tables III, VIII and IX; Austrade Australia s insurance market is the 14th largest in the world and the sixth largest in the Asia-Pacific region behind Japan, China, South Korea, India and Taiwan. The country s mature, innovative and well-regulated insurance industry, together with its strong legal, accounting, education, human resource and IT capacities, underpin its position as a financial services hub in the region. Section 2. Liquid Markets 30

33 High Net Worth Individuals by Country 3,000 2, ,500 2,460 Number of HNWIs (in thousands) 2,000 1,500 1,000 1,366 1, USA Japan Germany China UK France Canada Switzerland Italy Australia Brazil Spain 16.5% 20.8% 6.4% 31.0% 23.8% 10.8% 17.9% 19.7% 9.2% 34.4% 11.9% 12.5% HNWI Growth Rate % ( ) 1. High net worth individuals (HNWIs) are defined as those having investable assets of US$1 million or more, excluding primary residence, collectables and consumer durables. Sources: Capgemini/Merrill Lynch Wealth Management Bank of America Corporation, World Wealth Report 2010, page 6; Austrade The private banking industry in Australia has benefited from almost twenty years of sustained economic growth to become the third largest private wealth market in the Asia Pacific and the tenth largest in the world. In 2009, the HNWI population in Australia rose by 34.4 per cent to 173,600, making it the strongest rebound among the 12 countries with the largest numbers of HNWIs. Despite its relatively small population, Australia s pool of affluent individuals is larger than that of Brazil (146,700), Russia (117,700), and India (126,700), and is 36 per cent of China s total. Strategically, Australia offers a competitive regional location for providing wealth management services. Section 2. Liquid Markets 31