Australia A Global Financial Services Centre

Australia A Global Financial Services Centre Benchmark Report 2010

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 2011. 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 11 764 698 227 Date: September 2010 ISBN: 978-0-9807059-3-5 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.

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

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

Real GDP Growth by Country 2002 to 2010 F Average Growth Rate Country 1998 to 2010 2002 2003 2004 2005 2006 2007 2008 2009 2010 F China 9.7 9.1 10.0 10.1 10.4 11.6 13.0 9.6 9.1 10.5 India 7.0 4.6 6.9 7.9 9.2 9.8 9.4 6.4 5.7 9.4 Vietnam 6.9 7.1 7.3 7.8 8.4 8.2 8.5 6.2 5.3 6.5 UAE 5.4 2.6 11.9 9.7 8.2 8.7 6.1 5.1-0.7 1.3 Singapore 5.0 4.2 3.8 9.2 7.6 8.7 8.2 1.4-1.3 9.9 Korea 4.2 7.2 2.8 4.6 4.0 5.2 5.1 2.3 0.2 5.7 Philippines 4.2 4.4 4.9 6.4 5.0 5.3 7.1 3.8 1.1 6.0 Malaysia 4.1 5.4 5.8 6.8 5.3 5.8 6.2 4.6-1.7 6.7 Taiwan 4.0 5.3 3.7 6.2 4.7 5.4 6.0 0.7-1.9 7.7 Indonesia 3.5 4.5 4.8 5.0 5.7 5.5 6.3 6.0 4.5 6.0 Hong Kong 3.4 1.8 3.0 8.5 7.1 7.0 6.4 2.1-2.8 6.0 Australia 3.3 3.9 3.2 3.6 3.2 2.6 4.7 2.4 1.3 3.0 Thailand 3.2 5.3 7.1 6.3 4.6 5.1 4.9 2.5-2.2 7.0 Brazil 3.1 2.7 1.1 5.7 3.2 4.0 6.1 5.1-0.2 7.1 Greece 3.0 3.4 5.9 4.6 2.2 4.5 4.5 2.0-2.0-2.0 Spain 2.7 2.7 3.1 3.3 3.6 4.0 3.6 0.9-3.6-0.4 Canada 2.7 2.9 1.9 3.1 3.0 2.9 2.5 0.5-2.5 3.6 New Zealand 2.5 4.9 4.2 4.4 3.2 1.0 2.8-0.1-1.6 3.0 USA 2.4 1.8 2.5 3.6 3.1 2.7 2.1 0.4-2.4 3.3 UK 2.0 2.1 2.8 3.0 2.2 2.9 2.6 0.5-4.9 1.2 Netherlands 2.0 0.1 0.3 2.2 2.0 3.4 3.6 2.0-4.0 1.3 Switzerland 1.8 0.4-0.2 2.5 2.6 3.6 3.6 1.8-1.5 1.5 France 1.7 1.1 1.1 2.3 1.9 2.4 2.3 0.1-2.5 1.4 Germany 1.0 0.0-0.2 1.2 0.7 3.2 2.5 1.2-4.9 1.4 Italy 0.7 0.5 0.0 1.5 0.7 2.0 1.5-1.3-5.0 0.9 Japan 0.6 0.3 1.4 2.7 1.9 2.0 2.4-1.2-5.2 2.4 World Average 1 2.6 2.0 2.7 4.0 3.4 3.9 3.9 1.8-2.0 3.6 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

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 7.13 2 USA 7.22 USA 6.90 Denmark 6.73 Norway 5.96 Australia 7.04 3 Denmark 7.16 Israel 6.82 Switzerland 6.43 Australia 5.83 India 6.82 4 Hong Kong 7.09 Austria 6.67 Israel 6.14 Chile 5.83 Qatar 6.82 5 India 6.84 Malaysia 6.64 Austria 6.00 Denmark 5.79 Malaysia 6.63 6 Israel 6.80 Switzerland 6.43 Norway 5.96 India 5.78 Chile 6.29 7 Ireland 6.68 Australia 6.38 Chile 5.89 Brazil 5.54 Switzerland 6.27 8 Norway 6.68 India 6.33 India 5.87 Israel 5.53 Norway 6.11 9 Chile 6.41 Hong Kong 6.33 Brazil 5.83 Switzerland 5.38 Taiwan 6.07 10 Canada 6.38 Singapore 6.19 Finland 5.80 China 5.05 China 6.02 11 Switzerland 6.34 China 6.17 Singapore 5.78 Malaysia 5.04 Poland 5.80 12 Malaysia 6.34 Norway 6.08 Sweden 5.66 Finland 5.00 Singapore 5.78 13 Japan 6.32 UK 6.02 Netherlands 5.66 Austria 4.98 Sweden 5.75 14 Qatar 6.31 Chile 6.00 Malaysia 5.66 Singapore 4.96 Indonesia 5.64 15 Singapore 6.30 Taiwan 5.79 Hong Kong 5.61 Hong Kong 4.94 South Korea 5.55 16 Estonia 6.19 Japan 5.79 Taiwan 5.52 Taiwan 4.91 Canada 5.55 17 Finland 6.02 Ireland 5.76 Czech Republic 5.41 South Africa 4.84 Brazil 5.51 18 Iceland 6.00 Luxembourg 5.73 Canada 5.36 Netherlands 4.83 Philippines 5.50 19 China 5.90 Estonia 5.72 Germany 5.34 Germany 4.79 Austria 5.46 20 Thailand 5.82 Netherlands 5.66 Slovenia 5.29 Sweden 4.77 Hong Kong 5.40 21 UK 5.82 Slovenia 5.66 USA 5.29 Philippines 4.73 Thailand 5.33 22 South Africa 5.75 Sweden 5.61 Estonia 5.27 Slovenia 4.63 Denmark 5.22 23 Sweden 5.72 Czech Republic 5.60 Jordan 5.15 Lithuania 4.60 Netherlands 5.20 24 Jordan 5.67 Jordan 5.50 China 5.15 Jordan 4.60 Germany 5.14 25 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 1995-2010 (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

Unemployment Rates by Country 2007 to 2010 Unemployment Rate Percentage of Labour Force Annual Latest Rate 1 Country 2007 2008 2009 2010 Spain 8.3 11.3 18.0 20.1 Ireland 4.6 6.1 11.8 13.7 Turkey 10.3 11.0 14.1 12.0 Greece 8.3 7.7 9.5 11.7 Portugal 8.0 7.6 9.5 10.6 France 8.0 7.4 9.1 9.5 Sweden 6.0 6.2 8.3 9.5 USA 4.6 5.8 9.3 9.5 Belgium 7.5 7.0 7.9 8.6 Chile 7.1 7.8 10.8 8.5 Italy 5.9 6.7 7.8 8.4 Canada 6.0 6.1 8.3 8.0 UK 5.4 5.7 7.6 7.8 Germany 8.7 7.5 7.7 7.6 Brazil 9.3 7.9 8.1 7.0 Russia 6.1 6.4 8.4 6.8 New Zealand 3.7 4.2 6.1 6.8 Netherlands 4.5 3.9 4.9 5.5 Australia 4.4 4.2 5.6 5.3 Japan 3.9 4.0 5.1 5.3 China 4.0 4.2 4.3 4.2 South Korea 3.3 3.2 3.7 3.7 Switzerland 3.5 3.4 4.2 3.6 Norway 2.5 2.6 3.2 3.0 1. 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 2009. 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

Australia s Real Gross Value Added by Industry 2010 1 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 2 15.7% 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 2010. 2. Including Accommodation/Food Services, Administrative/Support Services, and Arts/Recreation Services. Sources: Australian Bureau of Statistics, cat. no. 5206.0, 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 2010. 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

Australia s Real Gross Value Added Growth by Industry 1999 to 2010 1 Construction Administrative/Support Services Professional/Scientific/Technical Services 5.1 5.2 5.3 Financial/Insurance Services 4.7 Healthcare/Social Assistance 4.4 Retail Trade Arts/Recreation Services Information Media/Telecommunications Transport/Postal/Warehousing 3.6 3.8 4.1 4.1 Agriculture/Forestry/Fishing Wholesale Trade 3.1 3.5 Mining 2.7 Accommodation/Food Services 2.6 Public Administration/Safety Rental/Hiring/Real Estate Services 2.2 2.6 All Industry Average Growth: 3.3% Per Annum Utilities 1.9 Education/Training 1.9 Manufacturing 0.9 0 1 2 3 4 5 6 7 Average Annual % Change 1. Annual total to March each year. Sources: Australian Bureau of Statistics, cat. no. 5206.0, 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 2010. 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

Gross Fixed Capital Formation as a Percentage of GDP 2008 30 29.4 29.3 28.8 25 20 15 10 5 0 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 17.9 16.8 24.9 24.2 23.9 23.1 22.7 22.6 22.2 22.1 22.1 21.9 21.8 21.7 21.7 21.3 21.1 20.9 20.9 20.9 20.8 20.6 20.6 20.4 19.9 19.5 19.4 19.3 19.0 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

Inward Foreign Direct Investment Stocks by Country Country 1990 1995 2000 2005 2006 2007 2008 2009 2009 Inward FDI Stock as a Percentage of GDP (%) (US$ Billion) Switzerland 14.4 18.1 34.7 45.7 67.8 88.3 87.8 94.2 464 Netherlands 23.1 27.7 63.3 70.7 76.1 93.6 73.2 75.3 597 UK 20.6 17.6 30.4 36.9 46.7 44.4 36.8 51.7 1,125 Spain 12.7 17.5 26.9 34.0 37.4 40.6 39.1 45.9 671 France 7.9 12.2 29.4 41.5 48.8 48.6 32.3 42.8 1,133 Canada 19.4 20.9 29.3 30.1 29.3 36.3 29.5 39.3 525 Malaysia 23.4 32.3 56.2 32.2 34.3 41.2 33.1 39.0 75 Thailand 9.7 10.5 24.4 34.2 37.2 38.1 34.2 37.5 99 Australia 23.2 28.0 29.8 32.8 37.8 40.5 29.5 33.5 328 Brazil 8.5 6.2 19.0 20.6 20.3 22.7 17.6 25.5 401 USA 9.3 13.7 28.5 22.8 25.1 26.1 17.9 21.9 3,121 Germany 6.5 6.6 14.3 17.1 20.3 20.9 18.2 21.0 702 Russia 1.4 12.4 23.6 27.0 38.2 12.7 20.3 252 Italy 5.3 5.8 11.0 12.6 15.8 17.2 14.8 18.6 394 Philippines 10.2 13.7 24.2 15.2 14.4 14.2 12.9 14.6 24 Greece 6.2 8.5 11.2 12.0 15.6 17.2 10.9 13.6 45 Indonesia 6.9 9.3 15.2 14.4 15.0 18.5 13.3 13.5 73 South Korea 2.0 1.8 7.1 12.4 12.5 11.4 10.2 13.3 111 India 0.5 1.5 3.5 5.1 7.5 8.8 9.6 12.9 164 Taiwan 5.9 5.7 6.0 11.8 13.3 12.4 11.3 12.7 48 China 5.1 13.4 16.2 12.2 11.0 9.7 8.7 10.1 473 Japan 0.3 0.6 1.1 2.2 2.5 3.0 4.2 3.9 200 World 9.8 11.4 23.3 25.4 29.1 32.5 25.4 30.7 17,743 Developed Economies 9.0 10.8 23.0 25.5 29.9 33.3 26.3 31.5 12,353 Developing Economies 13.6 14.6 25.0 25.2 26.9 30.0 24.4 29.1 4,893 Sources: United Nations Conference in Trade and Development Database (www.unctad.org/fdistatistics), 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 2009. This represents a compound annual growth rate of 8.2 per cent since 1990. As a percentage of GDP, FDI in Australia rose from 23.2 per cent in 1990 to 33.5 per cent in 2009. Section 1. Strong Economy 9

Australia s Exports of Goods and Services (US$ Billion) 1 Financial year ending 30 June 240 Merchandise Goods Commercial Services 49 43 45 200 Compound Annual Growth Rate since 1990: 7.8% 39 188 160 176 172 US$ Billion 120 24 26 30 31 114 144 80 40 9 11 11 11 39 40 41 41 14 15 47 48 19 19 60 60 16 19 18 18 54 57 59 61 20 68 77 75 98 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1. 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. 5368.0, 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 2009-10. 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

Australia s Exports of Education Services 1. Includes international students on student visas only. Share of 2009 Change 2007 2008 2009 Total 2008 to 09 (A$ Million) % Education Related Travel Services 1 12,177 15,002 17,986 96.8 19.9 1. China 2,738 3,432 4,102 22.1 19.5 2. India 1,618 2,413 3,187 17.2 32.1 3. South Korea 964 1,082 1,117 6.0 3.2 4. Malaysia 670 756 856 4.6 13.2 5. Thailand 498 605 719 3.9 18.8 6. Vietnam 286 467 713 3.8 52.7 7. Nepal 173 380 614 3.3 61.6 8. Indonesia 487 525 576 3.1 9.7 9. Hong Kong 571 558 560 3.0 0.4 10. Brazil 268 365 425 2.3 16.4 Other countries 3,904 4,419 5,117 27.5 15.8 Other Educational Services 2 383 495 556 3.0 12.3 Education Consultancy Services 132 124 115 0.6-7.3 Correspondence Courses 22 25 24 0.1-4.0 Services through Educational Institutions 104 203 250 1.3 23.2 Other Education Services 125 143 167 0.9 16.8 Royalties on Education Services 7 18 33 0.2 83.3 Total Education Related Services Exports 12,189 15,115 18,575 100.0 22.9 2. 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 2008. 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 2008-09). 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

The Prosperity Index 1 World Ranking by Country 2009 1.0 Scores (1 = the best, 0 = the worst) 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.922 0.920 0.919 0.917 0.2 0.1 0.0 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) 0.908 0.895 0.893 0.892 0.885 0.880 0.875 0.854 0.828 0.805 0.793 0.767 0.764 0.729 0.723 0.720 0.697 0.581 0.569 0.547 0.546 0.537 0.501 0.473 0.422 0.420 1. 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

Net Government Debt (% of GDP) 2010 140 120 116.0 121.6 100 91.1 % of GDP 80 60 57.5 60.5 66.2 68.6 71.6 40 20 0 Denmark New Zealand Australia 1 Canada Switzerland Netherlands Ireland Spain 2 Austria USA Germany UK France Iceland Portugal 2 Belgium Italy Japan 3.1 3.3 5.4 46.0 47.8 74.5 77.2 82.2 32.2 39.2 1. Does not reflect the latest federal government budget released 11 May 2010. 2. Does not reflect additional deficit reduction plans announced 10 May 2010. 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

Percentage of Nonperforming Bank Loans to Total Bank Loans 2004 to 2009 2004 2005 2006 2007 2008 2009 Latest Average Thailand 11.9 9.1 8.4 7.9 5.7 NA Dec 8.6 Philippines 1 14.4 10.0 7.5 5.8 4.5 4.6 Sep 7.8 Malaysia 11.7 9.6 8.5 6.5 4.8 3.8 Nov 7.5 China 2 13.2 8.6 7.1 6.2 2.4 1.6 Dec 6.5 UAE 3 12.5 8.3 6.3 2.9 2.5 4.6 Nov 6.2 Greece 7.0 6.3 5.4 4.5 5.0 7.2 Sep 5.9 Italy 4 6.6 5.3 4.9 4.6 4.9 6.2 Jun 5.4 Indonesia 5 4.5 7.6 6.1 4.1 3.2 3.8 Sep 4.9 India 6 7.2 5.2 3.3 2.5 2.4 2.4 Mar 3.8 Germany 4.9 4.0 3.4 2.6 2.8 NA Dec 3.5 Brazil 2.9 3.5 3.5 3.0 3.1 4.5 Oct 3.4 France 7 4.2 3.5 3.0 2.7 2.8 NA Dec 3.2 Singapore 5.0 3.8 2.8 1.5 1.7 2.3 Sep 2.9 Ireland 8 0.8 0.7 0.7 0.8 2.6 7.5 Sep 2.2 USA 9 0.8 0.7 0.8 1.4 2.9 5.4 Dec 2.0 Spain 10 0.8 0.8 0.7 0.9 3.4 5.1 Dec 2.0 Japan 11 2.9 1.8 1.5 1.4 1.6 1.8 Sep 1.8 Portugal 12 2.0 1.5 1.3 1.5 1.9 2.8 Jun 1.8 UK 1.9 1.0 0.9 0.9 1.6 3.3 Jun 1.6 Hong Kong 13 2.3 1.4 1.1 0.8 1.2 1.5 Sep 1.4 South Korea 13 1.9 1.2 0.8 0.7 1.1 1.5 Sep 1.2 Netherlands 1.5 1.2 0.8 NA NA NA Dec 1.2 Canada 0.7 0.5 0.4 0.7 1.1 1.2 Sep 0.8 Switzerland 0.9 0.5 0.3 0.3 0.5 NA Dec 0.5 Australia 14 0.2 0.2 0.2 0.2 0.8 1.1 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 2006. 8. 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 2005-06 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

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

Financial Development Index 2009 Global Ranking by Country UK Australia USA Singapore Hong Kong Japan China India Overall Index (out of 55) 1 2 3 4 5 9 26 38 Financial Access 16 1 12 9 13 37 30 48 Non-Banking Financial Services 1 3 2 11 9 6 12 17 Banking Financial Services 2 5 20 11 1 3 10 39 Financial Markets 2 6 1 3 9 5 26 22 Financial Stability 37 9 38 5 3 34 23 46 Business Environment 12 11 10 2 9 15 40 48 Institutional Environment 15 14 11 1 10 17 35 48 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

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 1,000 500 0 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

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

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 1995 914 431 26 91 229 55 29 6 47 March 2000 1,665 700 34 131 431 147 78 18 127 March 2005 2,900 1,324 48 163 636 235 191 34 270 March 2010 4,772 2,532 72 162 1,060 308 309 52 278 % of AFS Assets 100.0 53.1 1.5 3.4 22.2 6.5 6.5 1.1 5.8 % of GDP 376.3 199.7 5.7 12.7 83.6 24.3 24.3 4.1 21.9 CAGR % Since 1995 11.6 12.5 6.9 3.9 10.8 12.2 17.0 16.0 12.5 RBA = Reserve Bank of Australia. CAGR = Compound annual growth rates. Note: The US$/A$ exchange rate was US$0.8523 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. 5206.0, 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

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

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 1995 119 110 36 19 284 29 6 0 319 March 2000 263 168 106 41 578 91 18 13 673 March 2005 448 187 186 48 870 251 34 60 1,095 March 2010 878 182 262 46 1,368 319 52 11 1,729 % of Total FUM 50.8 10.5 15.2 2.7 79.1 18.5 3.0 0.6 100.0 % of GDP 69.2 14.3 20.7 3.6 107.9 25.2 4.1 0.9 136.3 % CAGR Since 1995 14.2 3.4 14.1 6.2 11.1 17.3 16.0 N/A 11.9 CAGR = Compound Annual Growth Rate Note: The US$/A$ exchange rate was US$0.8523 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. 5655.0 Managed Funds, Australia, Time Series Workbook (released 27 May 2010), Table 1. Managed Funds, Table 8. Investment Managers; ABS, cat. no. 5206.0, 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

Australian Investment Managers Asset Allocation % Share 32 Australian Equity 28 24 Overseas Equity & Fixed Interest 20 16 12 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 2009. Allocations to alternatives exceeded 5 per cent. Section 2. Liquid Markets 22

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 1999 2009e 1999 2009e 1999 2009e 31/12/09) 31/12/09) USA 1 10,195 13,196 62.5 56.7 109 93 12.2 2.6 Japan 2,630 3,152 16.1 13.5 54 61 6.1 0.8 UK 2 1,385 1,791 8.5 7.7 92 80 13.6 2.8 Canada 652 1,213 4.0 5.2 96 84 12.7 3.1 Australia 271 996 1.7 4.3 67 93 8.5 10.4 Netherlands 400 990 2.5 4.2 103 120 14.2 5.6 Switzerland 310 583 1.9 2.5 123 113 12.8 2.0 Germany 188 411 1.2 1.8 9 12 6.8 4.3 Brazil 70 392 0.4 1.7 12 22 54.3 18.3 South Africa 76 201 0.5 0.9 57 63 12.1 12.3 France 70 178 0.4 0.8 5 6 13.8 5.9 Ireland 49 102 0.3 0.4 54 43 12.2 3.8 Hong Kong 23 85 0.1 0.4 14 41 23.3 14.0 Total 16,318 23,290 100.0 100.0 76 70 15.6 6.6 1. 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

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 627 2 Norway Government Pension Fund Global 443 3 Saudi Arabia SAMA Foreign Holdings 415 4 China SAFE Investment Company 2 347 5 China China Investment Corporation 289 6 Singapore Government of Singapore Investment Corporation 248 7 Hong Kong Hong Kong Monetary Authority Investment Portfolio 228 8 Kuwait Kuwait Investment Authority 203 9 China National Social Security Fund 147 10 Russia National Welfare Fund 3 143 11 Singapore Temasek Holdings 133 12 Australia Future Fund, QIC and VFMC 4 130 13 Libya Libyan Investment Authority 70 14 Qatar Qatar Investment Authority 65 15 Algeria Revenue Regulation Fund 55 16 Kazakhstan Kazakhstan National Fund 38 17 US Alaska Alaska Permanent Fund 36 18 Ireland National Pensions Reserve Fund 33 19 South Korea Korea Investment Corporation 30 20 Brunei Brunei Investment Agency 30 21 France Strategic Investment Fund 28 22 Malaysia Khazanah Nasional 25 23 Iran Oil Stabilisation Fund 23 24 Chile Social and Economic Stabilization Fund 22 25 UAE Dubai Investment Corporation of Dubai 20 1. 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

Size of Key Stock Markets in the Asia-Pacific Region Market Capitalisation of Floating Stocks (US$ Billion, 30 July 2010) 1,000 900 936 800 USA 12,206 700 647 Japan 2,495 UK 2,362 US$ Billion 600 500 400 558 484 361 356 Canada 1,275 France 1,059 Switzerland 860 Germany 837 300 200 208 100 0 Australia China South Taiwan Hong Korea Kong India 104 84 Singapore Malaysia Indonesia Thailand Philippines New Zealand 61 25 17 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

International and Domestic Debt Securities Amount Outstanding Residence of Issuer, US$ Billion 2,400 25 2,565 2,200 Domestic Securities (Dec 2009) International Securities (Mar 2010) 2,000 1,800 1,600 US$ Billion 1,400 1,200 1,000 550 125 1,085 USA 25,065 6,140 Japan 11,522 171 Germany 2,806 2,052 UK 1,559 3,665 800 600 874 30 603 France 3,156 1,814 Italy 3,688 1,098 Canada 1,300 578 400 200 0 China 5 25 218 183 Australia South India Taiwan Malaysia Thailand Singapore Hong Korea Kong 8 180 52 116 47 100 22 98 37 55 10 30 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

Real Estate Investment Trust (REIT) Market Capitalisation December 2009, US$ Billion USA 271.85 Australia France 64.53 70.75 UK Japan Singapore Canada Netherlands Hong Kong Belgium South Africa New Zealand Turkey Malaysia Germany South Korea 37.18 29.43 23.13 20.61 11.23 9.52 6.76 3.40 2.54 1.89 1.54 0.71 0.13 0 50 100 150 200 250 300 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

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

Australian Residential Mortgage-Backed Security Issuance Financial year ending 30 June, A$ Billion 80 Domestic (non-aofm) Offshore Purchases by AOFM 70 60 50 A$ Billion 40 30 87 106 20 10 43 53 63 56 63 70 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 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 2007-08. 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 2008-09, and rose again to A$16.6 billion in 2009-10. 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

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 1,239.7 28.03 8.0 3,710 9 Canada 98.8 2.43 7.4 2,944 15 Brazil 48.8 1.20 3.1 252 Europe 3 UK 309.2 7.61 12.9 4,579 4 France 283.1 6.96 10.3 4,269 5 Germany 238.4 5.86 7.0 2,878 6 Italy 169.4 4.17 7.8 2,729 8 Netherlands 108.1 2.66 13.6 6,555 11 Spain 82.8 2.04 5.7 1,802 16 Switzerland 48.5 1.19 9.8 6,258 17 Ireland 44.6 1.10 8.9 4,516 18 Belgium 40.5 1.00 8.0 3,494 Asia-Pacific 2 Japan 506.0 12.44 9.9 3,979 7 China 163.0 4.01 3.4 121 10 South Korea 92.0 2.26 10.4 1,890 12 India 65.1 1.60 5.2 54 13 Taiwan 63.6 1.57 16.8 2,752 14 Australia 60.3 1.48 6.4 2,833 24 Hong Kong 23.0 0.57 11.0 3,304 31 Singapore 14.2 0.35 6.8 2,558 33 Thailand 10.5 0.26 4.0 154 35 Malaysia 8.8 0.22 4.4 322 40 Indonesia 7.3 0.18 1.3 32 42 New Zealand 6.7 0.16 5.8 1,567 45 UAE 5.1 0.13 2.5 1,112 54 Philippines 2.4 0.06 1.5 26 Other Countries 328.6 10.52 NA NA World 4,066.1 100.00 7.0 595 1. Countries are ranked by the US$ value of premium volume in 2009. 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

High Net Worth Individuals by Country 3,000 2,866 2008 2009 2,500 2,460 Number of HNWIs (in thousands) 2,000 1,500 1,000 1,366 1,650 810 861 500 365 477 362 448 346 383 213 251 185 222 164 179 129 174 131 147 127 143 0 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 % (2008-2009) 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