IR Global – Meet the Members – Australasia

Australasia – A Rising Power

The region of Australasia punches well above its weight in global economic terms.

While not always considered to be in the same league as East Asia, Western Europe and North America; it is quickly increasing its influence, with an expanding population and consistent economic growth.

The region is dominated by Australia and New Zealand, which have a combined gross domestic product (GDP) of more than USD1.7 trillion. The Australian economy alone is forecast to be the 13th largest in the world and the fifth largest in the wider Asian region in 2018.

Perhaps more importantly, though, both economies continue to expand, with Australia experiencing 27 years of consecutive annual economic growth. According to The Benchmark Report 2018, from The Australian Trade and Investment Commission (Austrade), the country is expected to realise average annual real GDP growth of 2.8 per cent between 2018 – 2022. New Zealand (NZ) government organisation, New Zealand Now, says the country’s annual GDP growth has averaged 2.1 per cent since March 2010. It topped 3 per cent in 2018 and is expected to reach 3.8 per cent in 2019.
To put that in perspective, the European Union recently downgraded its GDP growth forecast for 2019 to 1.5 per cent.
Aside from economic growth, one of the unique selling points (USPs) of the Australasia region is its closeness to both Western and Asian culture. Initial settlement of both countries over the past three centuries has given their cultures, institutions and legal systems a distinctly Anglo-Saxon feel, while more recent trade and commerce has forged close links with the powerful and fast-growing East Asian economy, which includes China, Japan and South Korea.

As a consequence of this history and development, the region is often seen as a perfect hub for western businesses interested in expanding into Asia. The openness of both countries to foreign direct investment (FDI) and entrepreneurialism only enhances their attractiveness.

As an example, figures from Austrade’s Benchmark Report show that ten of the top 12 export markets for Australian goods and services are within the Asian region. Furthermore, a quarter of Australia’s total assets (AUD2.7 trillion), are held within businesses supported by FDI.

Australia presently hosts around AUD3.3 trillion of foreign investment stock, and FDI has recorded consistently strong growth, up 8.6 per cent on average each year since 1997. As a percentage of GDP, Australia’s total value of foreign investment stock reached 185 per cent in June 2017 – double that of two decades ago.
The region’s openness to investment is well illustrated by the World Bank Report, Doing Business 2018. It ranked New Zealand as the easiest place in the world to do business, based on a number of indicators including starting a business, trading across borders, paying taxes, enforcing contracts and labour market regulation. Australia ranked 14th in the same study.
As a consequence of this openness, the population makeup of both countries has changed dramatically during the last three decades. In 2018, around 30 per cent of Australians were born overseas and 27 per cent speak an Asian or European language.

The influence of Asia in the Australian economy is well illustrated by analysing the trade agreements in place to assist Australian businesses. According to the Australian Department of Foreign Affairs and Trade (DFAT) – as of December 2018, Australia had 10 full free trade agreements (FTAs) in force with 16 World Trade Organization members. The countries covered by these FTAs account for around two-thirds of Australia’s total trade. All of those countries are in Asia, except two, namely the USA and Chile.
As of December 31, 2018 the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) added Mexico and Peru to that mix.
Both economies are also well diversified with investment opportunities in a range of different industries and sectors. According to Figure.NZ, the professional, scientific and technical services sector is the largest contributor to New Zealand’s economy, worth around NZD21.5 billion in 2017. This reflects the educated nature of the workforce and the FDI opportunities for cutting edge tech businesses. Construction contributed NZD16.8 billion, while New Zealand’s financial and insurance services industry was worth NZD15 billion in 2017, ahead of more traditional sectors such as agriculture that are commonly associated with the country.

The same is true of Australia, where the financial services and insurance sector was the largest contributor to GDP in 2017, worth AUD148 billion, or 9.4 per cent of the entire economy. The professional, scientific and technical services sector contributed AUD115 billion, or 7.3 per cent of the economy.

It is clear that the Australasia region has a wealth of opportunity for investors or entrepreneurs looking to tap into new markets, be that the vibrant domestic markets of Australia and New Zealand or the huge Asian economy.
The following pages contain advice from a range of Australasian professionals on the general topic of doing business in the region. The concise articles printed here, provide in-depth advice on relevant topics such as immigration visas, corporate governance, real estate, intellectual property and company establishment. All the experts are members of the international referral group IR Global and work closely together to make the experience of establishing a presence in Australasia as simple seamless as possible for their clients.