Blessed with rich natural resources, Australia’s economic activity has been augmented by demand for commodity exports and the investments made in the mining sector over the past decade. The risk however, is that Australia has become increasingly reliant on high commodities and robust demand from China to sustain strong levels of growth. The country’s free-market economy is supported by a highly educated workforce. Australia is a mature democracy with a broadly stable party system.

Our coverage – using our unique Total Analysis model – ensures that our clients make sound investment decisions in Australia. Our teams keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. We also provide in-depth analysis on 23 of Australia’s most important industries. Combining interactive data and forecasting with our risk-assessed and results-proven analysis gives our clients the big picture they need. We are confident that you, as our client, will find doing business in Australia is made easy.

Australia Country Risk

BMI View:

Growth Weakness Not Yet Over

Core Views

  • Real GDP growth is highly likely to slow over the coming years owing to a number of factors: slowing growth in the working age population; a high share of government spending relative to GDP; and a reversal in the country's terms of trade; and the growing risk of deflation. These impediments will result in real GDP growth averaging 2.3% over the next decade, down from 2.7% over the past decade.

  • Australia's Liberal-National coalition formed the government for a second term, following the July 2 federal elections, but we believe that it will not be able to significantly improve the country's business environment and economic growth prospects over the coming years. The coalition's expected lack of majority in the Senate suggests that risks of policies being...

Australia Industry Coverage (24)

Australia Agribusiness

BMI View:

BMI View: Australia's agribusiness sector enjoys great characteristics and will see its exports grow in the coming years, driven by the rise in production, its reputation as a reliable exporter of sage and quality products and strong external demand. However, the sector's future success will be somewhat held back by rising production costs and profitability issues which are weighting on the outlook for production, in the upstream dairy sector for example. Moreover, the country's vulnerability to extreme weather events will grow in the coming years with climate change, making agricultural production even more volatile. Finally, Australia has to face rising competition coming from lower-cost producers which aim at supplying the attractive markets in Asia and the Middle East.

Australia signed a number of trade deals with key importing countries, including the Trans Pacific...

Australia Autos

BMI View:

BMI View: Low interest rates and tax cuts continue to drive the Australian new vehicle sales market to new highs. This quarter, we maintain our 2016 sales forecast of 5.0% y-o-y growth, with commercial vehicles to outperform passenger cars.

Passenger Car and Light Commercial Vehicle Sales
f = BMI forecast. Source: FCAI, BMI

Australia Commercial Banking

BMI View:

Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

Australia Consumer Electronics

BMI View:

BMI View: Depreciation and product diffusion cycles (tablets, LED/LCD TV sets and smartphones) have resulted in significant volatility in the Australian consumer electronics market - and depreciation is forecast to result in another contraction in 2016. The market should however stabilise over the medium term as the economy stabilises and product categories return to volume growth trajectories primarily determined by replacement sales. We expect US dollar growth to return from 2017-2019 and offset the decline in 2016, with a CAGR of 0.2% forecast for 2015-2019 to USD11.1bn in 2019. There will however be select opportunities for faster growth: for instance, hybrid notebooks and high specification tablets...

Australia Defence & Security

BMI View:

BMI View: The Australian government plans large increases in defence spending over the next decade, in order to modernise the ADF - in particular the navy - amid rising threats linked to East and South China Seas territorial disputes, regional military build-ups, terrorism and cybercrime. Large-scale procurement programmes will be carried out over our forecast period to 2025 - most of which will be covered by foreign defence companies, due to Australia's still-limited military industrial base. That said, we see significant potential for expansion of the domestic defence sector in the longer term,...

Australia Food & Drink

BMI View:

BMI View: Australia's food and drink market will experience robust growth throughout our five-year forecast period, as companies benefit from established supply chains, large urban populations and shifting consumer trends towards healthier premium products. The mass grocery retail (MGR) sector will be a pivotal area of development, as discounters outperform and legacy retailers offset risks in traditional supermarket formats by expanding online and convenience offerings.

Food and Drink Spending

Australia Freight Transport

BMI View:

BMI View: Over the course of 2016 we expect to see road freight once more outperform the other two modes in Australia with the former coming in at 3.10% y-o-y growth, and rail freight and air freight are forecast to grow by 2.77% and 0.70% respectively. The slight y-o-y gains across all of the modes compared to 2015 are in line with our view that the overall trade picture is set to improve over the next 12 months with real trade growth pencilled in to increase by 3.00% in 2016. Through to the end of our forecast period in 2019, we expect growth to be steady, if uninspiring. We expect the Australian dollar to continue to face fundamental downside pressure, and this will allow the decline in imports needed to improve the country's external indebtedness over the coming years.

The Australian economy continued to slow in Q1 2015, and we maintain our 2015 real GDP growth estimate of 2.3% (...

Australia Freight Transport

BMI View:

BMI View: We expect to see steady, if particularly uninspiring, annual growth to be the main trend in 2016, with road freight pencilled in to lead the way in y-o-y growth terms (3.1%). Acting as something of a drag on growth across the freight modes will be China's weakening economy, while the unwinding investment boom in the mining sector will be further compounded by weakness in the housing market as of 2017. This being the case, along with our 2.2% forecast for GDP in 2017 (down from 2016's 2.4% forecast), we expect the freight modes that cater more for the domestic consumer market (road and air) will post smaller gains next year, as high levels of household debt continue to limit demand for certain goods.

Latest Updates...

Australia Information Technology

BMI View:

BMI View: We believe our previous forecast understated the size of Australia's software and IT services segments, and as such historical data was revised upwards in Q116. We also adopted a more bearish analysis of IT hardware spending trends in 2015 this quarter, and now believe the market contracted as a result of a decline in tablet volumes after the rapid proliferation of ownership 2011-2014, a trend that was exacerbated by economic uncertainty and currency depreciation. In 2016 depreciation will continue to present challenges, particularly for retail hardware vendors, but the outlook brightens as the forecast period progresses, and we highlight opportunities including premium retail hardware spending, cloud computing and Internet of Things solutions and services. We forecast a CAGR of 4.2% for IT market spending over 2015-2019, but caution there is downside to our outlook due to the...

Australia Infrastructure

BMI View:

BMI View: Australia's construction industry is poised for an uptick in growth as government supported infrastructure development starts to overcome headwinds presented by a decline in capital expenditure in the mining sector. This positive outlook hinges on the Liberal party's plans to promote additional private sector investment through a shift to a user-pays system for transport infrastructure; however, we note strong downside risk stemming from political uncertainty.

Latest Updates

  • We maintain our forecasts for growth acceleration in the Australia construction industry from 2016, with real...

Australia Insurance

BMI View:

BMI View: We have made very few changes to our forecasts this quarter. The absolute growth of the population and the economy should ensure that premiums in both segments of Australia's large, sophisticated and competitive insurance sector grow in real terms. However, it is easy to identify factors that limit growth in both segments. In the life segment, the insurers are to a certain extent in competition with Australia's massive superannuation funds, and are hard pressed to profit from the sale of group life products to the super funds. In the non-life segment, price competition is restraining the development of the important motor and property insurance sub-sectors.

Headline Insurance Forecasts (Australia 2013-2020)

Australia Medical Devices

BMI View:

BMI View : The Australian market has performed well in recent years, driven by a strongly-growing economy and the requirements of an increasingly elderly population. However, a weakening of the Australian dollar is expected to slow momentum in the US dollar value of the market. We forecast that the market will record a negative 2014-2019 CAGR of 2.3% in US dollar terms.

Projected Medical Device Market, 2014-2019
Total (USDmn) Per Capita (USD) Total (Local Currency mn) Per Capita (Local Currency) ...

Australia Mining

BMI View:

BMI View: Gold, copper and bauxite will emerge as the Australian mining industry's production growth bright spots during 2016-2020. Iron ore and coal output growth will slow more markedly due to continued price weakness.

Although Australia will remain one of the world's largest mineral producers, growth will slow across the board due to continued mineral price weakness. The Australian mining sector will be particularly affected by China's economic slowdown, as the country accounts for almost 80.0% of the country's iron ore exports. We expect Australia's mining industry value to fall to USD94bn in 2016, down from USD106bn in 2015. We forecast Australia's mining industry value growth to pick up hereafter, reaching USD112.6bn in 2020. The potential return of La Nina this year poses downside risks to coal and iron ore production forecasts.


Australia Oil & Gas

BMI View:

BMI View : The start-up of several mega LNG export ventures over 2015-2018 will propel Australia to overtake Malaysia to become the world's second largest exporter of LNG in 2016. That said, longer-term production and exports growth will be markedly slower post-2018, as low oil prices and a well-supplied global LNG market hinder investment in new projects. Although an upsurge in liquids output from large gas developments will temporarily swing Australia's historical crude deficit into a surplus, natural declines and rising consumption will restore the country's net importer status by the end of our forecast period to 2024.

Headline Forecasts (Australia 2013-2019)

Australia Petrochemicals

BMI View:

The Australian petrochemicals industry is on the brink, faced with potential feedstock supply problems, a lack of competitiveness and a saturated market. The closure of the country's automotive industry in 2017 will further dampen the sector's hopes of growth.

Polymer output declined 1.3% y-o-y in the first nine months of 2015 amid a worsening terms of trade and unwinding investment boom. The strengthening of the Australian dollar combined with falling Asian polymer prices hit the competitiveness of the petrochemicals industry. Additionally, the industrial sector as a whole underperformed.

The Australian petrochemicals industry is small and its plants are ageing. Faced with over-supply in the Asian market due to the Chinese slowdown and growth in ethane-based production in the US, the country's leading petrochemicals producer Qenos is facing uncertainty. Even the growth of...

Australia Pharmaceuticals & Healthcare

BMI View:

BMI View: Drugmakers operating in Australia will face an increasingly challenging business environment as the Sixth Pharmacy Community Agreement's measures come into effect. This includes a 5% price cut to medicines listed on the F1 formulary for more than five years, as well as changes to the calculation used in the price disclosure cycle. Critically, we highlight that biosimilar substitutability and naming will be a growing area of contention between originator firms and authorities who seek to curtail spending due to the exponential increase in biologics expenditure over the past few years.

Headline Expenditure Projections

  • Pharmaceuticals : AUD14.0bn (USD10.5bn) in 2015 to AUD14.5bn (USD9.6bn) in 2016; +3.4% in local currency terms and -8.6% in US dollar terms, due to significant exchange rate...

Australia Power

BMI View:

BMI View: Australia's power sector offers both substantial growth opportunities and significant challenges. The country has enormous renewables potential however inadequate integration of new renewables capacity into the grid results in volatile supplies which in turn has impacted upon pricing as thermal power plants have been mothballed and no longer provide a stable base-load. The rolling back of renewable energy targets and cutting of government financing is likely to prove a deterrent to large-scale investors in the renewables sector however off-grid developments, primarily roof-top solar, are proving increasingly popular. While a mature market, population growth will ensure some increase in demand and modernisation of the grid will result in further opportunities for various power infrastructure firms.

Headline Power...

Australia Real Estate

BMI View:

BMI View: Commercial real estate in Australia has weathered external headwinds from a slowdown in China, global economic uncertainty and a fall commodities prices. This can be attributed to the influx of foreign investment into prime assets that has kept prices buoyant and rental rates comparatively high. However, the surge of acquisitions from foreign investors has led to falling capitalisation rates, primarily influenced by a lack of supply. The current investment climate presents opportunities over 2017, with particular prospects for property managers.

Australia has recently reached a milestone of 25 years without recession, an impressive achievement during a period of global economic uncertainty and falling demand. The successful...

Australia Renewables

BMI View:

BMI View: Despite offering substantial growth potential, Australia's non-hydropower renewables sector is expected to see only limited growth over the course of our ten-year forecast period through to 2025. The ongoing uncertainty surrounding government policy on carbon emission reductions and renewable energy targets is a deterrent to investors, as is the expected slow growth in consumption demands in an already mature marketplace. Nonetheless, Australia is topographically well suited to the development of renewables and there is expected to be some growth in wind and solar power as the project pipeline is expanding.

Australia - Headline Renewables Forecasts

Australia Retail

BMI View:

BMI View: The Australian retail sector looks set to remain robust, with significant investment in shopping centre development and high number of retailers planning to enter the market by the end of 2016. The reinstatement of the country's coalition government for a second term is unlikely to significantly improve Australia's business environment and economic growth prospects over the coming years, but cheaper borrowing will help stimulate spending in a number of important sub-sectors, with housing and utilities witnessing the strongest growth.

Headline Household Spending

Australia Shipping

BMI View:

BMI View: Our short-term outlook for Australia's shipping sector is slightly mixed for 2016, with steady, if uninspiring growth, the order of the day across the country's main ports on the back of a subdued trade outlook and muted domestic picture. Leading the way in y-o-y box throughput terms will be the port of Brisbane (2.5% gains), while the port of Fremantle's 3.9% will see the best performance in tonnage terms.

The Australian economy continued to slow in Q115 and we maintain our 2015 real GDP growth forecast of 2.3% (versus 2.7% in 2014). The country's worsening terms of trade and unwinding investment boom continue to act as major headwinds to growth, thus providing unwelcome...

Australia Telecommunications

BMI View:

BMI View : The Australian telecoms market is a mature market, meaning that operators' strategies will focus on deepening and not widening. This will be done through the most advanced LTE networks, offering a wide range of innovative services, and new segments such as M2M. The monopoly of the NBN of advanced fixed technologies means that operators can focus on service competition as opposed to network roll-outs, allowing them to invest on content to attract and retain customers.

Key Data

  • BMI estimates 31.3mn mobile subscribers at the end of Q315, with incumbent Telstra continuing to dominate the market

  • The NBN has a monopoly on advanced fixed broadband technologies, but uptake remains low, with around 600,000 customers compared...

Australia Tourism

BMI View:

BMI View: The outlook for Australia's tourism market is highly optimistic. Annual international visitor numbers are increasing steadily and marketing campaigns aimed at increasing arrivals from key source markets such as China are proving extremely effective. The government remains committed to supporting the tourism sector and has enacted a range of measures, including the relaxation of visa restrictions, to encourage tourism growth. With international visitor numbers rising and in light of the country's open investment environment, we expect to see an uptick in hotel investment over the coming years, particularly in less developed destinations across Australia.

Key Forecasts (Australia 2013-2020)

Australia Water

BMI View:

BMI View: Weexpectthat water demand in Australia will continue to rise, putting additional pressures on the dwindling freshwater reserves, and stimulating investment in desalination and water treatment and reuse infrastructure.This will in turn see greater attention on the legislative environment, and improve the water sector's attractiveness for private sector players.

Headline Water Forecasts
2012 2013 2014e 2015f 2016f ...

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