australia indonesia business council · the australian economy is continuing its transition out of...

Australia Indonesia Business Council

January 2017Deloitte Access Economics, Australia Indonesia Business Council, January 2017

2© 2016 Deloitte Touche Tohmatsu. All rights reserved.

Overview

- Global Economy

- Australian Economy

- Indonesian Economy

- Trade Relationship

- Future of Australian and Indonesian trade

Deloitte Access Economics, Australia Indonesia Business Council, January 2017


The Global Economy



0.02%

3.80%

5.50%

5.50%

16.60%

30%

0% 5% 10% 15% 20% 25% 30% 35%

Leicester City winning English Premier League

Election of Donald Trump

Cronulla Sharks winning National Rugby League

Western Bulldogs winning AFL Premiership

Chicago Cubs winning World Series

Brexit

Event and Probability 12 months before

A series of low probability events that analysts, economists and gamblers called incorrectly

2016 - the year of the black swan



Commodity prices have been very strong this year…but it’s all a matter of perspective, we are still ~50% off the 2011 peak

0

50

100

150

200

1986 1991 1996 2001 2006 2011 2016

RBA Commodity Price Index2012 = 100

In USD Terms In AUD Terms

Commodity Prices

Source: RBA, Thomson Reuters, as of November


6© 2016 Deloitte Touche Tohmatsu. All rights reserved. Deloitte Access Economics, Australia Indonesia Business Council, January 2017

Global economic growth is expected to further improve in 2017

2017 Outlook

• Continued robust growth in emerging Asia and India.

• China’s 2017 economic outlook expected to be 6.5%, state owned enterprises remain highly leveraged, posing a medium-term risk to growth.

• There has been some tightening of the labour market in the US, though uncertainty about Trump’s election –and how this will play out into the future – remains.

• Persistently low inflation means the EU and Japan will maintain accommodative monetary policy.

Source: The World Bank

2.4%

2.6%

2.4% 2.4%

2.7%

2.9%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

2013 2014 2015 2016 2017 2018

Real GDP Growth

Global Economy Forecast


The Australian Economy



The Australian economy is continuing its transition out of the mining sector investment phase

The Australian Story


• Continued decline in mining sector investment expected through 2017

• Increasing house prices continue to pose risks to the economy, however APRA and RBA polices are beginning to temper price growth

• Labour market indicators remain mixed, part-time employment has increased over the past year, and overall employment growth has slowed.

• Commodity prices have risen over the course of the year, providing some boosts to national income if rising prices are sustained.


Indonesian Economy



Indonesia’s growth has been driven by growth in manufacturing and services and a relative decline in agriculture

The Indonesian Economy


• From 1965 to 2016 the manufacturing and services share of GDP has increased whereas the agriculture share has fallen, consistent with Indonesia’s industrialization development

• Indonesia’s growth has been supported by increasing levels of consumer expenditure, driving sales in motor vehicles, electronic goods, consumer goods and food and demand for services (education, healthcare and financial)

Sectorial Shifts, 1965-2014

0

10

20

30

40

50

60

Agriculture Industry Services1965 2014

%Change

Source: World Bank


Future role for Indonesia’s coalGlobal coal demand expected to grow by ~25% by 2040 as the world continues to industrialise, especially in India and other Asian nations

Energy demand and GDP per personGlobal Coal Demand

Source: IEADeloitte Access Economics, Australia Indonesia Business Council, January 2017


Role for coalIndia’s industrialisation will be supported by coal use, Indonesian supply will compete with domestic Indian supply

India Energy InvestmentsGlobal Energy Demand

Source: IEADeloitte Access Economics, Australia Indonesia Business Council, January 2017


Australian and Indonesian Trade Relationship



Indonesia is currently Australia’s twelfth largest trading partner

Trade relationship between Australia and Indonesia


8,401

1,406

0 5,000 10,000

Australia's Investment inIndonesia

Indonesia's Investment in

Australia

Australia's investment relationship

with Indonesia, 2015-2016 (A$m)

• There are over 470 registered Australian businesses operating in Indonesia.

• Two way investment between Australia and Indonesia was valued at $A9.8bn in 2015.

• Two way trade in goods and services was valued at $A15bn in 2015, down from $A15.7bn (-5%) in 2014.


Breakdown of major exports and imports

Trade relationship between Australia and Indonesia


1,127

619

586

461

353

247

0 200 400 600 800 1,000 1,200

Wheat

Education-related travel

Live animals (excluding seafood)

Sugars, molasses and honey

Crude Petroleum

Tourism

A$m

Australia’s Major Exports to Indonesia 2015-2016

2200

1,271

736

223

206

203

0 500 1000 1500 2000 2500

Tourism

Crude Petroleum

Specialised machinery and parts

Transport

Wood, simply worked

Gold

A$m

Australia’s Major Imports from Indonesia 2015-2016

• Wheat remained Australia’s leading exported good and education-related travel remained Australia’s leading exported service in 2015-2016, unchanged from 2014-2015.

• Crude petroleum exports more than doubled to $A353mn between 2013-2014 and 2015-2016, overtaking a range of other exports including beef, dairy products, aluminum and coal.

• Tourism remained Australia’s major imported service and oil remained Australia’s major imported good in 2015-2016, unchanged from 2014-2015.

• Gold imports increased from 2013-2014 to 2015-2016, overtaking a range of other imports including copper, iron, steel and aluminiumstructures.


Future of Australian-Indonesian Trade Relationship



There is considerable scope for Australia to expand its trade, investment and economic cooperation with Indonesia

Future direction of Australian-Indonesian Trade Relationship


Growth Areas -

Indonesia

Healthcare

Premium food and

beverages

Infrastructure development

Agribusiness (grains and

meat)

Education and Tourism

Financial and ICT Services

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