Australia – more than just a resources story

Portfolio manager and head of Australian equities in the International Equity Division of T.Rowe Price
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While many continue to view the Australian economy as being dominated by resources and commodity prices, in reality, this is not the case. Indeed, the Australian economy is transitioning, with more important drivers of growth coming to the fore, giving us good reason for optimism in 2016.

Important growth drivers

It is not difficult to understand why resource areas remain the focus of investor attention, given the swings in a cycle, from peak to trough, are often significant, leading to dramatic movements in commodity prices. However, in reality, only around 5% of the Australian workforce is linked to mining-related parts of the market. This is in contrast to the 40% working within retail, construction and manufacturing sectors. Clearly, from an employment perspective, it is these areas that matter most to the Australian economy, given the much larger concentration of workers.

It is also true that exports make up only around 20% of the Australian economy – a low level compared to many other countries – and of this 20%, roughly 30% goes to China. Interestingly, one of the growing parts of the Australian export sector is services, specifically education and tourism.

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