Australia and Japan: a View from Asia Kevin Sneader October 13th 2014
The world s economic centre of gravity has come back to Asia Locations weighted in 3D space by GDP 1980 2000 2010 1950 1940 1820 1500 2025 0 McKinsey & Company 1
Context Australia and Japan have unique, complementary assets they can bring to bear World s largest deposits in multiple minerals World leading agricultural technologies Ranked #5 on Global Creativity Index #3 in the world in education exports Third largest economy in the world 24 companies in global top 200, 1,400 trillion in hh financial assets #3 in the world in research funding number one in patents granted World-recognized quality Over $30 billion in tourism Creative, sophisticated, and demanding consumer base McKinsey & Company 2
50% of GDP growth from Asia from 2012 to 2025 Developed economies China GDP growth, 2012-25 100% = $50.2 trillion Rest of world 48% 14% 33% Asia: 52% 5% India Rest of Asia Asia SOURCE: Global Insight; EIU; McKinsey Global Institute McKinsey & Company 3
47% of the world s working population growth will come from Asia; 27% from India alone India 27% Rest of Asia 20% Rest of World 53% McKinsey & Company 4
The relative scale of the opportunity in Asia for Australia and Japan is massive Percent Incremental GDP growth Rest of the World 47.9 48.8 Rest of Asia 1.6 1.7 Incremental population growth Rest of the World 56.2 0.4 43.4 0 Rest of Asia McKinsey & Company 5
Unprecedented scale and pace of economic growth Years to double per capita GDP 1 1700 1800 1900 2000 154 Population at start of growth period Million 9 53 10 33 48 12 1,023 14 840 1 Time to increase per capita GDP in purchasing power parity (PPP) terms from $1,300 to $2,600. SOURCE: Angus Maddison; University of Groningen; Resource Revolution: Meeting the world s energy, materials, food, and water needs, McKinsey Global Institute, 2011. McKinsey & Company 6
Changing competitive landscape 116 Asian companies in the Fortune 500 in 2001 197 in 2014 SOURCE: Fortune McKinsey & Company 7
Building Asia Feeding Asia Innovating Asia Educating Asia McKinsey & Company 8
Building Asia Feeding Asia Innovating Asia Educating Asia = x 36 = x 3.5 > + TM = x 4 McKinsey & Company 9
Building Asia Feeding Asia Innovating Asia Educating Asia Urbanisation straining resources; environmental damage increasing Water shortages looming; agricultural productivity lagging Decline in working population; rising labour costs; challenged competitiveness Growing gap between education provided and skills needed; social tensions McKinsey & Company 10
Building Asia: $4.6 trillion already in motion USD billions Power Railways Real Estate Roads Oil & Gas Other 1,328 1,114 611 578 394 599 SOURCE: ipat McKinsey & Company 11
Building Asia: Three numbers indicating challenge and opportunity Asian cities in top 600 for growth: 307 Asian share of global CO2 transport emissions : 46% Asian cities in top 100 for PM > 2.5 : 53 McKinsey & Company 12
Feeding Asia: need for 800 million tons of new food supply Growth of food consumption in Asia 2013-2030 794 million tons 1.5X total EU food consumption SOURCE: FAO, Sage; PEAT; USDA, UNEP; world Bank; McKinsey analysis McKinsey & Company 13
China in need of calories Per Capita Meat Consumption +14% Per Capita Dairy Consumption +53% Crop Consumption +24% SOURCE: McKinsey Global Insights; team analysis McKinsey & Company 14
Innovating Asia: closing the agricultural productivity gap Proportion of workforce in agriculture: 53% Productivity vs rest of economy: 1/7 SOURCE: NSSO; Ministry of Statistics & programme implementation; McKinsey analysis McKinsey & Company 15
Productivity begins at home: opportunity for Australia Contribution to growth in GDI, 2005-2011 A$ billion, real 2010 Terms of trade 87 Additional capital 120 Additional labour 46 Capital productivity -43 Labour productivity 17 SOURCE: Australian Bureau of Statistics; McKinsey Global Institute analysis McKinsey & Company 16
Innovating Asia: China taking the lead & raising the bar Share of global R&D spend: 12% 28% of all patents SOURCE: NSSO; Ministry of Statistics & programme implementation; McKinsey analysis McKinsey & Company 17
Educating Asia: China's skills gap Total predicted shortfall by 2020 University graduates: 8 million Vocational graduates: 13 million Total economic impact $258 billion USD SOURCE: China National Bureau of Statistics; McKinsey Global Institute analysis McKinsey & Company 18
What it will take to capture the opportunity Viewing Asia as the second home market with same commitment to win as home Granular market understanding with value propositions that respond to Asian consumers' unique needs Culture of inclusion, flexibility and globalisation, but with Australian and Japanese roots Leveraging M&A /partnerships to fill gaps and gain scale Partnering with governments and aligning organisational interests to secure opportunities McKinsey & Company 19
Thank you McKinsey & Company 20