Finance

Here’s how Australia could continue to ride the Asian boom

WorldviewsWorldviews

GettyImages 175539057GETTY IMAGES

The last decade has seen unprecedented economic development and industrialization across Asia. And Australia, thanks to its rich natural resources and proximity to the region, has been perfectly positioned to benefit from this growth.

Asian demand for commodities such as iron ore, used in the production of steel, has fueled a mining boom in Australia and helped the country achieve a staggering 25 consecutive years of economic growth.

It has also tied Australia closely to the Asian market, with 74% of Australian exports shipping to Asia in 2015. While this was slightly down on 2014, there are positive shifts in the makeup of trade that should see it strengthen over time.

As NAB Economics noted in a research report this year, there is “ongoing progress in lifting commodity export volumes, diversifying the commodity base and lifting earnings in services trade.”

australia chart 1

Sources: Australian Department of Foreign Affairs and Trade; Brookings Institute

Looking ahead, Asia remains the world’s fastest growing region, and its increasing influence is undeniable. Asia contributed 39% of global GDP in 2014, up from 23% in 1990. Oxford Economics forecasts this share will rise to almost 45% by 2025.

Riding the next wave of growth

The continued urbanization and industrialization in emerging economies is projected to increase Asian demand for commodities, according to Australia’s Department of Industry, Innovation and Science.

And as Asia’s major economies mature, Australia is well positioned to grow its energy, agriculture, and services exports to Asia’s large and powerful middle class.

Because of rapid growth in the region, Asia is expected to host 64% of the global middle class by 2030, according to Brookings Institute research. This demographic shift bodes well for Australian service exports, in particular.

The services sector now accounts for 59% of Australian GDP, according to the Reserve Bank of Australia, and has contributed 0.5% to Australian economic growth over the last two years. This means increasing the sector’s share of exports will have a significant impact on the broader economy.

A weaker Australian dollar is also expected to help matters.

These medium- and long-term trade dynamics should ensure the Australian economy is able to ride Asia’s growth for some time yet.

If you’re looking to access the Australian market, consider the iShares MSCI Australia ETF (EWA), or broaden your search to other countries.

EXPLORE:Research other countries in the Worldviews series


This post is sponsored by iShares® by BlackRock®.

Visit www.iShares.com or www.BlackRock.com to view a prospectus, which includes investment objectives, risks, fees, expenses and other information that you should read and consider carefully before investing. Investing involves risk, including possible loss of principal.

International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. These risks often are heightened for investments in emerging/developing markets and in concentrations of single countries.

The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).

This article was sponsored by iShares by BlackRock. BlackRock is not affiliated with Business Insider Inc., or any of their respective affiliates. BlackRock does not control or guarantee the accuracy or completeness of information contained in this article or any content linked to this article; or any third parties which produce and provide such content; and does not endorse the views and opinions they express or the products and/or services they may offer.

©2016 BlackRock. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock. All other marks are the property of their respective owners. iS-19842

Find out more about Sponsor Content.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Most Popular

To Top