Liam Harrison – Senior Industry Analyst

Economic insights: Supply Chain Impacts

Agenda:

- Economic Overview- Supply Chain Overview- International Trade- Exposed Industries- Future of the Domestic Supply Chain

Economic Overview

Australian GDP growth

• 2019-20 GDP growth: -0.8%

• 2020-21 GDP growth: -1.0%

• If the forecasted recession occurs, it will be the first recession for Australia since ‘the recession we had to have’ of the early 90’s.

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

New Zealand GDP growth

• 2019-20 GDP growth: 1.5%

• 2020-21 GDP growth: -3.9%

• Retail, Arts, Tourism and Personal services industries expected to be hit hardest.

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

20

20

20

22

20

24

20

26

20

28

Supply Chain Overview

A – Agriculture, forestry and fishingB – MiningC – ManufacturingD – Electricity, gas, water and waste servicesE – ConstructionF – Wholesale tradeG – Retail tradeH – Accommodation and food servicesI – Transport, postal and warehousingJ – Information media and telecommunicationsK – Financial and insurance servicesL – Rental, hiring and real estate servicesM – Professional, scientific and technical servicesN – Administrative and support servicesO – Public administration and safetyP – Education and trainingQ – Health care and social assistanceR – Arts and recreationS – Personal servicesZ – Consumers

ANZSIC KEY SUPPLY CHAIN

Agriculture, forestry and fishing (A)3.1% Mining (B)

5.7%

Manufacturing (C)7.7%

Electricity, gas, water and waste services (D)

2.8%

Construction (E)8.0%

Wholesale trade (F) 3.8%

Retail trade (G)4.3%

Accommodation and food services (H)2.5%

Transport, postal and warehousing (I)4.9%Information media and

telecommunications (J)2.3%

Financial and insurance services (K)8.2%

Rental, hiring and real estate services (L)2.5%

Professional, scientific and technical services (M)

5.7%

Administrative and support services (N)3.3%

Public administration and safety (O)5.5%

Education and training (P)4.9%

Health care and social assistance (Q)5.9%

Arts and recreation services ®0.8%

Other services (S)1.9%

Ownership of dwellings9.1%

Taxes less subsidies on products7.2%

AUSTRALIAN GDP SHARE JUNE 2009

Agriculture, forestry and fishing (A)2.4%

Mining (B)7.9%

Manufacturing (C)5.6%

Electricity, gas, water and waste services (D)

2.4%

Construction (E)7.3%

Wholesale trade (F) 3.8%

Retail trade (G)4.2%

Accommodation and food services (H)2.3%

Transport, postal and warehousing (I)4.5%

Information media and telecommunications (J)

2.5%Financial and insurance services (K)

8.8%

Rental, hiring and real estate services (L)3.0%

Professional, scientific and technical services (M)

6.9%

Administrative and support services (N)3.3%

Public administration and safety (O)5.2%

Education and training (P)4.7%

Health care and social assistance (Q)7.4%

Arts and recreation services ®0.8%

Other services (S)1.8%

Ownership of dwellings8.4%

Taxes less subsidies on products6.7%

AUSTRALIAN GDP SHARE JUNE 2019

Agriculture, Forestry and Fishing (A)5.8% Mining (B)

2.1%

Manufacturing ©10.8%

Electricity, Gas, Water and Waste Services (D)

3.1%

Construction (E)5.4%

Wholesale Trade (F)5.1%

Retail Trade (G)4.3%

Accommodation and Food Services (H)2.0%

Transport, Postal and Warehousing (I)4.1%

Information Media and Telecommunications (J)

3.0%Financial and Insurance Services (K)

5.8%

Rental, Hiring and Real Estate Services (L)7.0%

Professional, Scientific and Technical Services (M)

7.6%

Administrative and Support Services (N)1.9%

Public Administration and Safety (O)4.5%

Education and Training (P)4.7%

Health Care and Social Assistance (Q)6.2%

Arts and Recreation Services (R)1.5%

Other Services (S)1.9%

Ownership of Dwellings6.1%

Taxes less subsidies on products7.3%

NEW ZEALAND GDP SHARE MARCH 2009

Agriculture, Forestry and Fishing (A)5.2%

Mining (B)1.2%

Manufacturing ©9.7%

Electricity, Gas, Water and Waste Services (D)

2.7%

Construction (E)6.4%

Wholesale Trade (F)5.1%

Retail Trade (G)5.1%

Accommodation and Food Services (H)2.2%

Transport, Postal and Warehousing (I)4.5%

Information Media and Telecommunications (J)

3.5%Financial and Insurance Services (K)

6.0%

Rental, Hiring and Real Estate Services (L)7.0%

Professional, Scientific and Technical Services (M)

8.3%

Administrative and Support Services (N)2.1%

Public Administration and Safety (O)4.3%

Education and Training (P)3.8%

Health Care and Social Assistance (Q)5.8%

Arts and Recreation Services (R)1.4%

Other Services (S)1.8%

Ownership of Dwellings6.2%

Taxes less subsidies on products7.7%

NEW ZEALAND GDP SHARE MARCH 2019

Manufacturing in Australia

0 20000 40000 60000 80000 100000 120000 140000

C25 Furniture & Other Manufacturing

C24 Machinery & Equipment Manufacturing

C23 Transport Equipment Manufacturing

C22 Fabricated Metal Product Manufacturing

C21 Primary Metal & Metal Product Manufacturing

C20 Non-Metallic Mineral Product Manufacturing

C19 Polymer Product & Rubber Product Manufacturing

C18 Basic Chemical & Chemical Product Manufacturing

C17 Petroleum & Coal Product Manufacturing

C16 Printing (including the Reproduction of Recorded Media)

C15 Pulp, Paper & Converted Paper Product Manufacturing

C14 Wood Product Manufacturing

C13 Textile, Leather, Clothing & Footwear Manufacturing

C12 Beverage & Tobacco Product Manufacturing

C11 Food Product Manufacturing

Exports Imports Domestic production not bound for export

International Trade

Australian Merchandise Exports

• Exports have risen strongly since the 1990’s

• Although COVID-19 is expected to dampen demand for smaller Australian industries, key commodities are projected to rise in demand over the next five years, driving export growth.

• Highest risk factor to export growth is trading relationship with China, which has become volatile as of late.

• Overall: China is a key export market; trading relationships with Australia will be a key indicator for potential export growth

$0b

$50b

$100b

$150b

$200b

$250b

$300b

$350b

$400b

$450b

$500b

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

20

17

20

19

20

21

20

23

20

25

20

27

Exports: Country of Final Destination

• Latest yearly trade data to March 2020

• Highly exposed to China and Japan

• COVID-19 expected to only moderately affect Japanese economy, however other underlying economic issues still present.

• Overall: China represents close to 40% of total Australian exports

Country of final destination Exports ($m) Share (%)

China 149857 38.2%

Japan 55672 14.2%

South Korea 25836 6.6%

United Kingdom 16093 4.1%

United States 15371 3.9%

India 13652 3.5%

Singapore 12772 3.3%

Taiwan 12435 3.2%

New Zealand 10307 2.6%

Malaysia 8755 2.2%

Other 71408 18.2%

Total 392158 100%

Australian Merchandise Imports

• Imports have also risen strongly since the 1990’s

• Strong rise in imports has contributed to the contraction of the Manufacturing sector

• China also dominant as partner for imported goods.

• Overall: Supply chain has become increasingly exposed over the past several decades; trading relationship with China will be instrumental for future supply chain security post COVID-19 $0b

$100b

$200b

$300b

$400b

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

20

09

20

11

20

13

20

15

20

17

20

19

20

21

20

23

20

25

20

27

Imports: Country of Origin

• Latest yearly trade data to March 2020

• Highly exposed to China and United States

• COVID-19 could severely affect the US economy, however insufficient data to determine long-term outcomes

• Overall: Australian supply chain is heavily linked to international economies

Country of Origin Imports ($m) Share (%)

China 76901 19.6%

United States 37354 9.5%

Japan 21274 5.4%

Thailand 15051 3.8%

Germany 13986 3.6%

South Korea 11619 3.0%

Malaysia 11059 2.8%

Singapore 10690 2.7%

New Zealand 7689 2.0%

United Kingdom 7186 1.8%

Other 92007 23.5%

Total 304816 100%

Exposed Industries

What industries are at risk?

• Agricultural, Mining, Manufacturing and Wholesaling industries are at the highest risk, due to their higher level of exposure to international trade

• Other industries, such as travel services, are also at risk

Trade Risk

Source: The Sydney Morning Herald

The Future of the Domestic Supply Chain

Manufacturing Revival?

• The COVID-19 outbreak has established the weaknesses in both Australia’s and New Zealand’s supply chains

• Calls to revive elements of manufacturing for crucial that are currently heavily outsourced, such as medical equipment manufacturing, have been made

• Full manufacturing revival unlikely; expenses far outweigh gains

Thank you!