Growth and Australia: CAs debate the issues
A fall in the fortunes of the mining industry plus an ever-changing political landscape may signal tough times ahead for Australian business.
A succession of six political leaders over eight years - with Malcolm Turnbull's dramatic return as prime minister just the latest shift in power - is always going to create challenges. Australia and its economy appear to have cruised through so far, but with demand for its mineral resources falling, trouble is brewing.
Where does 'the lucky country' go from here? Does Australia's current prime minister offer any greater hope than his recent predecessors? And what is the continuing fascination with Australia for the many ICAS members who move there on a three-month secondment, and end up staying for life?
ICAS panel session
ICAS President Jim Pettigrew and ICAS chief executive Anton Colella hosted a panel in Sydney as part of their visit to Sydney and Melbourne. The first point of discussion was a pressing question: with the mining boom over, where does the economy look for growth?
"This is one of the biggest themes right now," said Anne Loveridge, partner with PwC and board member at National Australia Bank. "China was buying everything we could dig out of the ground but has moved on to its next stage of development."
Rachel Grimes, CFO of Group Technology at Westpac and deputy president of the International Federation of Accountants, said: "Services have become a new focus, particularly education, accounting, architecture and law as Australia seeks to diversify from being seen as an economy based purely upon mining."
Also affecting economic outlook are regulatory and political issues around foreign investment, Jim pointed out.
Anne Loveridge and Jim Pettigrew
Rachel agreed. "Our bank regulators have stepped in and there are a series of things going on to make sure the right people are buying homes, for instance," she said. "Plus, authorities are trying to make sure people are buying new homes to keep the economy going."
Not everybody is feeling the pinch, Anne said, explaining that current homeowners feel wealthy as a result of recent growth, but non-homeowners now feel locked out. "The governor of our Reserve Bank has said that we can keep interest rates low but we need 'animal spirits' in our appetite for investments to drive the economy," she said.
Overseas perception of Australia
"I think one of the challenges for Australia is the perception of it from overseas," added Clive Cuthell, CFO of Nuplex Industries. "It is perceived as a food producer and a miner. Mining has fallen into reverse, so if you're looking at investment the perception is that there are more attractive opportunities elsewhere."
For Australian businesses looking to invest locally in infrastructure, competition from competitors such as Canadian superannuation funds is inflating prices, said Graeme Arnott, deputy CEO and COO, FSS Trustee Corporation.
"This is great for governments that are recycling assets, but it often ends up very expensive for local investors," he explained.
"While many of the investment opportunities might be international, we want to invest in interesting infrastructure projects here at home because that helps to connect us to our members."
International investors are still very interested in specific opportunities in Australia, said Jonathan Dunlop, partner at KPMG. "There have been several notable transactions recently, particularly in logistics and insurance."
Thanks to the falling Aussie dollar, the tourism industry is beginning to experience an upward trend, added executive coach and ex-KPMG partner Graeme Reid. "That may compensate for some of the lost mining revenue," he said.
What effect then, does the game of musical chairs in the Australian Parliament have on business, Jim asked.
"Business leaders view Malcolm Turnbull as somebody who 'gets it'," said Russell Leslie, inaugural ICAS Sydney chairman, long-time Macquarie Bank executive and now owner of Swish Wines.
I think there is going to be a whole package of tax reform, and we really need to have that.
"Turnbull understands that the future of Australia is not an existing multinational like BHP, but the large number of small Australian businesses employing fewer than 10 people, which might grow to be the next BHP. He wants to encourage Australians to embrace risk."
The panel also noted that the prime minister had championed the encouragement of Australia's technology sector, with the appointment of Chris Pyne to the new post of innovation minister.
Clive said: "He [Turnbull] has the communication skills to create change. Previously the concept of GST [goods and services tax] increases was a big no-no, but now this is being discussed because of the way he has brought it up."
Jonathan Dunlop said: "I think there is going to be a whole package of tax reform, and we really need to have that... Turnbull said he is going to look after the Aussie 'battlers' and that he is going to do it in a way that makes sure people are dealt with fairly, so he will be looking after those that might suffer if GST rises from 10 per cent to 15 per cent. I think he might find a way to push for that."
Another trait Turnbull displays, said Stephen Harrison, CEO of Global Accounting Alliance, is "...willingness and ability to negotiate with some fairly wild independents in the Senate".
He added: "[The previous prime minister Tony] Abbott tended to turn his back. Turnbull is communicating and negotiating and giving his ministers a free hand to negotiate, too."
It's not all good news for the new PM, according to Sam Apps, group procurement director at George Weston Foods. Turnbull has backed off on some areas on which he previously had a strong opinion, such as same-sex marriage, allowing policies created under the conservative Abbott to stay in place.
The concern is that he is waiting to get the popular vote mandate in case he is undermined from inside the party," Sam said. "But is it too late to wait a year to make some of the changes and set the tone for his time in office?"
Failing to look to the future
Craig Maxwell, ICAS Sydney chairman and partner with BDO, said: "My problem is that Australia does not have any longevity in political decision making. The politicians don't look far enough ahead to make the big decisions that will have an effect 15 to 20 years from now."
Anton Colella asked the panel, mostly ICAS members, what the challenges and opportunities for CAs thinking of moving to Australia are.
Jonathan Dunlop and Anton Colella
"There are a lot of good opportunities," Craig said. "I came here 13 years ago and if you can demonstrate a good work ethic you will get rewards. You can progress more quickly. Things were more hierarchical in the UK, but come here and you can do well."
Sydney has become a business hub in the region, Sam added. "You feel so much more connected to the rest of the world than when I arrived 18 years ago. There are a lot of CAs here to connect with, and technology means you're hooked into a global network too," she said.
Anton said the number of ICAS members arriving in Australia over the coming decade is set to boom.
"ICAS stands out," he said. "Ninety-five per cent of our intake either has an upper-second or first-class degree from a top 20 university. Most of them trained in the Big Four. In the last few years we've seen a high level of mobility when they qualify. We currently have 16 per cent outside the UK and in the next five years that will go up to 25 per cent, so we anticipate our Australian community growing quite dramatically."