Essential sectors that drive Australia's economy

5 minute read + PDF  01.11.2023 Brendan Clark, Jeremy Blackshaw, Michael Lawson, Simon Scott, Shane Evans, Owen Cooper, Carla Deluca, Matthew Cunningham, Paul Kallenbach

In this second part of our Investor Sentiment Report, we delve into the essential sectors that drive Australia's economy.


Key takeouts


  • Financial services, Energy and resources, Health, Infrastructure, Real Estate and Agribusiness sectors play pivotal roles in attracting investment and offering promising incentives to foreign investors.
  • In Part 1, we evaluated Australian opportunities and explored the inbound investment trends by region.
  • In Part 3 of our study, we examine the key considerations that decision makers should be mindful of when considering investing in the Australian market.

Investor Sentiment Study 2023

Part 2: Essential sectors that drive Australia's economy

Australia is an inviting and prosperous nation, with a multitude of investment opportunities. The nation’s location within the Asia-Pacific region, along with its political stability and well-defined legal framework, provides certainty and security. With our educated workforce, a robust financial system, and abundant natural resources, Australia is a major player in global trade and investment.

Australia’s proximity to China, Japan, South Korea, Singapore and Indonesia has elevated it as a significant hub for trade and investment, and its cultural ties to Asia, coupled with its language proficiency and regional insights have established its position as a gateway to the continent.

Australia boasts a small yet affluent population, a high standard of living, and a well-developed consumer market, making it a sought-after destination for businesses looking to introduce their products and services. Australia’s business-friendly atmosphere, supportive governmental policies, and robust infrastructure make it an ideal choice for enterprises seeking a foothold in the Asia-Pacific region before venturing further afield.

In this second part of our Investor Sentiment Report, we delve into the sectors that drive Australia’s economy, exploring their roles as magnets for investment. The Financial services, Energy and resources, Health, Infrastructure, Real Estate and Agribusiness sectors play pivotal roles in attracting investment and offering promising incentives to foreign investors.

Financial services

The Australian financial services industry has experienced a year of heightened regulatory scrutiny, focusing on areas such as financial promotion, ESG compliance, and product suitability, with the Australian Securities and Investments Commission fostering a proactive compliance approach. Amid this backdrop, key trends have emerged, including the sector's digital transformation and the pursuit of growth opportunities by major players. Rising regulatory costs, especially in ESG, have pushed businesses to consider mergers and acquisitions as a means to scale efficiently. Australia offers foreign investors five compelling reasons to explore financial services investments: a robust industry, a skilled workforce, innovation, a strategic Asia-Pacific hub, and a strong regulatory framework.

Energy and resources

The energy and resources (E&R) industry stands at a pivotal juncture, as technological advancements and evolving policies push for a cleaner and more sustainable energy landscape, challenging the traditional fossil fuel-based model that has driven Australia's energy sector for decades. Against the backdrop of global geopolitical tensions and climate concerns, the industry has seen a surge in investments in renewables, hydrogen, and low-emission technologies. Australia's abundant natural resources, such as lithium, cobalt, and rare earth elements, have positioned the nation as a key player in the global transition to cleaner energy.

Key factors enticing investment in the Australian E&R sector include its rich natural resources, a robust mining industry, advanced services and technology adjacencies, attractive funding opportunities, and a well-developed infrastructure.

Health

The healthcare industry is recognised for its robustness and growth prospects, with a projected CAGR of 4.5% from 2021 to 2028, driven by an aging population's increasing demand for healthcare services and the pressing need for digital infrastructure and telehealth capabilities highlighted by the COVID-19 pandemic. The industry offers favorable demographics due to Australia's aging population, a strong focus on research and development (R&D), a robust regulatory framework, public-private partnerships, and opportunities in medical tourism. Key investment areas in the sector include biotechnology and pharmaceuticals, medical devices and equipment, and digital health, emphasising the importance of digital delivery and data use in transforming care and service models.

Infrastructure

The infrastructure landscape in Australia witnessed a "profitless boom" in 2022, marked by soaring activity but limited profits due to high construction costs, material costs, and supply chain uncertainty. Infrastructure investments are vital for Australia's economic growth and prosperity, with the government's focus on addressing the growing population's needs. Public sector infrastructure programs continue to provide greenfield and brownfield project opportunities, and investors have expanded their horizons into areas like telecoms and healthcare infrastructure. Three key investment areas in infrastructure are green infrastructure, social infrastructure, and "soft" infrastructure, with a growing focus on sustainability.

Real Estate

The real estate sector in Australia is the second-largest sector, with fundraising rebounding in 2021, and deals worth $27 billion completed in that year, with industrial and logistics assets being particularly favoured. Global economic uncertainties post-pandemic, including high interest rates, construction costs, and geopolitical conflicts, are influencing how real estate organisations and investors approach key asset classes. The office sector has seen reduced occupancy due to remote work, while industrial property demand has outpaced supply, supporting strong rental rates. Retail assets in suburban areas continue to perform well due to shifts in consumer spending habits. Hotel and leisure assets have seen stronger trading conditions than expected. The residential sector remains resilient due to population growth, with build-to-rent and land lease models gaining focus.

Agribusiness, food and fibres

The agribusiness, food, and fibers sector in Australia has experienced significant changes, including shifts in supply chains, evolving consumer preferences, technological advancements, and a move toward vertical integration and value-added products to cater to the emerging middle class in Asia. The Australian agribusiness sector, known for its resilience and commitment to producing high-quality, sustainable food, plays a crucial role in global food security, especially in the Asia-Pacific region. Australia offers rich natural resources, strong agricultural traditions, access to growing markets, innovative technologies, and strong environmental credentials, making it an attractive destination for foreign agribusiness investments. Key areas for agribusiness investments include alternative proteins, renewable energy, and agritech/foodtech.

Technology, media and telecommunications

The Technology, Media, and Telecommunications industry in Australia is on the brink of significant growth and transformation due to the emergence of new technologies, such as generative AI, quantum computing, and blockchain, as well as global trends in digital transformation and cybersecurity. Australia boasts a thriving start-up ecosystem and has seen substantial investment in early-stage companies, fostering innovation and growth in the sector. Key drivers for considering Australian technology investments include access to innovative start-ups, collaboration with research institutions, government support for innovation, access to the Asia-Pacific market, and a high-quality workforce. Notable investment areas include generative AI, quantum computing, and 5G technology infrastructure.

Investor Sentiment Study 2023

Part 2: Essential sectors that drive Australia's economy

Investor Sentiment Study 2023

Part 1: Investor Sentiment Study 2023

We provide a snapshot of the strong track record of foreign investment activity and sentiment about future opportunities in Australia.

Investor Sentiment Study 2023

Part 3: Activate successful investments

In Part 3 (and the final chapter) of our study, we examine the key considerations that decision makers should be mindful of when considering investing in the Australian market.

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