Viewpoint: Feng Shui, the Renminbi and 'The Dubai effect'

By Renato Mota, General Manager Distribution

If you attended the IOOF Leadership Series for 2014 – our annual adviser roadshow  held in capital cities over the past two weeks – then my above heading may resonate. Not only did we have the privilege of hearing from renowned demographer, Bernard Salt, and his views on the Asian cultural influences that are impacting Australia but we also heard the economic and market insights from our panel of experts from Alliance Bernstein, Perennial and IOOF. Together, these made for a thought provoking session. 

Thank you to those who attended - we appreciate the positive feedback. If you couldn’t make this year, here’s a few interesting take outs and we hope to see you next year.

Bernard’s key themes

In light of our ageing population, as well as the ethnicity composition, Australia in the next five years will look very different from the Australia of the past five to ten years. Bernard described the shifting of our tribal composition from an Anglo base to an Asian fusion as witnessed by the large influx of Chinese (54%) and Indian (101%) immigrants between 2006 and 2011.

While the past 30 years have seen us increasingly emulate Mediterranean values, the future will no doubt see greater expression of the aspirational values of the Chinese middle class. The principles of Feng Shui, for example, are already evident in many Australian households today, however, Bernard also asks ‘Will we see more Arabic cultural influences over the longer term?’

And what about the phrase coined by Bernard as the ‘Dubai effect’? Will the practice of middle-eastern entrepreneurs making their money in the likes of Saudi Arabia or Kuwait and then parking their family, money and lifestyle in the safe haven of Dubai, also become true of Asian entrepreneurs in Australian cities? If the likes of Sydney and Melbourne offer a lifestyle choice for middle class Asians who generate wealth in their native countries, then could this be a commercial opportunity for businesses in Australia?

Throughout an engaging and insightful presentation, Bernard summed up both the corporate and community themes that reflect our ever changing world and ones that he deems to be consistent throughout the globe.

Corporate Community
  • 'More for Less’ … customers want you to deliver more but pay you less
  • Expect the competition from left field … often a result of new technology eg Coles insurance offering
  • Globalisation … new players discovering Australia
  • Celebration of the individual … rights, entitlements … minorities
  • Loss of faith in institutions … church, unions, big business, politicians, not sure about public sector
  • Consequential rise of the need for transparency, accountability, apology and regulation

What the panel had to say

Our panel members offered their views on the changes occurring in South East Asia – China, in particular - and whether that was creating new investment opportunities for Australia.

Steve Merlicek, IOOF’s Chief Investment Officer commented that, while China and other parts of Asia have delivered strong economic growth, this has failed to translate into investment returns in the same geographies. Commenting that China’s share market performance is down about 60 per cent since 2008, Steve is bearish on Chinese investment markets.

On the other hand, Senior Economist, Asia Pacific for Alliance Bernstein, Guy Bruton, commented on the growth of the Renminbi, the process of financial sector reform and liberalisation in China and the change this has initiated in the way we may view China – ‘The manufacturing giant has the potential to become the world’s banker and that’s going to open up opportunities for Australian businesses and also create opportunities for investors,” he said.

Perennial’s Frank Uhlenbruch, made the observation that, as income per capita rises in India and China so will  their demand for better quality food “moving from a starch to protein diet’. He also commented that Australia was well positioned to benefit from increased demand for high quality commodities such as aluminium instead of iron ore and cleaner energy with natural gas instead of coal.

In summary, it appears clear that the demographic and economic changes taking place in Asia will have a significant impact on Australia over the next decade. And as a nation, we appear to be well positioned to capitalise on some of these trends.

As always, thank you for your feedback and we would appreciate any suggestions on other topics or areas of interest you would like to see IOOF bring to you, our clients.