economic insights: supply chain impacts...c11 food product manufacturing exports imports domestic...

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.

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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%

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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

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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

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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!