LM - Australian Investment Exposure

Imagine a country of about 25m people, democratic, tolerant, welcoming to immigrants, socially harmonious, politically stable and economically successful; good beaches too.

It sounds like California 30 years ago, but it is not: it is Australia today.

Yet Australia could become a sort of California—and perhaps a still more successful version of the Golden State.

It already has a successful economy, which unlike California’s has avoided recession since 1991, and a political system that generally serves it well. It is benefiting from a resources bonanza that brings it quantities of money for doing no more than scraping up minerals and shipping them to Asia.

It is the most pleasant rich country to live in, reports a survey this week by the OECD. And, since Asia’s appetite for iron ore, coal, natural gas and mutton shows no signs of abating, the bonanza seems set to continue. However, as our special report in this issue makes clear, the country’s economic success owes much less to recent windfalls than to policies applied over the 20 years before 2003. Textbook economics and sound management have truly worked wonders.*

* Source www.theeconomist.com > Date 26 May 2011

An interesting introduction to the economy of Australia by a reputable source then - so lets look a little closer into what clearly is a robust and resilient continent.

When mention is made of the size of Australia we are all made aware of the fact that Australia is a big place - the above image however captures the true magnitude of its size and breadth.

Flying Time Sydney To Perth = 5 hrs !!
Total Population is Less Than Half That of the UK !!

Australia Is Ideally Positioned As A Centre For The Asia Pacific Region

AAA sovereign rating with political stability, strong and independent financial institutions, sound public finances, sensible policy frameworks for both macro-economic and micro-economic factors, is underpinned by a proven regulatory system, and has the capacity to deploy capital carefully and profitably.

Four of the world’s nine AA rated banks.

Fourth largest managed funds industry in the world.

World’s largest Real Estate Investment Trust (REIT) market outside the US.

At the forefront of private financing of infrastructure assets and is a world leader in allocating to infrastructure as an asset class.

Third largest number of high net worth
individuals in the region behind Japan and China with assets under management of US$550 billion.

World’s largest economic resources of commodities and the need to develop resources services and infrastructure, making Australia an ideal destination for Islamic financing contracts.

Highly skilled and multilingual workforce and advanced business infrastructure.

5 distinctive and very diverse territories within Australia

With so much discussion and talk focused on the mining sector its quite interesting to note that in fact mining only accounts for 7.3% of the economy
and trails the Construction - Manufacturing - Finance / Insurance Sectors

The Australian economy as can be seen is rather more dynamic and balanced !!

Interestingly of the top 100 banks in the world only 8 are AA rated and four of those are Australian !!

"The Australian economy has been one of the most resilient in the OECD during the global economic and financial crisis.
The impressive results, which are only partially due to links to fast growing China and India, have shown that the
economy was well prepared to face major shocks. Years of sound policies left ample
room for monetary and fiscal policy to act rapidly and forcefully when the crisis struck."
Source: OECD REPORT NOVEMBER 2010

So it does appear that compared to Australia none of the referenced countries control their debt ratios as efficiently or effectively
Another confirmation why Australia never went into recession or required any financial bailout.

Unemployment peaked at 5.9% and currently stands at 5.1%

Australia can boast one of the most robust financial regulatory systems in existence.

Australia was the first developed economy to raise interest rates.

A look at the Australian Economy Mix Chart above reveals that Education and Training form a significant part of the economy.

Australia is home to some of the best universities in the world and attracts students from all around the globe especially Asia.

A high percentage of these graduates who have studied in Australia and come to appreciate the quality of life that exists in the country decide to set down their roots and become residents - Australia therefore benefits from these highly skilled individuals who earn above average income and positively contribute to society - brain drain is definitely not occurring.

These growing band of young residents coupled with the 'cherry picking' immigration policy of the Australian government ensure that only "in demand" individuals are invited to live and work in the country.

The impact of these measures combined with organic population growth have resulted in a housing demand that is unlikely to be met for at least another 9 years.

The disparity between the housing supply and demand is best expressed by the following chart and helps to illustrate why housing prices and rental incomes should remain robust.

Unlike the US housing market Australia does not have a sub prime mortgage market.

Australia's growing housing market is built upon a sound financial footing whereby not only is real demand in existence but that quantifiable affordability exists alongside demand.

Affordability in the long term is best expressed by loan serviceability and delinquency rates.

Compare the US and Australia

30 Day Delinquency Rates

	United States	Australia

2004	3%	0.75%

2009	7% (40% For Sub Prime Loans)	1.7%

We Hope The Above Information Has Been Informative And Insightful

Hopefully You Are Now Thinking Instead Of

"Why Should I Be Invested In Australia ?"

To

"Why Wouldn't I Be Invested In Australia ?"

Take a Closer Look At The LM International Funds That Capitalise On The Australian Property Development Market.

LM Australian Income Fund - LM Managed Performance Fund