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With Australia in Transition, Disruption is in Focus

Disruption is a key theme in Australia's ongoing economic and equity market transition.

A major transition is underway in Australia which is driven by record levels of household debt, shifts in China’s growth model and increasing competition for domestic oligopolies. As Australia embarks on a less-certain future, disruption is driving corporate strategy and influencing the way investors assign value to future opportunities and earnings streams. 

Past performance…

Australia has delivered more than a quarter-century of uninterrupted, robust growth built on strong institutions, trade linkages and capable economic management. 

…may not be indicative of future returns

Looking ahead, however, there are challenges on the horizon. Record levels of household debt, low wage growth and structural changes to China’s growth model all raise concerns over the sustainability of growth.    

Disruption as both driver and destroyer of value

Booms in consumer leverage and housing have boosted adjacent industries that have built large profit pools and enjoyed above-peer returns. Likewise, sector concentration in Australia (which is twice the level of the US) has been strongly rewarded by investors.

But this domestic honeypot is now attracting increasing disruptive attention. Technology and data are being used aggressively to change competitive landscapes and Australian consumers – among the fastest technology adopters globally – are providing a scale response to many new and innovative ideas.

These trends present huge opportunities for organisations able to harness them. They simultaneously present enormous challenges to firms that aren’t able to adapt and respond. 

The disruption we have to have

Morgan Stanley’s latest Australia in Transition report – The Disruption We Have to Have – looks into each of these issues in detail and maps out what they mean for investors. In particular, it focuses on four key areas:

  • The multi-channel challenge for retailers

  • The structural growth and global scalability of Australian software as a service

  • The growing threat to retail banks’ traditional dominance of the payments system

  • How streaming media will impact traditional media and related areas such as sports rights

The report maps the key issues, lessons from offshore, likely catalysts for change and the most-exposed and best-positioned companies in the sector.

These issues will also be examined in detail by global thought leaders at the Morgan Stanley Australia Summit 2019. Highlights of these discussions will be featured in subsequent articles.

 

For more on how to implement these themes in your investment portfolio, or a copy of our report, speak to your Morgan Stanley financial adviser or representative. Plus, more Ideas from Morgan Stanley thought leaders.