The world is changing for the Australian corporate treasurer.
Domestically the current environment is challenging. Financial professionals find themselves in an economy in a state of transition, as Australia emerges from the other side of a commodities boom and adjusts to a more diversified, service-based economy. While Australia came through the 2008 global financial crisis in better shape than many economies in Europe and the US, driven to a large part by this commodities boom and close proximity to Asia, in recent years this demand has slowed. The domestic economy is now experiencing relatively slow growth and subdued inflation and low interest rates.
This has led Australian treasurers and their businesses to have a heavy focus on efficiency, effective cost management and sustaining profit growth. The external pressures have driven considerable attention on areas that multinational companies (MNCs) in the US and European markets have already taken on board. These include supply chain management, transaction banking solutions that improve operating processes such as automated reconciliation, straight through processing (STP) via host-to-host solutions and liquidity management.
The impending introduction of the real-time domestic new payments platform (NPP) in late-2017 will also present both challenges and opportunities for the Australian corporate treasurer. The NPP will produce real-time settlement as well as, in time, a number of opportunities via the additional services that will be available. These include the use of aliases and simplified information to support transactions and data reconciliation.
Depending on the industry in which they operate, this will either require some immediate fresh thinking, or will be a more gradual impact, but in each case will provide the basis for innovative thinking for treasurers looking for greater efficiencies with their retail payments and collections.
As Australian treasury departments adjust to this new world on the domestic front, they are also becoming more connected internationally, particularly with the Asian region, in line with the shift in Australia’s economic and trading partners.
China is now Australia’s largest trading partner, a move away from the historical trading reliance on the US and UK, for example. Meanwhile the emerging Association of South East Asian Nations (ASEAN) is also growing rapidly, both as a trading partner and as a source of investment opportunities. The formation of the ASEAN Economic Community, together with the various regional trade agreements (such as the Trans-Pacific Partnership and China-Australia Free Trade Agreement) present many new opportunities for Australian businesses.
For the whole region, ANZ estimates that by 2050 Asia will account for around 50% of global gross domestic product (GDP). This growth therefore represents a considerable opportunity for Australian businesses that are outward bound, as the region offers substantial end-markets for their products and a competitive source of supply and financial capital.
The impact is felt across many varied industries in Australia. In agriculture for example, the growing demand that comes from the expanding middle class is predicted to increase export income from Australia’s grain industry from A$5.7bn (US$4.4bn/€3.8bn) to A$7bn by 2030. And in dairy, the demand from countries such as China, Indonesia, the Philippines and Vietnam is expected to increase Australia’s milk production from 9.2bn to 15bn litres, according to ANZ research.
Equally, we have seen increased capital flow from the region – as well as the traditional markets of Europe and the US – into Australian businesses. For example, Chinese investors have been investing in Australia’s commercial real estate, agribusiness, infrastructure, leisure and retail sectors; a trend that is certain to continue.
From Sydney to Shanghai
With these trends, Australian corporate treasury departments are both becoming international and are, very likely, being integrated into much larger international entities. These days, ANZ and its peers finding that their treasurer clients are no longer typically in Sydney, but just as likely to be in Singapore or Shanghai.
This new connectivity is having an impact on the mindset of Australian corporate treasurers and the way they run their treasury teams, but one with which they are quite comfortable and are embracing.
Certainly, the challenges of managing their costs, operating efficiencies and supply chains get magnified when dealing cross-border; where understanding local regulations, capital requirements, currency exchange controls and dealing with local partners all add to the mix of issues for a treasurer to deal with. Equally, for a transaction banker, it is just as important to be well versed with what’s happening with the renminbi (RMB) and its convertibility as it is with the development of real-time payments.
But equally, as noted earlier, this connectivity has opened up ideas and solutions for treasurers that have been tried and tested in other markets. As regards the impending NPP, Australian treasurers can learn from the experiences of, say, Singapore and the UK, both of which have gone through similar transformations. The use of regional treasury centres, complex liquidity management solutions and treasury management systems (TMSs) are all trends that we expect to see continue.
Overall, these are really positive long-term trends for the typical Australian business and the economy at large. The access to global skills and capital has broadened the range of products and services that a treasurer can avail themselves of, improved resilience and contributed to an increased global mindset. Each of these will serve Australia well going forward.
China's bad debt markets are such a hot commodity that distressed assets are being sold on Alibaba’s Taobao ecommerce platform alongside household products. But the IMF warns the situation is unsustainable.
Many banks around the world, large and small, continue to experience major security failures. Biometric systems such as pay-by-selfie, iris scanners and vein pattern authentication can help.
The implementation date of Europe's revised Markets in Financial Instruments Directive, aka MiFID II, is fast approaching. Yet evidence suggests that awareness about the impact of Brexit on MiFID II is, at best, only patchy and there are some alarming misconceptions.
Despite all the automation and improvements that digital banking has the potential to achieve, customers and their needs still form the very core of the banking sector.