Volume 39, Number 02
Business
Investing in Australia
The image of a land down under evokes all sorts of things—from ten of the world's most dangerous animals, to the stunning sight of Uluru at sunrise (or indeed sunset) in the midst of thousands of miles of nothing other than flatlands, from the Great Barrier Reef to Sydney Harbor Bridge.
But is this a country to invest or make money in?
Well the answer of course is yes, it just depends how you want to invest. The Aussie dollar is what is known as a commodity currency, as it is backed by enormous amounts of natural resources in the shape of industrial metals, gold, uranium, copper and so on, which are in heavy demand by all Asian countries and in particular China and India.
Alternative energy could now become a burgeoning growth area as the new Prime Minister, Kevin Rudd, has ratified the Kyoto Protocol, leading entrepreneurs to think of new ways to produce fuel and energy from natural resources.
Investing in water systems is an area that is also receiving lots of attention owing to the drought conditions in South Australia. Pipelines to the south are being put in place to alleviate the severe water restrictions that are needed to conserve stocks essential for farmers and growers.
Property is another leading sector for investment but the international investor tends to look at Australia not so much for rental yields, as these are lower than in other countries, but more for capital appreciation, or better still, lifestyle options where the investor can use their investment for part of the year.
So what is the most effective way to invest in Australia to gain a bit of diversity to an investment portfolio, especially now that the US dollar has weakened and could continue to do so in the foreseeable future?
The super cycle of commodities that Australia is benefiting from is one way, either by investing directly to individual shares of companies such as BHP Billiton or managed equity funds that invest into mining companies, equipment manufacturers, shipping companies, or railway operators—all of whom are involved on the commodity business be it extraction or moving to the end user.
Property is always a tangible asset. You can see it, and in some cases you can make use of it yourself for part of the year. Selecting somewhere near the beach will always produce either good returns in capital growth terms or personal satisfaction at sitting put, admiring the views.
Cairns, for example, is one of those places that offer access to one of the world's greatest natural phenomena—the Great Barrier Reef. If the property you buy is intended for rental purposes you can be assured there will be a steady demand for tenants wishing to visit the reef.
Australia offers much for the global investor: an enormous continent of geographical and economic diversity with a stable government and a strong vibrant economy supported by a strong currency. So if it is asset class or currency diversification, make sure you have your own bit of Australia in your portfolio.
Provided by MAGELLAN JAPAN:
THE FINANCIAL PLANNING COMPANY
Email mtt@magellantt.com
Tel. 03-3769-5511