Financial stability, attractive growth, and high economic freedom combine to make Australia and New Zealand a compelling destination for foreign diversification allocations.
The case for Australian and New Zealand as a destination for foreign market diversification is undeniable in our view. We find these markets provide developed market foreign diversification, strong growth versus value, superior economic freedom to propel growth, superior fiscal strength, and a strong alternative to Western European investments.
Australia and New Zealand are developed markets, offering a stable British foundation of government (democracy, English Common Law), contract rights, rule of law, and property ownership rights. However, these developed economies benefit from significant exposure to emerging markets through their proximity to and significant exports to neighboring emerging markets.
Australia and New Zealand have higher economic freedom rankings than the US and Western Europe. Economic freedom rankings are based on the rule of law, government size, regulatory efficiency, and openness of markets.
- Superior fiscal strength as measured by much lower government debt versus country GDP
- Similar or higher credit ratings than the US and the European Union average
- Higher labor participation rates than the US and European Union
- Controlled inflation and low-interest rates
- Favorable tax policy
| Economic Factor | Australia | New Zealand | European Union | US |
|---|---|---|---|---|
| Debt/GDP (1) | 22.3% | 35.9% | 81.7% | 129.0% |
| S&P Credit Rating (2) | AAA | AA+ | AA | AA+ |
| Labor Participation (1)(4) | 67% | 72% | 58% | 63% |
| Economic Freedom Rank (3) | #13 | #6 | #35(Average) | #25 |
Source: (1) Trading Economics (2) Factset (3) Heritage Foundation (4) World Bank
| Annualized GDP Growth | Australia | New Zealand | European Union | US |
|---|---|---|---|---|
| 3 Yr | 2.8% | 3.0% | 3.3% | 3.4% |
| 5 Yr | 1.9% | 2.1% | 1.1% | 1.8% |
| 10 Yr | 2.2% | 2.8% | 1.7% | 2.1% |
| 20 Yr | 2.6% | 2.4% | 1.3% | 1.9% |
| 30 Yr | 3.0% | 2.9% | 1.7% | 2.4% |
Source: U.S Bureau of Economic Analysis, World Bank, Eurostat, Australian Bureau of Statistics and Stats NZ.
Period ending December 31, 2023