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.
Higher economic freedom rankings than the US and Western Europe (#4 and #3, Heritage Foundation) versus #17 for US. 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 as the US
- Higher labor participation rates than the US
- Controlled inflation and low-interest rates
- Favorable tax policy
|Economic Factor||Australia||New Zealand||US|
|GDP growth (1)||2.2%||1.8%||0.3%|
|S&P Credit Rating (2)||AAA||AA+||AA+|
|Labor Participation (1)||64%||70%||60%|
|Dividend rate (2)||4.7%||3.6%||2.0%|
|Heritage Economic Freedom Rank (3)||#4||#3||#17|
Source: (1) Trading Economics (2) Factset (3) Heritage Foundation