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The new world for Australian corporate treasurers

The boom times are over for corporate treasurers in Australia. After a decade of relative ease, there is now a heavy focus on cost management and efficiency as the economy shifts. Meanwhile, the global nature of business is increasing the importance of an international perspective, especially when it comes to Asia.

" Financial professionals find themselves in an economy in flux."
Alan Huse, Head of Transaction Banking, Australia and Papua New Guinea, ANZ

In Australia, the current environment is challenging. Financial professionals find themselves in an economy in flux as the commodities price and investment boom adjusts to a more diversified, service-based economy.

Demand has slowed, leading to comparatively slow growth, subdued inflation and low interest rates – and hence the focus for treasurers and their businesses on efficiency, effective cost management and sustaining profit growth.

GLOBAL PEERS

External pressures have driven considerable attention to areas companies in US and European markets have already taken on board, aligning Australia more with its global peers.  

This includes supply chain management, transaction banking solutions, operational processes, straight through processing and liquidity management. The impending introduction of the real-time domestic new payments platform (NPP) in late-2017 will also present challenges and opportunities.

The NPP will produce real-time settlement as well as additional services as it rolls out, including the use of aliases and simplified information to support transactions and data reconciliation.

For treasurers, depending on the industry in which they operate, this may require some immediate fresh thinking. Even when the impact is a more gradual impact innovation will be necessary 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 Asia, in line with the shift in Australia’s economic and trading partners.

China is now Australia’s largest trading partner. The importance of the Association of South East Asian Nations (ASEAN) is growing rapidly, both as a trading partner and as a source of investment opportunities for Australia.

The formation of ASEAN, together with other regional trade agreements such as the Trans-Pacific Partnership and China-Australia Free Trade Agreement present many new opportunities.

For the whole region, ANZ estimates by 2050 Asia will account for around 50 per cent of global gross domestic product (GDP). This growth represents a considerable opportunity for internationally focussed businesses 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, growing demand from the expanding middle class is predicted to increase export income from Australia’s grain industry from $A5.7 billion to $A7 billion by 2030.

Equally, we have seen increased capital flow from the region – as well as the traditional markets of Europe and the US – into Australian businesses. Chinese investors have been investing in Australia’s commercial real estate, agribusiness, infrastructure, leisure and retail sectors; a trend certain to continue.

NEW CONNECTIVITY

With these trends, Australian corporate treasury departments are both becoming international and are, very likely, being integrated into much larger international entities. ANZ finds 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 teams.

Certainly, the challenges of managing costs, operating efficiencies and supply chains are magnified when dealing across borders. Understanding local regulations, capital requirements, currency controls and local partners all add to the mix of issues.

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.

This connectivity has opened up ideas and solutions for treasurers tried and tested in other markets. With the NPP, Australian treasurers can learn from the experiences of Singapore and the UK, both of which have gone through similar transformations in recent times.

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 a treasurer can use, improved resilience and contributed to an increased global mindset. Each of these will serve Australia well going forward.

Although the current economic environment is challenging and a focus on efficiencies will remain, the long-term prospects for Australian corporate treasurers are positive – and necessary.

Alan Huse is Head of Transaction Banking for Australia and Papua New Guinea at ANZ

A version of this article previously appeared on gtnews

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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