Sydney as a global finance hub? It may surprise, but Australia’s financial capital is a centre for innovation, from structured finance to funds management. And global firms are increasingly choosing its high-skill, low-risk environment for operations servicing the broader Asian region. It is positioning itself as a future centre for carbon trading.
Famous for sunshine, beaches and the Sydney Opera House, Sydney is also home to a growing, high-skilled workforce of 150,000. That is almost half the size of London’s financial workforce and 40% of New York’s. It is not a hard sell – Sydney is, according to the Anholt City Brands Index, the world’s favourite city for the second year in a row.
Sydney’s finance sector, together with governments at national and state level, are ambitious about growing and further internationalising Sydney as a finance centre, with a campaign to attract investment and more skilled people to a new financial precinct on Sydney Harbour.
It isn't a hard sell – Sydney is ranked as the fourth financial services centre in the Asia-Pacific, while the Global Financial Centres Index ranks it 10th in the world in terms of competitiveness. The city is renowned for its world-leading capability in infrastructure finance, alternative asset financing, project financing and real estate financing.
New South Wales (NSW) premier Morris Iemma says Sydney is the engine room of the Australian economy and is well placed to build further on its global position in financial services – particularly in the Asia-Pacific.
“Australia has the largest asset management market in Asia, and Sydney is the national headquarters for financial transactions. Financial services is the fastest-growing industry in Sydney, and funds management and foreign exchange are expected to fuel further growth,” he says. “My government will work side-by-side with business to secure Sydney as a global financial services centre, with our plans including a new international financial district along the lines of London’s Canary Wharf or the Dublin Docklands.”
The next chapter
A new international financial precinct is being established at Barangaroo on the foreshore of Sydney, Australia’s most liveable and vibrant city. Located next to the central business district (CBD), 20 minutes from Sydney International Airport, Barangaroo will play a major role in the next chapter of Sydney’s growth in the 21st century.
The aim is for Barangaroo to be Australia’s premier commercial development – a new part of the CBD located on the edge of Sydney Harbour. Planning is advanced and offers have been sought from development consortia to work with government to commence delivery of infrastructure and buildings from 2009. Using world-class design and cutting-edge sustainability measures, the Barangaroo development will also establish an international benchmark for urban waterfront renewal.
Institutions from around the globe wanting to reduce costs in expensive centres such as London, New York or Hong Kong are invited to consider the economic, lifestyle and cultural opportunities of locating to Sydney’s waterfront, along with the ability to occupy purpose-built premises. On offer is 400,000 square metres of state-of-the-art development space, including up to 280,000 square metres of commercial office space for about 15,000 workers, alongside a new majestic headland park and vibrant public space.
Fast-growing industry
Financial services is now the fastest-growing service industry in NSW, recording growth of more than 9% a year over the past 10 years. Across Australia’s financial markets, annual turnover increased by 19.8% to A$120,000bn ($102,000bn) in 2006/07 – measured by Australia’s debt, equities, foreign exchange and derivatives markets.
Australia has the largest pool of investment fund assets in Asia. As a result of compulsory superannuation fund contributions, total consolidated funds under management are growing strongly in Australia and reached A$1300bn in June 2007, up 22% on the previous year. The assets of superannuation funds were A$1200bn in June 2007 and are expected to triple in the next 10 years.
Australia’s stock market, measured by floating stocks, is the largest in Asia-Pacific. It advanced one place, becoming the world’s seventh largest, overtaking Switzerland. The foreign exchange market is the fastest growing in Asia. The market more than doubled in turnover between 2001/02 and 2006/07. The average daily value of turnover in all currencies was A$203bn in the 12 months to February 2007, with 53% in non-Australian dollar transactions.
Australia’s international debt securities market is by far the largest in the Asia Pacific, while Australia’s domestic debt securities market is the fourth largest, behind Japan, China and South Korea. Assets under management by hedge fund managers in Australia have increased sevenfold in the past five years to reach A$70.3bn, the largest hedge fund industry in Asia.
Ranking high
Australia’s private equity and venture capital industry is one of the leaders in the Asia Pacific region and ranks 11th globally. Finance and insurance accounts for almost 8% of Australia’s gross domestic product, making it the third largest industry in the national economy. In July 2007, banks in Australia held local assets of A$1900bn.
Of the 55 authorised deposit-taking banks in Australia, 53 have operations in Sydney. This includes all of the 10 foreign subsidiary banks in Australia and the 31 local branches of foreign banks. Australia’s banking system has minimal risk due to well-managed interest and foreign exchange risks by all four major banks. The International Monetary Fund (IMF) highlights high earnings, strong asset growth and low levels of problem assets as characteristic of the Australian banking system.
Financial services industry growth is supported by a world-class regulatory environment. Australia has been rated by the IMF as having one of the soundest regulatory and supervisory structures in the world. In mergers and acquisition (M&A) activity, in 2007/08 Australia was ranked third in the world behind the US and UK. With $137bn of activity, this represents 4.4% of the value of global M&A activity. Australia is the largest M&A market in Asia-Pacific, with one-third of the region’s transactions.
Sydney is the head office location of the Reserve Bank of Australia, the Australian Securities Exchange and the Australian Financial Markets Association. It is the first major financial centre to open in the Asian time zone, providing a trading day that bridges the closing of the US market and the opening of European markets. Global financial services firms in Sydney are able to provide after-hours coverage for their US and European operations due to the city’s ‘follow-the-sun’ advantage.
Sydney is a major location for high-end, middle-office processing capabilities. American Express is based in Sydney for its Asia-Pacific regional processing and customer support. Deutsche Bank is based in Sydney for its operations centre, one of only four in the world. This makes Sydney competitive in activities such as complex settlement, funds administration, accounting and human resources, specialist technology and operations support and multilingual call centres. The Macquarie Group, headquartered in Sydney, is a diversified international provider of banking, financial, advisory and investment services
Carbon Trading
The NSW government supports Sydney’s aim to become the headquarters of Australia’s carbon trading scheme. This builds on the state’s expertise in climate change, having established the world’s first mandatory greenhouse gas emissions trading scheme in 2003. Sydney’s carbon trading expertise and the location of key elements of a trading system in the city make it the ideal centre of the national carbon trading system.
Sydney has a productive, multilingual and highly skilled workforce, speaking more than 160 different languages. More than half the working population is tertiary educated.
The city is a renowned centre for academic excellence in the financial and regulatory areas within Asia. NSW produces more university graduates than many other Asia-Pacific business locations, including Hong Kong Special Administrative Region and Singapore. There are more business students in Sydney (70,884) than the total number of students in Singapore (23,626) and Hong Kong (55,216). Similarly, there are more information technology students in Sydney than Singapore and Hong Kong.
International companies that establish in Sydney or NSW and relocate staff to the city have the bonus of a great quality of life. Sydney was rated 10th out of 215 cities in the Worldwide Quality of Life Index, published by Mercer Human Resource Consulting in 2008. Sydney is set on one of the world’s most stunning harbours, fringed by easy-to-reach sandy beaches.
As the most multicultural city in the Asia-Pacific region, Sydney’s diversity has produced a society that is creative, open and friendly. It offers a secure environment for families, with excellent infrastructure in health care, education, transport and telecommunications.
Contactinvestment@business.nsw.gov.au
