Eric Chan, Investment Manager, abrdn Asian Income Fund Limited’

Eric Chan pens his thoughts on his recent trip to Australia, where he spoke to some of our holdings and potential prospects around their businesses and the broader macro outlook there.

Purpose of the trip

I wanted to get a better feel of where our holdings are and how they see the operating environment heading into 2024. I was also keen to speak to managements of some prospects that we are monitoring, as well as gain deeper insight into the broader macro themes that are driving sentiment and economic activity.

Key takeaways

Big macro theme: Immigration

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Source: Australian Economic Comment, 2023 in one chart, 11 December 2023, HSBC Global Research

Through 2023, a key macro theme has been the sharp rise in inward migration to around half a million people, from an expected 235,000 forecast in October. This will potentially underpin the economy’s growth and will likely put upward pressure on property prices, as well as provide some relief from the acute labour and skills shortage. While household consumption has slowed considerably, the population growth will help stem the decline in consumer spending, while preserving resilience in absolute terms. While minimum wage increases and Enterprise Bargaining Agreements will keep wage inflation sticky into 2024, thus keeping the central bank’s policy stance relatively hawkish, the influx of workers in a labour-constrained economy might help alleviate some of the pressure.

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