I have recently enjoyed my first two week holiday ever since joining RBC over 36 years ago. I had the pleasure of traveling around the globe to Australia and New Zealand, and just wanted to share some thoughts and observations as the subject of this newsletter.

 

AUSTRALIA

 

First, let’s clarify, we spent five days in Sydney, Australia. I would guess Sydney is not a fair representation of the entire country, but I would say it’s a good start. I would put Sydney in the top 4-5 cities I have ever visited.

 

General

Sydney’s population is just over 4.0 million people (entire population of Australia is 24 million). It may be situated on one of the most beautiful harbours in the World, framed by the Sydney Opera House and the Harbour Bridge. The city is very spread out and actually stretches on both sides of the harbour.

 

Infrastructure

 

 

When I compare Sydney to Toronto (approximately 3 million people) and see how Sydney developed its harbour, it’s not even a close competition. Sydney has been very strategic in its infrastructure spending and aesthetics. It has maintained the integrity of the waterfront as public space and not let developers have their way. From my first hotel window view, I could see 12 construction cranes, so building was healthy. And property prices, especially driven by Asian investment are over the top.

Sydney is right in the middle of a mega public light rail transportation overhaul which when all is said and done, will cost somewhere in the $10 billion range. Downtown has been torn up for some time, costs have escalated and time frame deadlines extended (hear that London?). Approximately 13 new stations are scheduled to be open in the first half of 2019 and will also introduce Sydney’s first underground metro.

There is currently a lot of debate over a second harbour bridge, as the current bridge handles between 150,000 to 200,000 cars on a daily basis.

 

Retail

 

(Queen Victoria Building) 

                                             

Retail is alive and well in Sydney. If you are a “foodie”, Sydney has some incredible choices. Shopping wise, Sydney has not only kept buildings like the Strand Arcade (opened in 1982) and the huge Queen Victoria Building (1898) alive and well, but has also maintained their character in the buildings rod iron works, staircases, building’s “bones”, etc.

Another observation which came quick, is given the immense size of the city, you rarely see many homeless people or street panhandlers. Now, given the amount of open space, we did see a lot of buskers and performers who were actually pretty talented.

Many establishments now charge a surcharge to use a credit card to pay!

 

Housing

I had the pleasure of sharing breakfast with a senior Human Resource Manager with Italian eyewear maker Luxottica. You may not recognize that name but they own such brands as Oakley, Persol, Ray Ban, Sunglass Hut, Lenscrafters, and make glasses/frames for names like Chanel, Prada, Armani, Versace and DKNY, among others. Last year’s revenues were about $12 billion (USD).

This gentleman was a German ex-pat and responsible for 5000 employees in Eastern Australia alone. He explained their feelings toward a “living wage”, and how it worked.

He explained how expensive rentals were, and how he and his wife paid $2600 per month for a very small two bedroom flat, where as in Germany he had a four bedroom for the same price.

The most interesting part of the conversation was collecting his thoughts on what was going on in Germany, Chancellor Merkel, etc. … and then we swung to a conversation on the difference in refugees is huge. About 900,000 in 2015 and 750,000 in 2016 (Source Euronews.com)), Australia has taken in only 6000 refugees for all of 2013, 2014, 2015 and 2016. To say they have strict refugee policy would be an understatement.

In fact, Australia regularly sends in its navy to push asylum seekers back with a “stop the boats” policy. Some unlucky asylum seekers (reportedly about 1200) have been captured and forcibly sent to the Pacific Island of Naura where they are in a form of containment, some now over three years. Let’s say that Australia doesn’t have a refugee problem as a result.

 

Finance

(Australia Stock Exchange)

 

A trip to the Australian Stock Exchange (ASX) was an eye opener as well. It isn’t an “exchange” per se that we would imagine, with a trading floor as in Toronto, New York or Chicago. In fact, there isn’t even a “floor”. Everything is digital and all you see are the two trading screens in the photos.

Australia’s market is similar to our TSX, heavily weighted towards financials, energy (a bit) and heavy on mining names (perhaps more so). In my meetings with Aussie advisors, the consensus was the commodity cycle is about to kick in, and they were pretty optimistic overall. Have to admit, the view from RBC Capital Markets in Sydney was much better than ours in London, Ontario.

 

(View from 47^th Floor at RBC)

 

Bank deposits in Australia pay in the 2.5-3% range.

Advisors in Sydney all wear suits, but nine out of ten wear no ties (just the “grey” haired gents). Happy Hour is not a misnomer in Australia. They LOVE happy hours from 4 to 6 and all the patios were jammed (and they were all wearing suits, so they weren’t tourists), this was Tuesday to Thursday, not just Friday. Aussies love their pubs.

 

Cabbies

Like every major city I’ve been to in the last three years, Uber is crushing cab drivers. Most claim they are down 40-60% in revenues, but when asked why they don’t switch, there is resistance. One seemingly “informed” cabbie said he pays $9300 a year for cab insurance, while his brother at Uber pays only $780, so as he said, “how can he have the same coverage?”

 

Minimum Wage

Given our recent commentary on the subject, and the increases hitting us as we write, this is one I spent a lot of time inquiring about.

Minimum wage in Sydney is approximately $18 per hour but has a lot of variables which can get it to about $27.00. Most who work on Sundays get $36-38 minimum wage per hour. Observing the results of this became a bit of a science experiment for me.

To say food prices were expensive would be a massive understatement. One breakfast I had was two scrambled eggs on two pieces of dry bread, no side, no meat: $29.00. With coffee? $35.00 (ouch). And you see the results:

• Most restaurants have no tipping (95%). None. Zero. Only time I had an option to tip was at a couple fine dining places.
• The service is expected with no “carrot”: no pleasantries, no asking for another glass of wine, nobody ask if you’d like dessert, in many places water is self-serve.
• Often takes 30-40 minutes to get a bill.
• Those $29.00 eggs? Took 40 minutes to get them.
• Had drinks at the Opera House with a beautiful view. The server there made $27.00 an hour, but said he made a lot more money in Hawaii with their $8.00 minimum wage.
• So net conclusion of my experiment?
• Establishment makes less since higher costs, less turnover of tables and no cross/up selling.
• Servers make a lot less and most just don’t seem “happy” in their jobs.
• Clients lose since less service and “experience” not what we are used to.

People

Of all the countries we’ve been to, the Irish still take the crown as the nicest people (yes, even ahead of the Italians), but I have to say, the Aussies are right up there.

In a city of over 4 million people, never heard a single horn in 5 days, and drivers often screech to a halt to let pedestrians cross (not so in Toronto or New York where I swear they aim for you!)

Right from the cab ride, to the hotel to every shop or meeting I’d have to say the Aussies are some of my favourite people on Earth.

And I have to say, what’s with all the men? They are all tall, fit, men’s men who are simply hunks, then they start talking with that accent… let’s face it North America, we can’t compete! J

 

NEW ZEALAND (NZ)

 

(New Zealand – North Island)

(Wellington Harbour)

 

Without repeating a whole lot, NZ is a mini version of Australia, but even more laid back. Reminded me of Eastern Canada with that “chill” feel.

• Entire population of NZ is 4.7 million people, spread over 2 islands.
• Minimum wage was $19 – same observations in restaurants.
• Housing is crazy expensive - $1600 a month in Wellington (the capital) for a bedroom with shared kitchen/living room with four others.
• Unlike Canada, the indigenous Maori are integrated. No “reserves”, very little government handouts, and it seems to work.
• Bank deposits pay an amazing 3.90%.
• New government elected not long ago – extreme left and I think going to hurt the country.
• Biggest export is the famous NZ All Blacks Rugby Team which has won the last two Rugby World Cups in 2011 and 2015. They have an incredible 80% winning record and simply dominate the sport. Another statistic: Domestic violence spikes/increases 40% in the two days after an All Blacks loss.  

Bottom line, “Kiwi’s” would rank right up there as simply good, genuine human beings, and the country of New Zealand, physically, has to be one of the most beautiful places on Earth.

While the 30+ hours in travel time tested my already minimal patience, I do look forward to visiting “down under” in the future again one day. The Chart below says it all!

 

 

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