Australia information technology report q2 2014

Q2 2014
www.businessmonitor.com
AUSTRALIA
INFORMATION TECHNOLOGY REPORT
INCLUDES 5-YEAR FORECASTS TO 2018
ISSN 2041-7160
Published by:Business Monitor International
Australia Information Technology
Report Q2 2014
INCLUDES 5-YEAR FORECASTS TO 2018
Part of BMI’s Industry Report & Forecasts Series
Published by: Business Monitor International
Copy deadline: March 2014
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CONTENTS
BMI Industry View 7
Key Trends And Developments 8
IT SWOT 10
Wireline SWOT 11
Political 13
Economic 14
Business Environment 15
Industry Forecast 17
Table: Australia IT Sector - Historical Data And Forecasts (AUDmn) 17
Broadband 22
Table: Telecoms Sector - Broadband - Historical Data & Forecasts 22
Table: Telecoms Sector - Broadband - Historical Data & Forecasts 22
Macroeconomic Forecasts 24
Economic Analysis 24
Monetary Easing Can Only Do So Much 25
Weaker AUD To Provide Some Reprieve 26
Table: AUSTRALIA - ECONOMIC ACTIVITY 27
Industry Risk Reward Ratings 28

Table: Asia Pacific IT Risk/Reward Ratings - Q2 2014 30
Market Overview 31
Hardware 31
Software 37
Services 39
Industry Trends And Developments 46
Regulatory Development 49
Table: Government Authority 49
Government Initiatives 49
Regulatory News 51
Competitive Landscape 53
International Companies 53
Table: Dell 53
Table: Datacom 54
Table: SAP 55
Table: Panasonic 56
Local Company 57
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Table: The Good Guys 57
Company Profile 58
SAP 58
Hewlett-Packard 63
Regional Overview 70
Hardware Sales Opportunity Remains 72
Demographic Forecast 74
Table: Australia's Population By Age Group, 1990-2020 ('000) 75
Table: Australia's Population By Age Group, 1990-2020 (% of total) 76
Table: Australia's Key Population Ratios, 1990-2020 77
Table: Australia's Rural And Urban Population, 1990-2020 77

Methodology 78
Industry Forecast Methodology 78
Sources 79
Risk/Reward Ratings Methodology 80
Table: It Risk/Reward Ratings Indicators 81
Table: Weighting Of Components 82
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BMI Industry View
BMI View:
Australian IT sales are forecast to reach AUD27.943 in 2014 an increase YOY of 5.8% with the market
continuing to anticipate growth against a backdrop of steady, if unspectacular economic growth. Tablet
sales continue to compensate for declining sales of desktop and notebook devices, with a strong
performance from manufacturers of Android tablets. However H213 sales of all "smart devices" may
indicate the beginnings of market saturation. Meanwhile the government's One Education Programme aims
to have distributed 50,000 laptops to school children across the country by June 2014. Ongoing broadband
infrastructure roll out will be beneficial to Australia's digital economy , particularly for e-commerce and
cloud computing.
Computer Hardware Sales: AUD11.3bn in 2013 to AUD11.8bn in 2014, up 3.9% in local currency terms.
Strong demand for tablets is compensating for a decline in desktops and notebook shipments. The release of
new devices using Intel's upgraded second generation Haswell and Broadwell chipset architectures could
boost shipments in H214.
Software Sales: AUD4.3bn in 2013 to AUD4.4bn in 2014, up 3.9% in local currency terms. Security
software sales are increasing, particularly for small and medium-sized enterprises (SMEs) and consumers.
Enterprise resource planning and other e-business products to the small and medium-sized enterprise
market remain a key trend driving sales
IT Services Sales: AUD10.8bn in 2013 to AUD11.7bn in 2014, up 8.9% in local currency terms. IT
services will be continue to be the highest performing growth area, with cloud services the key growth
driver as local companies try to use efficiencies enabled by the National Broadband Network (NBN).

Risk/Reward Ratings: Australia's score is 68.0 out of 100.0, which remains unchanged. Australia's score
has declined due to a lower growth outlook. The country ranks fourth in our latest Asia Risk/Reward
Ratings table, behind Singapore, South Korea and Hong Kong, but still ahead of larger markets in the
region such as China, India and Indonesia.
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Key Trends And Developments
Cloud computing is expected to be one of the leading IT market trends globally, but in Australia there is
potential for particularly fast growth thanks to the investments in improving connectivity via the NBN. This
will extend the reach of services, as well as providing the faster upload speeds that are key to advanced
cloud computing services. Cloud computing has already gained traction in Australia, with the big four banks
deploying solutions and leading international vendors such as IBM, Oracle and Amazon Web Services
investing in the market. The NBN and the government's cloud computing strategy, announced in May 2013,
are expected to catalyse the cloud market's development in the relatively underpenetrated areas of the public
sector and with SMEs.
In June 2013 it was reported that the Australian Communications and Media Authority (ACMA) was
considering implementing regulatory measures to oversee the use of cloud technology. In a discussion
paper, security, privacy and access to data were all identified as issues that might need regulating.
Subsequently, the government outlined a policy for the adoption and use of cloud computing in official
administrative processes. Its guidelines emphasise the importance of striking a balance between taking
advantage of the cost, flexibility and scalability benefits of cloud computing, and of keeping large quantities
of private data secure. Of vital importance is that the most sensitive of government-held information is not
subject to any undue threats. From 12 March 2014 both the private and Federal public sectors will have to
comply with the 13 new Australia Privacy Principles (APPs) under the Privacy Act that regulate the
collection, holding, use and disclosure of "personal information".
Over the past quarter, there have been a number of important developments in the cloud computing sphere.
Thus, in October, the Australia-based cloud services provider Bulletproof unveiled the country's first
Amazon Web Services (AWS) pay-as-you-go support solution, called On Demand. The service will
incorporate 24-hour customer support, including assistance in 15 minutes for critical issues. On Demand
will have no fixed or ongoing costs, and will employ an as-a-service model whereby customers will

instantly have access to Bulletproof's 24-7 support, but will only pay for the support time they use.
Meanwhile, major new cloud services continue to be set up: in August 2013, US virtualisation software
company VMware revealed that it was preparing to roll-out its hybrid cloud service in Australia, working
with a local partner to launch the vCloud Hybrid Service. Australia will be the first Asia-Pacific region to
receive the new VMware service due to its high rate of virtualisation and status as a mature market. Then, in
November 2013, South Africa-based ICT services provider Dimension Data announced that over the next
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three months it would be setting up four new global cloud data centres, one of which would be in
Melbourne, Australia.
Metalogix has opened a new sales division in Melbourne, reports PRNewswire. This will enable the
company to expand its footprint in Asia Pacific. The new sales division will be offering support to in-
market customers who have deployed Metalogix best of breed suite of products in order to enhance the use
and performance of enterprise content on Microsoft SharePoint, Exchange and Cloud platforms. Also, the
division will allow the company to offer timely services to its more than 300 customers in the region, and
complements the company's 24/7 live customer support centre in Manila, Philippines.
Australia has also been quick to embrace the growing bitcoin trend, with Australian-based start-up company
CoinJar announcing in December 2013 that it will receive "Australia's first major bitcoin investment", after
it signed a AUD455,000 deal with local venture capital firm Blackbird Ventures. Coinjar is a bitcoin
buying/selling exchange that was founded in February 2013. However bitcoin prices have been fluctuating
significantly in recent months.
The latest data on Australia's hardware market show that tablets have made significant progress, while
shipments of desktops and notebooks are in decline. . However H213 sales of all "smart devices" may
indicate the beginnings of market saturation.
Microsoft's partner vendors have demonstrated the potential for hybrids/convertibles, which combine
productivity and content consumption use cases, in H113, and the release of Intel's latest Broadwell chipset
architecture in Q2 2014, enabling slimmer and longer battery life devices, is expected to accelerate this
innovation and blur the distinctions between devices.
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IT SWOT
SWOT Analysis

Strengths
■
High incomes and strong supporting infrastructure support high spending.
■
Strong government support for ICT programmes.
■
IT-literate population with high levels of PC ownership.
■
Strong financial sector.
■
Tablet sales are compensating for decline in desktop and notebook sales.
■
Upgraded economic forecasts for 2014
Weaknesses
■
Australia has a relatively mature domestic market, with relatively slow growth rates.
■
Sensitive to volatility in the global economy.
Opportunities
■
Government cloud computing strategy creates opportunities for vendors in the public
and SME sectors.
■
Considerable demand for cloud computing services.
■
Other major IT projects in areas such as healthcare, education and smart cards.
Threats

■

■
A cheaper Australian dollar would affect consumer and business demand in the
import-dependent IT market.
■
Vendors face threat of parliamentary enquiry into product pricing and are coming
under pressure regarding tax arrangements.
■
H213 "Smart Devices" sales figures may indicate the beginnings of market saturation
or "user fatigue".
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Wireline SWOT
Wireline SWOT

Strengths
■
Australia's overall wireline sector is host to a large number of service providers, many
of which offer a full range of voice, data and internet services.
■
Many service providers offer broadband internet connectivity by means of several
different technologies.
■
The penetration rate, measured as a proportion of buildings reached with broadband
network infrastructure, is extremely high.
■
The residential market supports strong demand for pay-TV services.
■
The business market supports strong demand for converged data services.

■
Australia's leading broadband operators continue to report strong internet and
multimedia service sales.
Weaknesses
■
Despite a significant number of service providers, the broadband market continues to
be dominated by Telstra.
■
Despite fixed-line market liberalisation and steady growth in the number of unbundled
local loops, Telstra remains the dominant player in the sector.
■
After a period of moderate growth, business demand for fixed telephony lines now
appears to be weakening.
■
Overall, demand for traditional fixed-line services is shrinking, resulting in a
diminishing market.
Opportunities
■
The National Broadband Network (NBN), announced in April 2013, aims to be
completed sooner and cheaper, with the trade-off being slower connectivity.
■
Demand for wireless broadband services, including WiMAX, 3G datacard and USB
modem-supported services is growing.
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Wireline SWOT - Continued
■
Australia's leading broadband operators are investing in the development of higher
speed broadband services. This has potential to drive demand for new data services.
■

The government revealed that it has set aside AUD60mn for regional, rural and
remote telecoms projects; satellite and wireless broadband networks are seen as a
source of potential investment in remote regions.
Threats
■
Fixed-line sector may decline at a more rapid rate than expected, with potentially
negative consequences for ADSL growth.
■
Proliferation of naked ADSL could hasten the decline of the fixed-line sector.
■
Growing popularity of wireless broadband services could negatively affect the market
for fixed broadband access based on DSL and cable.
■
The high rate of broadband penetration reduces the scope for further growth in the
broadband sector; growth will slow as the market nears saturation point.
■
Following the election of the new Liberal-National Coalition (LNC) government in
September 2013, the NBN is likely to offer slower connectivity than originally
envisaged.
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Political
SWOT Analysis

Strengths
■
Australia is a mature democracy with a broadly stable party system.
■
Economic stability over recent years supports the current political system and radical
groups are unlikely to gain substantial support.

Weaknesses
■
As one of the region's largest and most stable states, the country attracts many
refugees and economic migrants. The issue is a key source of domestic tension and
has been hotly debated in parliament in recent times as the capsizing of a boat led to
the death of a number of refugees. The issue continues to be debated in the federal
parliament with no sign of political parties co-operating to find an alternative that
would ensure the safe passage and fair processing of the refugees, while reducing the
possibility of people smuggling.
■
The fragility of the state governments' finances compared to the large infrastructure
projects that they need to undertake has led to questions with regards to the
compatibility of the federal-state system with the country's current development
needs.
Opportunities
■
Australia has historically enjoyed close military ties with the US. However, with the
rise of regional economic powers such as China, it will need to balance competing
military and economic ties.
Threats
■
Australia's early support for the US 'War on Terror', among other things, has made
Australians abroad a target for Islamic extremists.
■
Australia's close alliance with the US, particularly under John Howard, has left a
lingering feeling among some Asian governments that it is America's 'deputy sheriff'
in the region.
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Economic

SWOT Analysis

Strengths
■
A free-market economy supported by a highly educated workforce.
■
Blessed with rich natural resources, Australia's economic activity has been
augmented by demand for commodity exports and the investments made in the
mining sector.
Weaknesses
■
The persistent current account deficit increases vulnerability to capital flows and, by
extension, currency volatility.
■
The export basket is highly concentrated in commodities, and consequently exposes
the economy and currency to fluctuations in world prices for metals, coal and
agricultural goods.
Opportunities
■
The rapid expansion of Asian economies in recent years offers new opportunities for
diversifying trading ties from core European markets.
■
A low level of government debt has provided a certain amount of flexibility in fiscal
policy to support domestic demand through the downturn.
Threats
■
The high level of private sector debt - especially mortgage loans - fuelled by overseas
funding poses a threat to sustained growth.
■
A collapse in exports from a drop in resource demand from China and other resource-

hungry countries would severely impact headline GDP growth.
■
Australia is vulnerable to extreme weather that may lead to droughts and floods,
which have become increasingly severe in past years as a result of global climate
change.
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Business Environment
SWOT Analysis

Strengths
■
A highly educated workforce and comparatively modern transport infrastructure
underpin economic prospects.
■
A number of free trade agreements with countries such as New Zealand, Thailand and
the US serve as a boon for trading activities.
Weaknesses
■
Despite its openness, Australia requires the Foreign Investment Review Board to
approve any commercial real estate investment by a foreign company or individual
valued at US$5mn or more.
■
With a population of just over 23mn, the domestic consumer base is small by regional
standards.
Opportunities
■
Australia is currently in talks with China, Malaysia, the Gulf Co-operation Council,
Indonesia, India, Japan and South Korea regarding potential bilateral free trade
agreements. It is also part of negotiations for the Trans-Pacific Partnership and a

regional south pacific pact, PACER plus.
■
Upgrade and expansion of urban infrastructure will be needed to sustain population
growth in Australia's main cities, providing opportunities for public-private
partnerships in the future. The government is also targeting infrastructure
improvements to rural areas.
■
More healthcare infrastructure will be needed to support the ageing population, and
with the introduction of the federal government's National Disability Insurance
Scheme, the industry is likely to see increasing demand for services.
Threats
■
Corporate taxes for foreign investors in Australia remain higher than in other
countries, and it seems unlikely that the government will succeed to reduce the rates
in the near future.
■
Recent investment proposals by Chinese firms regarding the agricultural and resource
extraction sector have raised fears that strategic assets will be lost to foreign players.
This has led to more conditions attached to the sale agreements, which is likely to
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SWOT Analysis - Continued
reduce the attractiveness of these assets. It remains to be seen if the recent
implementation of a database to increase transparency around foreign-owned
Australian assets will spur more regulation.
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Industry Forecast
BMI has estimated growth of 5.8% for the Australian IT market in 2014. Although PC sales have declined,
strong tablet sales mean the overall performance of the hardware market is in line with our expectations. We

expect the IT market to reach AUD27,943mn in 2014, up from AUD26,413mn in 2013. We expect growth
to be on average faster than in 2014. We forecast a total IT market spending compound annual growth rate
(CAGR) of 5.3% in 2014-2018, with the market reaching AUD32,578mn in 2017. Over this period the
market will remain stable at around 1.7% of GDP. The Australian IT market has considerable medium-term
potential, particularly in areas such as tablets, cloud computing,real-time enterprise software and data centre
growth.
Table: Australia IT Sector - Historical Data And Forecasts (AUDmn)

2011 2012 2013e 2014f 2015f 2016f 2017f 2018f
IT Market Value 24,318 25,390 26,413 27,943 29,530 31,045 32,578 34,126
o/w Hardware 10,814 11,090 11,334 11,772 12,255 12,617 13,064 13,446
- PC 8,781 9,094 9,385 9,753 10,172 10,484 10,869 11,200
- Servers 973 998 1,020 1,060 1,103 1,135 1,176 1,210
o/w Software 4,068 4,118 4,303 4,435 4,695 5,048 5,200 5,399
o/w Services 9,435 10,181 10,777 11,736 12,580 13,380 14,315 15,282
IT Market, % of GDP 1.7 1.7 1.7 1.7 1.7 1.7 1.7 1.7
e/f = estimate/forecast. Source: BMI
BMI has estimatedgrowth of 5.8% for the Australian IT market in 2014. Although PC sales have declined,
strong tablet sales mean the overall performance of the hardware market is in line with our expectations. We
expect the IT market to reach AUD27,943mn in 2014, up from AUD26,413mn in 2013. We expect growth
to be on average faster than in 2014. We forecast a total IT market spending compound annual growth rate
(CAGR) of 5.3% in 2014-2018, with the market reaching AUD32,578mn in 2017. Over this period the
market will remain stable at around 1.7% of GDP.The Australian IT market has considerable medium-term
potential, particularly in areas such as tablets, cloud computing,real-time enterprise software and data centre
growth.
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2014 Outlook
We expect growth in 2014 to outperformthat seen in 2013, growing by 1.8 percentage points (pps) to 5.8%.
This is despite our forecast of a further contraction in GDP growth to 2% for 2014, We expect real GDP

growth will fall to just 2.1% in 2013 from 3.2% in 2012, with the real terms increase in private final
consumption falling to 1.3% from 1.5%.
However, Australia remains a very attractive market even taking into account that we forecast GDP per
capita to fall modestly until 2017. Disposable incomes are still relatively high in global terms andthis gives
Australian consumers high levels of purchasing power to spend on consumer products such as tablets,
laptop-hybrids and ultrabooks.
Government spending levels are increasing generally, and the government has a number of programmes
specifically boosting IT spending, eg the National Broadband Network (NBN), which is extending
connectivity across the country. We expect government spending to increase by 2% in real terms in 2014 ,
the same level as for 2013. Government programmes should also help keep computer hardware sales in
positive growth territory. Government subsidies of computers in education will provide support for the
market. National and state governments will continue to roll out new initiatives, and the Victoria
government has invested more than US$150mn in IT in schools. New South Wales and Queensland were
also rolling out IT for schools projects. An initiative by the not for profit organisation One Laptop Per Child
will see 50,000 laptops distributed to the nation's schoolchildren by June 2014.
Looking at the enterprise segment, with the exception of a few key areas, demand for IT products and
services will continue to be squeezed by weak business confidence due to an uncertain economic outlook.
However, sectors such as government, telecoms, healthcare and banking should continue to supply demand
for implementation, consulting and managed services. The potential for a Chinese hard-landing would likely
have far-reaching consequences for Australia, which could go beyond the impact of any crisis in developed
markets.
Economic concerns aside, there are areas of growth in the enterprise segment, which are mainly based on
the increasing prevalence of connectivity. After the narrow victory of the Labor party-led coalition in the
2010 elections, the decision to continue the development of the NBN had a positive impact by boosting the
reach and quality of broadband infrastructure. The election of a Liberal / National Coalition government in
2013 is likely to result in a swifter roll out of broadband by NBN but at slower connectivity speeds. Three
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key areas that stand to benefit are cloud computing, data analytics and machine-to-machine
communications.

In 2014, uptake of cloud services will continue to increase. Surveys indicate that cloud computing is a
priority for Australian CIOs, while the release of the government's cloud computing strategy in Q213 should
also boost deployments. Cloud initiatives have already been implemented by many of the country's leading
banks, and across sectors cloud adoption is spreading from storage and email to areas such as human
resources management. The government has adopted a six-year cloud computing strategy. Cloud computing
spending could reach around AUD4bn by 2017.
Market Drivers
The squeeze on the IT market from a slowdown in economic growth in 2013 will alleviate over the medium
term. BMI forecasts the Australian economy will register an average of 2.7% real GDP growth 2014-2018,
with private final consumption increasing slightly slower annual average of 1.7% real growth. Australia is a
high-income market and we expect it to remain attractive for premium products, with low inflation and
unemployment, a contrast to many other high-income economies around the world that have higher risk
levels.
Government initiatives such as e-government, healthcare and education will drive significant opportunities
for IT vendors over the medium term. The National E-Health Transition Authority aims to create a
paperless environment in Australia's health sector, including public hospitals. Although the government is
pursuing investments in IT in a number of areas, it is reviewing procurement procedures to reduce cost,
which could squeeze vendor margins. For instance, in early 2013 the Australian Government Information
Management Office (AGIMO) consolidated its contracts with Microsoft through a single reseller to deliver
cost savings of AUD100mn.
Governmental broadband plans will provide a boost to the development of Australia's digital
economy. Increased reach of broadband infrastructure will boost activities such as online banking and
shopping, while the increased upload speeds delivered by the NBN will be a crucial enabler for widespread
adoption of cloud computing services. However NBN roll out targets may be under threat after it announced
the resignation of Richard Thorpe, its Head Of Construction who was the third incumbent of this role in
three years.
Meanwhile, in the enterprise segment, regulatory compliance will result in continued spending by banks,
and intense competition in the retail sector is spurring spending on customer relationship management
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(CRM) and back-office systems. Competition in the telecoms field is a driver for that key IT spending
segment, where deregulation has led to new entrants. High labour costs in Australia will generate demand
for services that replace labour, such as Ask Watson, adopted by ANZ Bank in H113. Such technology is in
the early stages of commercial deployments, but BMI believes that Australia could be a fertile market for
such technology over the medium term on the basis of potential cost savings.
There has also been a recent announcement that Paycorp, a provider of secure online credit card processing
to 50,000 businesses in Australia has made an agreement to incorporate Paypal into its bouquet of payment
methods, which should significantly increase their market reach throughout the Asia Pacific area of
operations.
Segments
BMI estimates that household PC penetration crossed the 90% threshold in H113, meaning there is little
scope for growth in first-time PC sales. This means the market will grow slower relative to emerging
markets in the region. However, there are large opportunities in the personal/upgrade device market as we
expect consumers will continue to be willing to spend on innovative devices that offer new use cases.
Tablets are the most prominent device meeting these requirements, but we believe hybrids/convertibles and
ultrabooks that use Haswell and, soon, Broadwell chips could gain traction in Australia.
The software market is expected to register slower growth than the hardware market, growing with a CAGR
of 4.6% from 2014 to 2018. Even so it will still remain at less than half the hardware market size by 2018.
Enterprise resource planning (ERP), customer relationship management (CRM) and business intelligence
solutions will be increasingly popular in the small and medium-sized enterprise (SME) market, as
companies aim to enhance productivity through the automation of essential functions. BMI believes
security software has potential for strong growth over the medium term as awareness about threats grows,
particularly among SMEs.
BMI expects IT services will be the outperforming segment of the IT market in the medium term, as
demand is driven by cloud computing services, data analytics and machine-to-machine communications.
Cloud computing should see strong growth with the rollout of the NBN and the release of the government's
cloud computing strategy in 2013. Opportunities will exist in telecoms, healthcare and utilities
verticals. Cloud computing will be key as businesses look for opportunities to reduce cost and increase
flexibility, and has already gained traction in the market and spread beyond initial core application areas,
with around one-third of Australian organisations estimated to be using some cloud services.

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Over the medium term the development of supporting infrastructure, new cloud computing offerings and
increased competition in this segment are expected to fuel further demand from end-users for this
technology. The federal government has set out a timetable for migrating government agencies' computing
systems to a public cloud environment. Australia's big four banks will remain in the vanguard of moves
towards cloud computing after revaluating their IT spend during the economic downturn.
Summary
The hardware market is forecast to grow from AUD11,772mn in 2014 to AUD13,446mn in 2018, with PC
sales (including accessories) forecast to rise from AUD9,753mn to AUD11,200mn, boosted by computer
procurement for education and new form factors. Software spending is forecast to rise from AUD4,435mn
to AUD5,399mn and IT services from AUD11,736mn to AUD15,282mn.
IT Market Industry Trends
2011-2018
MARKET: IT market value, AUDmn (RHS)
MARKET: IT market value, % of GDP (LHS)
2011
2012
2013e
2014f
2015f
2016f
2017f
2018f
1.6
1.65
1.7
1.75
0
20,000

40,000
e/f - estimate/forecast. Source: BMI
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Broadband
Table: Telecoms Sector - Broadband - Historical Data & Forecasts

2011 2012 2013 2014f 2015f 2016f 2017f 2018f
No. of internet users ('000) 28,920 30,950 31,492 31,940 32,224 32,635 33,185 33,886
No. of internet users/100 inhabitants 127.2 134.3 134.9 135.2 134.7 134.7 135.3 136.5
No. of broadband internet subscribers ('000) 11,123 12,161 12,647 13,090 13,483 13,887 14,304 14,733
No. of broadband internet subscribers/100
inhabitants 48.9 52.8 54.2 55.4 56.4 57.3 58.3 59.3
f = BMI forecast. Source: BMI, ITU, Australian Bureau of Statistics, operators
Table: Telecoms Sector - Broadband - Historical Data & Forecasts

2010 2011 2012 2013f 2014f 2015f 2016f 2017f
No. of internet users ('000) 16,922 17,859 18,752 19,690 20,675 21,502 22,362 23,256
No. of internet users/100 inhabitants 75.5 78.5 81.4 84.4 87.5 89.9 92.3 94.8
No. of broadband internet subscribers ('000) 9,739 11,123 12,161 12,647 13,090 13,483 13,887 14,304
No. of broadband internet subscribers/100
inhabitants 43.5 48.9 52.8 54.2 55.4 56.4 57.3 58.3
f = BMI forecast. Source: BMI, ITU, Australian Bureau of Statistics, operators
We have lowered our broadband forecast for Australia to reflect the risk of disruption to the National
Broadband Network (NBN) project. Following the appointment of new Communications Minister Malcolm
Turnbull, the entire board of state-owned NBN Co has resigned. Besides having to revisit the ownership
structure of the NBN Co, which could involve private sector participation to fund the rollout, massive
changes will also be needed to renegotiate contracts with network vendors, causing delay to the protracted
NBN project.
We expect the Australian broadband market to continue exhibiting growth potential with the mobile

broadband segment forming the main growth driver. It is also increasingly common for customers to own a
fixed and mobile broadband connection. The NBN aims to deliver broadband services, either by fixed or
wireless means, to the entire population, and achieving this goal on target should provide a boost to the
broadband uptake towards the end of our forecast period.
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Industry Trends - Broadband
2011-2018
f = BMI forecast. Source: BMI, Australian Bureau of Statistics, operators
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Macroeconomic Forecasts
Economic Analysis
BMI View: The greater-than-expected job loss print recorded in December 2013 is in line with our outlook
for Australia's unemployment rate to head higher in 2014. The weak job report has fuelled increased
expectations for the Reserve Bank of Australia to cut rates further, which in turn,has weighed on the
Australian dollar. While the weaker currency is likely to provide some breathing room for businesses, we
believe that these factors will prove to be no panacea, and we maintain our outlook for real GDP growth to
weaken to 2.0% in 2014, versus an estimated 2.4% in 2013.
In line with our downbeat expectations for the Australian labour market, the December report showed that
the economy lost more full-time positions than the addition of part-time ones. While workers leaving the job
market (or simply given up looking for a job) helped keep the overall unemployment rate steady at 5.8% at
the end of 2013, we believe that further job losses in the months ahead will outweigh the impact from this
trend, and force the overall unemployment rate to head towards our end-2014 forecast of 6.5%.
Current Stability Driven By Unsustainable Factors
Australia - Seasonally-Adjusted Unemployment Rate & Labour Participation Rate (RHS), %
Source: BMI, Australia Bureau of Statistics
Australia Information Technology Report Q2 2014
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Monetary Easing Can Only Do So Much

On the back of this weak job market report, many market participants are now cheering for further rate cuts
from the Reserve Bank of Australia (RBA), expecting that these interest rate cuts could help revive
economic activity. We, however, hold a less optimistic outlook on the benefits that monetary easing can
bring. To be sure, we expect the central bank to heed softening economic indicators and add another 50
basis points (bps) to the 225bps worth of cuts that they have delivered over the past one-and-a-half years.
These cuts have supported growing investor interest in the Australian housing market that has help pushed
up house prices, which, in turn, has propped up the balance sheets of many households. However, this
increase in household wealth is not sustainable, especially given the lack of fundamental factors to support
house prices at current levels (except for the low interest rate environment). Indeed, with activity and new
order levels in the manufacturing and services sectors remaining in contractionary territory according to the
Australian Industry Group's performance indices, we see little reason for house prices to head higher over
the coming months. As such, we maintain our outlook for the RBA's monetary easing to provide little
support to economic growth, and expect real GDP growth to slow further to 2.0% in 2014 from an already-
downcast forecast of 2.4% in 2013.
Little Room For Optimism
Australia - New Orders Sub-Index For Manufacturing And Services
*A level about 50 indicates expansion, Source: BMI, Australian Industry Group
Australia Information Technology Report Q2 2014
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