Where Australia needs more big business

Australia’s top 20 list of publicly listed businesses shows us what we are good at – but also reveals obvious gaps which the nation should seek to fill if it wants to remain competitive and prosperous.

Australia’s top 20 list of publicly listed businesses shows us what we are good at, but also reveals obvious gaps.

It is a table that poses questions about the future of Australian prosperity and property values, both residential and commercial. It is a list of the 20 biggest publicly listed companies in Australia ranked by market capitalisation. The data is readily available on a number of sites, including companiesmarketcap.com.

Bernard Salt’s Gap Analysis table of top 20 publicly listed companies in Australia

20 biggest businesses: where we prosper

Of course I have added my own ‘secret sauce’ to the Australian top 20, namely the year in which these businesses were formed. Foundation years can be muddied when mergers are involved, but the years cited at least give an idea of when these businesses were formed. I have also added the city in which each business is (officially) headquartered.

Market capitalisation is a product of the share price multiplied by the number of shares. The valuations are expressed in USD which enables international comparisons. The most valuable company on the ASX last week was Commonwealth Bank ($157bn) followed by BHP ($141bn) and CSL ($101bn),

If Australia’s biggest business by market capitalisation, CBA, was listed on the New York Stock Exchange, it would rank at position No. 59.

America’s most valuable publicly listed company, Apple, has a market capitalisation that is 21 times that of CBA.

Also worth noting, is the US retailer Walmart (No. 12 in the US, $612bn), equivalent to not quite four CBAs, is headquartered not in New York or even Chicago but in Bentonville Arkansas, population 54,000 which is about the same size as Shepparton. (Maybe Shepparton could lobby CBA to relocate its headquarters from Sydney to Shepparton?)

Sydney-Melbourne rivalry still resonates

The Australian business community and people have much to be proud of in this list. Over 200 years, we have created corporate assets and skill sets designed to service the needs of a growing and (over the longer term) an increasingly prosperous nation.

Westpac was founded in 1817; ANZ started in 1835; CSL was founded in the latter years of World War I; CBA and the Reserve Bank were established along with the post office as a dividend of federation. Sydney got the two banks; Melbourne got Australia Post, which later gave rise to Telstra.

Sydney also got weekenders for the Prime Minister and the Governor-General at Kirribilli and Admiralty House. Surely these assets contravene the spirit of federation and the purpose of an independent Canberra.

(Our national capital should have been established at Albury-Wodonga, and if the PM and the G-G really do need a reprieve from the unrelenting hustle and bustle of Canberra, shouldn’t they go to a rural retreat like Chequers or Camp David as opposed to the pulsing heart of a global city? And shouldn’t that rural retreat in all Sydney-Melbourne-rivalry fairness be located in Victoria at, say, Mt Macedon or Daylesford? Just a thought.)

CSL’s positioning in Melbourne’s Parkville effectively ensured that for 100 years, and more, Parkville commanded the title of this nation’s premier medical research hub. New vaccine- manufacturing facilities are being developed by CSL at Broadmeadows, well north of Parkville.

The tensions between Sydney and Melbourne, heightened by the divvying-up of the spoils of federation, clearly still resonate down the decades. And, it has to be said that Sydney seems to be winning, based on the proportion of ASX top 20 businesses (and the PM’s Kirribilli retreat) more or less headquartered there.

Indeed, chief executives of Australia’s biggest public companies often retain an office (and support staff) in Sydney and also in Melbourne. (Good for the property industry!) And they can be remarkably coy about publicly citing their city preferences.

This is not the case in, for example, France where the nation’s biggest businesses are unashamedly Paris-based, namely LVMH, Hermes, L’Oreal, Dior. London too is the natural home of the UK’s biggest businesses.

A mining truck at the Covalent lithium mine in Western Australia, owned by Wesfarmers. Picture: Cameron England

Resources key to our prosperity

Many of Australia’s biggest businesses are built on a model involving the extraction of resources. Australia’s BHP is the world’s biggest mining company. It was founded in Broken Hill in 1885, but its head office soon relocated not to the nearest capital, Adelaide, or to Broken Hill’s state capital of Sydney, but to what was then the most prosperous city in Australia – Melbourne.

And there, BHP’s head office stayed, including to, through and beyond the merger with South Africa’s Billiton. And despite the fact that the C-suite of Melbourne’s other resources giant, Rio Tinto, decamped to London in the late 1990s.

The reason why Australia’s biggest companies are skewed towards resources is because Australia is the only nation on the planet to command the resources of an entire continent. Not even the Americans make such a claim.

Indeed, we Australians should be world’s best at locating, extracting, adding value to and shipping (mined) resources to global markets. I would therefore expect logistics (eg WiseTech Global) to figure prominently in Australia’s corporate skill set and assets.

But there are gaps in this list of Australia’s biggest publicly listed businesses. Sure, we have resources, banking, retail (Woolworths) and even entertainment (Aristocrat) businesses, as well as some large recently developed (say, last 30 years) technology companies such as Atlassian and REA (online real estate).

Australia needs to be building its agribusinesses and related infrastructure, such as grain-handling facilities at ports, in order to help feed a growing global population, Bernard Salt says. Picture: Zoe Phillips

Where are the gaps?

But where are Australia’s agribusiness businesses at scale? Some of our biggest agribusinesses remain co-operatives. Is this a business model that can lift Australia’s share of global food production into the future?

Given the UN is projecting a 25 per cent increase in world population over the next 50 years, Australia should aim to lift agribusiness production and export by, say, 35–40 per cent over this timeframe. This will mean that our grain-handling (port) facilities should include provisioning for vast expansion in their 25-year strategic plans.

And why is there no renewable energy business emerging (at scale) and which could then expand globally by snapping up renewable assets in other countries?

Surely by the mid-2030s, a publicly listed global renewables business will have emerged from somewhere? Why not from a corporate asset based in Australia? Indeed, where are the emerging renewable versions of global energy companies like BP, Shell, Exxon Mobil?

Australia is a growing nation, building, we are told, the equivalent of new cities the scale of Canberra and Hobart every year. So, where are the homegrown publicly listed companies that are building houses, offices, warehouses and civic infrastructure to accommodate all this remarkable and unrelenting growth?

Have we outsourced a large slice of this market to big business headquartered in other countries? Along with the task of and the responsibility for managing Australia’s agribusiness resources? Surely not!

Are we investing in and developing the skill sets and the homegrown corporate assets required to build tunnels and bridges and underground railway lines for our ever-expanding cities and towns?

Melbourne and Sydney are projected to grow from 5 million to 8 million over the next 30 years. Madrid, by comparison, is expected to grow from 6 million to 7 million. By my logic, this means that Australia should have naturally emerging corporate assets capable of delivering heavy engineering works like, say, tunnels to deliver fluidity of movement in our biggest cities.

Outlook for business

So what happens over the course of the next 25 years, taking us to the middle of this century? Do we continue to look outside Australia for the expertise to manage and process agribusiness product? Do we continue to outsource complex engineering and construction works? Do we have (or do we have the pathway to deliver) the capabilities and the corporate assets to build nuclear submarines?

I think homebuilding is safe from the outsourcing process unless, of course, accommodation modules can be manufactured more cheaply elsewhere and then marketed, so as to become hyper-fashionable locally.

Or do we make decisions now about the businesses and the skill sets, as well as the corporate assets that we need to deliver prosperity and, more importantly, self-determination to the Australian people?

I say we should be taking a global view and a long-term view. We need to create or cultivate food-based businesses at scale.

We should have locally based sovereign businesses engaged in complex civil engineering works. We need to be building the businesses and the skill sets (and the training facilities) that can support, however tangentially, defence capabilities.

We should not lose the capacity to refine oil on the Australian continent. We need sea lanes to remain open and protected. We need the ability to train technicians and tradies in all parts of the Australian continent.

And we need to plan this with a mindset that skills, businesses and labour should all have interoperability: working on drones, building tunnels, assuring energy and resources flows, teaching next-gen workers are all part of this vision to assure Australia’s future.

A dystopian view of the future would involve global businesses (perhaps based in, say, Silicon Valley) develop business models that supplant local businesses in retail, financial services, and maybe even in logistics.

Thinking beyond the electoral cycle

In some ways, these questions, this big-picture, medium-term outlook that goes to the prosperity and the security of the Australian people and their way of life, all stems from a simple, single table identifying what we’re good at and, by omission, what we’re missing out on.

I say we need to build strategic strengths and capabilities, not so much for us today, but for the Australians of the 2030s, the 2040s and beyond.

Bernard Salt AM is founder and executive director of The Demographics Group; data sourced from companiesmarketcap.com