Australia’s technology sector is garnering attention with advancements in fintech, cleantech and gaming, among other exciting industries.
The country’s characteristically resilient economy — which had not experienced a recession in nearly 30 years prior to COVID-19 lockdowns — has provided a sturdy backdrop for its growing tech sector. As economies worldwide face uncertainty, Australia’s job market continues to defy global trends.
In fact, as COVID-19 restrictions were lifted, Australia’s employment level rose by a record 366,100 jobs in November 2021, surpassing projections of a 205,000 turnaround, as per a Reuters report.
Australia tech outlook: Strong international players
With Australia’s strong economy in mind, companies at an international scale have been securing footholds in the country’s technology market in recent years.
For instance, Japanese tech conglomerate Softbank (OTC Pink:SFTBY,TSE:9984) began investing in Australia in 2016 via the acquisition of AI and robotics firm ST Solutions. ST Solutions' flagship robot, Pepper, can greet customers in 21 languages using emotional response analytics. Pepper is at the forefront of Softbank’s robot initiatives.
Similarly, in April 2019, Google (NASDAQ:GOOG) launched its inaugural commercial drone delivery system in North Canberra, Australia. The service — called Wing — delivers food, coffee and retail items by drone to residences. Orders are placed through a mobile app.
More recently, Google announced plans to invest AU$1 billion in Australia over the next five years, including in tech startups and a regional research hub in Sydney. "Australia can help lead the world's next wave of innovation, harnessing technology to improve lives, create jobs, and make progress," Google CEO Sundar Pichai said.
Some of the biggest names in global tech are also taking positions in Aussie-grown tech startups. In May 2020, Chinese gaming and social media firm Tencent Holdings (OTC Pink:TCHEY,HKEX:0700) bought a 5 percent stake in Australian buy now, pay later company Afterpay (ASX:APT,OTC Pink:AFTPF)
As these large tech companies invest in Australia, tech unicorns (startups with valuations of more than a billion dollars) have garnered attention. According to CB Insights, there are currently six Australian unicorn tech companies: Canva, Culture Amp, Judo Capital, Safety Culture, Go1, Pet Circle and Airwallex.
Design startup Canva is estimated to be worth US$40 billion. It has over 60 million monthly active users, and 85 percent of Fortune 500 companies use its services, including Salesforce (NYSE:CRM) and PayPal (NASDAQ:PYPL). In May 2019, it acquired both Pexels and Pixabay, broadening its stock photo subscription model service. After securing US$200 million in funding in September 2021, the company has plans to double its workforce.
Australia tech outlook: Top tech trends
As mentioned, Australia’s current tech ecosystem is largely underpinned by the country’s advancements in three core sectors: fintech, cleantech and gaming.
According to Deloitte, the fintech sector in Australia is both maturing and scaling at a steady clip, making it ripe for investment. In its Technology Fast 50 2020 report, the firm highlights Half Dome, My Plan Manager and Autoguru as the top technology companies in Australia. For its part, EY reports that 58 percent of Australians used fintech applications in 2019, with the adoption rate rising 27 percent since 2017.
When it comes to cryptocurrencies, another part of the fintech landscape, Australian exchanges CoinJar and Coinspot allow users to buy and sell digital assets. In August 2019, the Gemini exchange also launched its services in Australia, offering users the ability to exchange bitcoin, bitcoin cash, zcash, litecoin and ether. A December 2021 EY report states that the country is on track to see its crypto market swell to up to 30 times its current size by 2030.
Emerging as a leader in the cleantech sector, Australia is making strides in renewable energy technology, such as wind and solar power, as well as energy storage. In early 2019, Melbourne began using wind to power 100 percent of its municipal infrastructure, such as universities, town halls and street lights.
In Queensland, Genex Power began construction of its 250 megawatt Kidston pumped hydro project in 2021. The company secured a government loan of up to AU$610 million to move the project forward. Meanwhile, as part of a 10 year deal, members of the Melbourne Renewable Energy Project will purchase 88 gigawatt hours of wind power annually from Pacific Hydro; the deal has resulted in the creation of nearly 150 new jobs. Fast Company notes that this new business model has spurred renewable energy contracts from several large corporations in Australia.
As Australia makes formative moves in renewable energy, it is also showing explosive growth in the gaming and esports sectors. PwC expects revenue for Australia’s games and esports market hit AU$3.41 billion in 2020.
Australia is home to a number of ASX-listed esports companies, including: Esports Mogul (ASX:ESH), Emerge Gaming (ASX:EM1), iCandy Interactive (ASX:ICI), Kneomedia (ASX:KNM,OTCQB:KNEOF) and SportsHero (ASX:SHO,OTC Pink:NIROF). Further expanding the esports investment opportunities in Australia, the ASX now has an esports-focused exchange-traded fund, the VanEck Vectors Video Gaming and Esports ETF (ASX:ESPO).
As the esports sector continues to expand, it has attracted international partnerships. In 2018, Riot Games, publisher of League of Legends and Valorant, partnered with the Australian Football League and brought an esports event to the Margaret Court Arena in Melbourne, a stadium that seats 4,000. In the summer of 2020, Ubisoft Australia extended its partnership with XP Esports Australia for seasons two and three of the XP Women’s League, as well as the new High School League Rainbow Six competition.
In 2022, Australian esports fans can look forward to the country's first DreamHack festival, an international immersive gaming lifestyle experience first launched in 1994. The three day event will take place in Melbourne, and will feature professional tournaments, as well as “the biggest range of e-sports and gaming content ever seen at an Australian festival," reported Esports Grizzly.
Australia tech outlook: What’s ahead
Looking ahead, PwC expects the Australian gaming and esports market to reach AU$4.9 billion by 2025. The forecasted growth is attributed to app-based games and in-app purchases in a market saturated with smartphone ownership and improved monetisation strategies for increased revenue from mobile games.
Deloitte has made several predictions for the future of tech in Australia. The major sectors the firm sees leading the way forward include on-demand video streaming services, gaming consoles, semiconductor chips, fixed wireless access, private 5G and wearable medical devices.
For its part, the Tech Council of Australia states that the number of workers in the country’s technology field will increase by 286,000 between 2021 and 2025 to reach over 1 million employed in the industry.
It's clear that the capital markets recognised this growing demand early on. In mid-2019, ABC News reported that the ASX was aiming to become an epicentre for tech listings, and over the past few years it has focused on recruiting more late-stage tech companies to access greater pools of capital.
Underscoring this growth are key economic factors. Australia’s economy is recovering from COVID-19 lockdowns. According to the Organisation for Economic Co-operation and Development (OECD), “as the recovery continues, labour market conditions will improve and spare capacity will be absorbed.” The OECD is calling for real gross domestic product to grow by 3.8 percent in 2021, 4.1 percent in 2022 and 3 percent in 2023.
What’s more, the wave of initial public offerings (IPOs) that swept Australia’s tech industry in late 2020 continued throughout 2021, with newly listed companies such as Airtasker (ASX:ART) and PEXA (ASX:PXA) amassing initial valuations of AU$255 million and AU$3 billion, respectively. Tech listings are expected to underpin IPOs on the ASX in 2022, and are anticipated to include buy now, pay later business Beforepay, marketplace technology firm Marketplacer and healthcare technology business Careteq.
This is an updated version of an article first published by the Investing News Network in 2019.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
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