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Australia should focus on Asia’s millionaires – not its “middle class”

9 Apr 2014
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Australia’s corporate strategists and national economic planners are mesmerised by what they believe will be rich pickings from the growth of Asia’s middle class. But while the population estimates of Asia’s emerging middle class are impressively large, their disposable incomes are not.

Asia’s increasing demand for basic commodities has benefitted Australia’s resources sector enormously but similar success stories for our non-resources sectors are not as obvious. The promise of a vast Asian middle class bracing to buy Australian products and services remains elusive and arguably not very profitable. Our market- entry strategies into the region need to be re-evaluated and we should examine more carefully which sub-set, if any, of the emerging Asian middle-class market we can serve profitably.

When Australians think of “middle class”, we generally think of a mainstream with disposable incomes that – even at the lowest end – will provide food on the table, a regular holiday and at least one flat-screen TV. In reality, however, the lives of most of Asia’s so-called middle classes are very different. Across emerging Asia – which has grown so dramatically over the past few decades – most households classified as “middle-class” have an annual income of only US$2,000–10,000. Even after adjusting for purchasing power parity, their standard of living despite their high aspirations is severely constrained by their limited budgets and is well below that of most Australians.

Tejpavan (Pavan) Gandhok is an entrepreneur and a ‘pracademic’. He is a Visiting Fellow at Asialink and the Australia India Institute, and an Affiliate Faculty member at Singapore Management University. He has worked in senior leadership roles with leading strategy consulting, corporate finance advisory, and private equity firms. Pavan is an Indian-born, US-educated Australian citizen, an Overseas Citizen of India and a former permanent resident of Singapore.

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2014
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