5 industries at risk of disruption

Australian households are being squeezed by softer income growth and an escalation in the cost of essential items which have been rising well ahead of inflation. Following 25 years of uninterrupted expansion and a mining boom, Australia has become an expensive place to live and conduct business. The prices of essential items such as insurance, home lending and groceries in Australia are very high by global standards. In each of these industries industry leaders are generating returns in excess of 40% on every dollar invested. This is at a time when government bonds are yielding a paltry 2%. These usurious rents are a double-edged sword however. While these businesses are incredibly profitable, their returns in many cases are attracting unwanted competition. Investors need to consider the sustainability of these returns as new competitors try and get a piece of the action. In this edition of the Leading Edge we review the outlook for a number of these industries. In many cases incumbents are over earning and under investing, a dangerous combination particularly for those exposed to disruptive technologies. (VIEW LINK)