For the ten years to 29^th February 2024 the All Ordinaries Accumulation Index of Australian shares, which includes dividends paid, returned 8.2 per cent per annum. Over the same period the MSCI Index of Global Shares (ex Australia) earned 12.7 per cent per annum.

One thousand dollars in Australian shares is now worth $2,199 while $1,000 in overseas shares is worth $3,305. There are several reasons for this. Major industries operate overseas that do not exist or are small in Australia.

We have no major technology companies. Microsoft, Facebook, Apple, Google and Amazon are all US based. Australian company Atlassian chose to list in the US. These companies have made huge gains over recent years, that look set to continue.

They will be the main commercial developers and distributors of artificial intelligence applications. So far no Australian companies look likely to be major players in AI.

Australia’s only pharmaceutical company is CSL, and it only operates in blood products. The major drug companies worldwide make big profits from new drugs they develop and patent.

The latest example is the weight loss drugs developed by Denmark’s Novo Nordisk and Eli Lilley in the US. These are hugely profitable with the companies building new factories to keep up with demand.

We do little manufacturing in Australia. Our labour costs are too high. Some overseas companies do well from it. Think Volkswagen, Toyota, BMW, Airbus, Boeing, Rolls Royce and Caterpillar to name a few.

Another likely reason for Australia’s weaker returns is our overregulation and bureaucracy, which continue to increase. It takes far too long to get approvals to do anything.

It takes about ten years from the time an exploration company discovers a mineral deposit until it gets all approvals to start mining. In the 1990’s it took three to five years.

New subdivisions, factories, even solar farms, take years to be approved. Orange City Council and NSW Government owned developer Landcom want to develop a new suburb in Orange to supply badly needed houses. They expect it will take four years just to get the land rezoned.

Australia has many more stringent regulations and government expectations slowing companies’ operations than most other countries. Think privacy, occupational health and safety, gender equality, diversity requirements, and so on. These may seem minor, but they reduce profitability.

Some super and investment administration services allow investors to choose specific, direct international shares, but for most people the easiest way to gain international exposure is using managed funds.