by Professor Ross Kingwell – AEGIC Chief Economist.
Perth is closer to Bali than to Melbourne or Sydney. Although geographically very close to Australia, Indonesians, as near neighbours, have very different diets to Australians.
An Indonesian’s diet is hugely grain-centric (Chart 1). Indonesians main dietary focus is on rice. It ranks globally as having the 5th highest per capita annual consumption of rice at around 135 kilograms and this level of consumption has only declined slightly over the last several years. A range of government policies subsidise rice production and consumption, because rice is the main source of calories for Indonesians and rice-based diets are part of the cultural heritage and social fabric of Indonesia. However, Indonesia also has emerged to become the world’s 4th largest per capita consumer of instant noodles – around 49 packets per person per year. This combination of rice and instant noodles results in the average Indonesian’s diet being dominated by cereal staples (see Chart 1 & 2)(Hover cursor over each slice of the pie).
The average Indonesian diet involves consuming 588 grams per day of the foodstuffs shown in Chart 1. By contrast, the average Australian diet involves consuming 962 grams per day of the same foodstuffs, but in different proportions. The weight of daily per capita consumption of foodstuffs in Australia is 64 percent more than in Indonesia. Australians for example consume 196 grams of milk (~190 mls per day) whereas the average Indonesian consumes only 13 mls each day.
The diet of the average Australian is much more diversified, including more consumption of milk, red meats, fruit and fruit juices. However, Australians, on average, also consume almost double the amount of sugar-sweetened beverages and consume less seafood.
As per capita wealth grows in Indonesia, the Indonesian diet is likely to be gradually less fixated upon the cereal staples of rice and wheat-based noodles. More likely is the diversification of diets away from cereal dominance to greater inclusions of meat, dairy and non-cereal products such as vegetables. Hence, it’s likely that the growth in Indonesia’s population over the next two decades, rather than the increasing wealth of Indonesia, that will be the launching pad for increasing volumes of wheat being sold to Indonesia for noodle manufacture.
Rising incomes are likely to result in provision of sufficient calories in most Indonesians’ diets, and these diets will be gradually less solely centred on cereal staples. Yet, as Indonesians become wealthier, more urbanised, better educated and more-travelled, and as they diversify their diet, then new wheat-based product markets will emerge. Breads, cakes, pastries and cookies will likely experience a lift in per capita consumption.A challenge for Australia’s wheat industry then becomes to answer this question: Does Australia have sufficient comparative advantage in breeding, growing and exporting wheats suited to the manufacture of these sorts of increasingly popular food types?Is growth in demand for these products sufficiently assured to justify committing resources to service that demand? To answer these questions requires understanding the changing market demands in Indonesia and understanding Australia’s domestic capabilities, whilst simultaneously training an eye on the abilities of Australia’s wheat exporting competitors. This is a focus of on-going research by AEGIC.