Out with the Mining in with the...?
Before the 19th century, Australia’s economic output was made up mostly of sectors involved in basic necessities, such as food, leather and domestic items, with the government acting as the primary producer and consumer. It was only in response to the gold mining boom and growth in the wool industry that more commercial and industrial opportunities came. Advances were seen primarily in the manufacturing, agriculture and services sectors to complement these industries, such as banking and commerce. [1]
At the turn of the 20th century, agriculture, forestry and fishing composed Australia’s largest sector. By the 1950s, agriculture itself accounted for around one third of activity. It was a major contributor to exports, with wool products being one of them. In this same period, manufacturing quickly grew, making a little under 30% of GDP mostly in reaction to World War II. But from the 1980s and 1990s, manufacturing’s contribution started to shift to the services sector, which was increasingly growing in importance. The shift was triggered by investment booms, such as that in mining during the 1960s and business services in the 1990s. [2] Since then it has continued to fall, to less than half of its contribution to output compared to the 1950s and 1960s, while services made up 71.3% of GDP in 2010 which included industries such as finance, insurance, tourism, retail, education and health. [3]
Even though not a large proportion of GDP, mining—made up primarily of iron ore and coal in the past decade—has been a large contributor to growth and export demand due to increasing demand in Asia. [4] Having been highly sensitive to commodity prices, it is clear that relying on the mining boom is not sustainable. What does this mean for the future of the economy? With less dependence on mining, focus is now driven towards future growth in non-mining and non-manufacturing sectors. Protection of the manufacturing and agriculture industries by the government has receded through decreases in subsidies. As the services sector is largely labour intensive, there is opportunity for growth in employment and higher labour participation should Australia continue to focus on the services sector. The industry providing the most value and fastest growth within this sector is finance and professional services, which is an industry that Australia has significant competitive advantage in. [5]
With focus on entrepreneurship for start-up and growing businesses recently in the 2015-16 budget, there is an opportunity for progress in innovation and technological advancements. Technological shifts in the future are expected to maximise customer value and provide better access to global markets. On the one hand, emerging economies in Asia will provide new opportunities for external trade. On the other hand, it is conceivable that Asian growth will undermine Australian competitiveness. Growth of GDP in the region is expected to outpace that of others in the world, while trade has grown 18% per year on average. Recent trade agreements show a shift to Asian markets such as China, Japan and Korea, with foreign investment popular in sectors such as education and tourism, housing and financial services. [6]
The evolution of Australia’s trade sectors shows how industries are rapidly changing. Businesses today need to be responsive to developing trends, such as globalisation and technological advancements, if they want to remain viable in the future.
Cynthia is in her 3rd year studying a Bachelor of Commerce/Economics. She enjoys being able to apply economics and its theories to business and industry situations. She joined ESSA as a writer in order to challenge her critical thinking.
[1] Australian Bureau of Statistics, 2012, Evolution of Australian Industry, viewed 31 August 2015, http://www.abs.gov.au/ausstats/[email protected]/Lookup/by%20Subject/1301.0~2012~Main%20Features~Evolution%20of%20Australian%20Industry~239
[2] Australian Bureau of Statistics, 2005, 100 Years of Change in the Australian Industry, viewed 31 August 2015, http://www.abs.gov.au/AUSSTATS/[email protected]/lookup/1301.0feature+article212005
[3] Economy Watch, 2010, Australia Industry Sectors, viewed 31 August 2015, http://www.economywatch.com/world_economy/australia/industry-sector-industries.html
[4] Connolly, E., & Lewis, C., 2010, ‘Structural Change in the Australian Economy’, in Reserve Bank of Australia, Bulletin, September Quarter http://www.rba.gov.au/publications/bulletin/2010/sep/pdf/bu-0910-1.pdf
[5] Economy Watch, 2010, Australia Industry Sectors, viewed 31 August 2015, http://www.economywatch.com/world_economy/australia/industry-sector-industries.html
[6] Pash, C., 2014, 5 Huge Trends that will Determine Australia’s future, viewed 31 August 2015, http://www.businessinsider.com.au/5-huge-trends-that-willdetermine-australias-future-2014-6
Illustration: Harmony Wong