Five industries set to fly in 2010-2011

With the new financial year upon us, we look at the Australian industries set to fly and fall in the next 12 months.

Organic farming will be the biggest winner in 2010-2011 as Australians consider the health benefits and environmental impacts of their food choices, while insulation services will be the biggest loser following the Federal Government’s scrapping of its Home Insulation Program. Also, wildly contrasting fortunes for major industries in Australia’s communications sector.

Whereas most of the world’s developed nations remain bogged down by the fallout from the ongoing global financial crisis, Australia’s outlook for the new financial year is relatively positive, with economic growth to reach 3.7% in 2010-2011.

The Australian industries set to fly and fall in the new financial year include:

THE TOP FIVE

1. Organic farming

Revenue growth: +15.1%; total revenue: $0.45 billion; employment growth: +2.0%

Ever-increasing health concerns, greater awareness of environmental sustainability, higher disposable incomes and the availability of a wider range of organic produce will support phenomenal growth in Australia’s organic farming industry, which currently accounts for less than 1% of the total value of grains, meat, horticulture and dairy production in the country.

Big business is jumping aboard the organic farming bandwagon. For example, recently international heavyweights McDonald’s and Unilever made bold moves to become more environmentally friendly and ethically sound by sourcing coffee and tea respectively from plantations accredited by American environmental organisation Rainforest Alliance while Coles supermarkets have their own private-label organic brand.

2. Online information services

Revenue growth: +8.7%; total revenue: $1.56 billion; employment growth: +7.3%

An increased use of mobile devices such as smartphones and Apple’s iPad will result in a big increase in Australians accessing of online information on the go. Moreover, in the wake of the global financial crisis, the demand of Australian businesses for financial information – in order to manage risk, make better decisions and adapt to shifting economic conditions – will expand.

Consumers are getting an increasing proportion of their news and information online, migrating from traditional sources such as print media and television. Advertisers are following consumers, buying advertising space on the websites of information providers such as Fairfax and News Limited, as well as buying search terms from search providers such as Google and Yahoo.

3. Insurance brokerage

Revenue growth: +7.2%; total revenue: $11.20 billion; employment growth: +2.4%

There will be rapid growth in premium pricing as Australian insurance carriers strive to recoup underwriting capacity lost on recent investment activities. This will result in substantial revenue growth for brokerage firms since brokers earn commissions on the size of the premiums written.

As brokers distinguish themselves from direct insurance sellers through a greater emphasis on advisory services and financial management, they will increase profitability and allow for both employment and wage growth. Employment will grow at 2.4% and wages at 3.1%.

4. Mobile telecommunications carriers

Revenue growth: +6.9%; total revenue: $19.60 billion; employment growth: +0.8%

Australia’s mobile telecommunications carriers will benefit greatly thanks to the growing demand among Australians for mobile internet data subscriptions and their continuing migration from fixed phone services which enable them to avoid associated line rental fees.

The smartphone explosion is seeing revenue from mobile services other than voice, SMS and MMS rise rapidly. Millions of people cannot get enough of being able to browse the internet and watch television on their hand-held devices and they love their apps as well.

5. Alternative health therapies

Revenue growth: +6.5%; total revenue: $3.46 billion; employment growth: +4.3%

An increasing acceptance of alternative therapies and more holistic approaches to health among Australians will see its associated industry continue to expand.

Growing acceptance of alternative therapies coupled with increasing coverage of such treatments by private health insurance providers is the key to this industry’s continuing success.

THE BOTTOM FIVE

1. Insulation services

Revenue growth: -24.1%; total revenue: $0.84 billion; employment growth: -55.6%

Australian insulation services will be out in the cold, at least for the next two years, as a consequence of the Federal Government’s abrupt withdrawal of the subsidy that had been the major catalyst for the growth experienced by the industry following Labor’s 2007 election victory.

Once insulated by government support, the insulation services industry stands alone now, making it vulnerable to a number of competitors, including special construction trade contractors and humble do-it-yourself enthusiasts. After two years of exceptionally strong employment growth, the new financial year will see this industry’s workforce more than halve in size.

2. Wired telecommunications carriers

Revenue growth: -4.8%; total revenue: $11.1 billion; employment growth: -4.7%

A large fall in revenue for Australia’s wired telecommunications carriers driven by a strong reduction in the number of wired access lines being taken up as a result of substitution.

Once wired telcos were at least able to compete on price but now naked DSL and VoIP products have removed their ability to even do that. The pricing war has not only reduced the revenue of wired telcos but also eroded their profitability, forcing them to slash jobs and wages.

3. Paper manufacturing

Revenue growth: -3.1%; total revenue: $2.68 billion; employment growth: +2.9%

Australian paper manufacturers will take a hit as consumers migrate from print to electronic media (see online information services in the top five industries). Furthermore, imports account for more than 50% of the paper products used in Australia these days.

Accounting for 24% of the paper manufacturing industry’s downstream demand, newspapers, book and magazine publishers have struck a major competitive obstacle in written content moving online and to electronic devices. Online news joining forces with eBook readers iPad and Kindle, not to mention smartphones, are continually stealing market share from paper producers.

4. Video hire outlets

Revenue growth: -3.1%; total revenue: $1.04 billion; employment growth: -1.6%

Tough times are ahead for Australia’s video hire outlets as the electronic distribution of video content, including internet streaming and downloads (both legal and illegal), increases.

Once customers may have been deterred from watching video content on a computer and still opt for video hire but that matter has been redefined with the online capabilities of video game consoles. Other factors include the popularity of pay television and the increasing volume of free-to-air content via digital channels that is positioning itself more competitively to video hire stores.

5. Grape growing

Revenue growth: -3.0%; total revenue: $1.50 billion; employment growth: 0%

Australian grape growers will have plenty to whine about as a result of a grape glut, an unfavourable exchange rate and international competitive pricing pressures.

For a number of reasons Australian wines, towards the production of which nearly 90% of Australian grapes go, either have not been selling or selling too cheaply. Many Australian vineyards have become unprofitable and the situation will get worse before it gets better.

Robert Bryant is the general manager of business information firm IBISWorld.