As industry gets set to embark on a new financial year, IBISWorld has released its annual list nominating Australia’s top 10 industries set to soar in 2011-12 – and the five worst-performing.
1. Oil and gas production
Forecast to grow by 18.3% in the coming year to reach $41.2 billion in 2011-12, oil and gas production has been highlighted by business information firm IBISWorld as this year’s top industry performer.
Despite the fact Australia’s oil production is falling, gas output has continued to grow strongly, and significant industry growth is expected off the back of higher gas output – through the discovery of new fields and expanded production at existing fields – and higher prices, which will stimulate revenue.
2. Sugar manufacturing
A sweeter year is expected for the sugar industry in 2011-12, with IBISWorld forecasting that increased ethanol demand will assist the industry to grow by 16.3%, to reach $2.7 billion in revenue.
Sugarcane can also be used to produce ethanol, and it is this increasing diversion of sugar into ethanol production that is playing a key role in the industry’s growth.
Rising global sugar prices and streamlined production will also play a part in boosting industry revenue.
3. Organic farming
Demand for organic products in Australia has risen steadily over the last five years as consumers increasingly factor in the health benefits and environmental impact of their food choices. Strong growth has been supported by the mainstream acceptance of organic food, with major retailers – such as Coles and Woolworths – extending and promoting their own range of organic produce and products, making them more price-competitive and easier for consumers to access.
In particular, baby foods are a strong growth area for the organic farming industry, as parents seek to avoid feeding their children foods that contain chemicals and preservatives.
The organic labelling system rolled out in 2009 is further supporting industry growth. It is forecast to expand by 13% to reach $504 million in 2011-12. This system has made organic products easier for consumers to identify, and ensures products meet required definitions and standards.
And although organic produce currently represents just 1% of farm-gate sales, it is growing at a rapid rate off the back of increasing demand.
4. Mining
The mining sector has continued to reap rich rewards in recent years – with developing economies’ demand for Australian-sourced commodities mostly driving growth.
And despite the high Australian dollar, 2011-12 will be no different, with IBISWorld forecasting the combined effects of surging demand and rising commodity prices to increase revenue by 12.9% to $207.7 billion.
With close to 70% of our mined commodities exported to foreign markets, the growth of Australia’s mining sector is closely linked to international demand.
5. Automotive fuel retailing
While increases to the cost of crude oil and the roll-on effect hitting prices at the pump may have been hurting consumers’ pockets, there is good news ahead for automotive fuel retailers. IBISWorld is forecasting increased economic activity will necessitate greater fuel consumption, resulting in growth of 10.9% over 2011-12, taking total industry revenue to $37 billion.
Australia’s economy is currently performing strongly, resulting in low unemployment and high demand for transport and infrastructure. The increased movement of people and goods – driving to and from work and trucking materials interstate – will see significant growth for the sector.
Diesel sales are expected to expand more rapidly than petrol sales in the coming years, as motorists switch to diesel vehicles, which offer greater fuel economy.
6. Multi-unit apartment and townhouse construction
According to IBISWorld, the trend towards higher-density housing is expected to see the multi-unit apartment and townhouse construction industry grow by 10.6% in 2011-12 to reach $11 billion, as high home ownership rates stimulate the demand for construction of higher-density housing, and the attractiveness of such property as an investment increases.
As a result of property price increases, we have seen a shift in the types of residences Australians are calling home, with quarter-acre backyards in the suburbs increasingly being traded for balconies in the centre of the city. This has seen apartment sales rise as a percentage of housing stock from 10% in 2000 to 12.9% in 2008 – a trend expected to continue over the coming decades, with the population density of Australia’s largest cities gradually rising.
7. Financial asset investors
Although the financial asset investors industry took a large hit during the last five years, the year ahead is set to see the industry prosper. IBISWorld is forecasting industry revenue growth of 9.8% over the course of 2011-12 to reach $17 billion.
Driving this growth will be the improvement in investor confidence amid a resurgent economy that is likely to lead to greater flow of investment funds into the industry. This is expected to occur on the back of recovering asset values, a bullish sharemarket and a rising interest environment that will provide opportunities for investors to generate returns on funds invested.
8. Renewable energy
As the need for an environmentally-friendly energy solution mounts, increased investment in clean energy technology and regulatory changes surrounding carbon emissions is expected to boost the renewable energy sector, which is forecast to grow by 9.7% in 2011-12 to reach $1.4 billion.
While renewable energy is less economical than coal-fuelled electricity generation, the commitment towards a decarbonised future – and the Australian Government’s aim of generating 20% of the country’s electricity needs from renewable sources by 2020 ¬– will stimulate growth for the renewable energy industry in the coming years.
9. Online shopping
Online retailing will continue to create a buzz in 2011-12, with industry growth forecast at 9%, to reach $5.5 billion in revenue. It’s driven mostly by the increasing number of brick-and-mortar shops set to launch online stores.
While the past year has seen a number of Australian retailers, such as Big W and David Jones, launch online platforms, many of our leading players are yet to enter the arena. IBISWorld predicts that over the coming months the number of names with an online presence will rapidly expand as retailers seek to compete through offering greater flexibility to customers, as well as expanding product lines.
New technology – particularly the smartphone boom – will help boost the demand for online shopping. In 2010, 25 million purchases were made online using mobile devices, and this is expected to increase by more than 50% in 2011-12.
10. Domestic airlines
Hit hard by the global financial crisis, and recently affected by the volcanic ash cloud, Australia’s domestic airline industry has proved quite resilient over a turbulent few years – and the news is likely to improve with IBISWorld forecasting growth of 9% over 2011-12, to reach revenue of $13.4 billion.
Drivers of the growth include a few key factors: increases in business-related travel and hikes in business-class prices; the growing popularity of low-cost airlines; and competition between airlines vying to fill economy seats, which reduces travel costs for consumers and strengthens air travel demand.
1. Gaming and vending machine manufacturing
Forecast for a revenue fall of 12.6% over the coming year (down to $439 million), Australia’s gaming and vending machines manufacturing sector tops IBISWorld’s list of worst-performing industries for 2011-12, with the strong Australian dollar and government restrictions on gaming machines playing a key role in the downturn.
The strong Australian dollar will see increased competition from imports in the vending machine sector, with imported products expected to account for 64.6% of domestic demand by June 2016.
Restrictions on the number of gaming machines allowed in one area – such as within a state, suburb or local council – are expected to become increasingly stringent over the next five years, as governments across Australia seek to combat problem gambling.
Although per capita gambling expenditure is forecast to increase in the next five years, horseracing and sports betting are expected to benefit the most.
2. Wired telecommunications carriers
Appearing on IBISWorld’s worst-performer list for the second year in a row, the downward spiral for wired telecommunications carriers is expected to continue at a rate of -7.6% in 2011-12, down to $10.2 million in revenue.
The substitution of mobile lines in lieu of wired access lines, coupled with the pricing war between fixed-line and mobile carriers, are identified as key factors driving the downturn.
While wired telecommunications carriers were once able to compete with mobile carriers on price, the introduction of ‘naked DSL’ and VoIP products, as well as the expansion of mobile phone ‘cap’ plans offering almost unlimited phone calls and texts, have created an environment where wired telcos struggle to compete.
As a result of the pricing war, not only has revenue been reduced, but profitability has also been eroded, seeing wired telcos heavily reduce workforces and wages – they are forecast to fall at 7.4% and 7.3% respectively in 2011-12.
3. Institutional building construction
Revenue for the institutional building construction industry has fallen in recent years as government expenditure on such buildings has been scaled back. This downward trend is expected to continue in 2011-12, with IBISWorld forecasting a 7.3% contraction to $10.2 billion.
The majority of funding for the industry comes from the public sector, with the work being undertaken by private contractors. The reining back in of government funds following heavy expenditure on programs such as Nation Building during the GFC has resulted in a fall for this industry.
4. Image processing and printing services
The state of the Australian economy and the confidence consumers have in their relative levels of wealth or poverty are no longer relevant to image processors and printers. By and large, Australians simply do not print their photos anymore.
Printing was once an indispensable part of the photographic process, but the digital revolution has created some serious challenges for the industry – which is forecast to decline by 4.9% in 2011-12 to $527.3 million.
The ability to view images on a computer makes printing images less necessary, except for display purposes. Furthermore, digital images allow photographers to keep only the images they choose, rather than the compulsory roll of film, which automatically results in fewer images being printed.
Finally, increasing alternatives for displaying images – through online sites such as Facebook, Flickr or on digital frames – mean consumers don’t need to print images in order to share them. Add to this the proliferation of mobile devices that can view digital images, and the future is less than bright for this industry.
5. Book and telephone directory publishing
IBISWorld forecasts the book and telephone directory publishing industry will fall by 2.3% to $4.2 billion in the coming year.
As shown through the collapse of REDGroup earlier this year, retailers and publishers of printed books and directories are facing increasing competition from online substitutes.
Couple this with the growing availability of, and demand for, competing media – such as the internet, apps and TV – and it is no wonder demand for printed materials is falling.
As the number of households with access to computers, computer games, the internet and a multitude of TV channels (including Pay TV, and HD free-to-air channels) increases, IBISWorld believes the growing popularity of such media will likely reduce the available leisure time and household budget for other leisure pursuits, such as reading books.
Robert Bryant is the general manager of IBISWorld
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