FYI | Jan 18 2008
By Chris Shaw
As evidence the Australian economy continues to grow solidly ANZ Banking Group senior economist, industry, Julie Toth notes as at June last year there were just over two million businesses operating in the country, up from 1.96 million the year before and 1.87 million four years ago.
In total these businesses produced an estimated total of $1,019 billion in goods and services for the year, which was a 3.9% rise over the total in 2006. Property and business services is the largest industry in terms of output, followed by manufacturing, while in employment terms retail is the biggest followed by property and business services.
Looking at respective performances Toth notes it was those industries most exposed to the mining sector that recorded the strongest growth in annual output, with examples including services to mining generating an increase of 10.1%, road transport up 10.6% and construction up 8.8%.
Overall the mining industries contributed around 7% to Australia’s GDP in value terms, but in terms of export revenues the sector was responsible for almost half of total revenues.
In contrast those industries with exposure to the drought delivered lower output, with agriculture impacted the most as evidenced by its 20.9% decline. The wheat sector was the largest contributor in this regard, as production more than halved from the previous year. Wood and paper manufacturing recorded a fall of 2.7%, while water and sewerage services experienced a 5.5% fall in output.
Labour market issues are becoming evident in some sectors, with Toth pointing out it is again the mining-related industries where the signs are strongest given the strong wage and employment growth being experienced and the record number of job vacancies.
Other industries to record strong employment growth during the year include the transport, education, retail, property and business and culture and recreation sectors, while the agricultural sector has seen little improvement in employment since the drought first began to impact in 2002.
Toth’s assessment is while overall business profits and profitability remain at healthy levels they have clearly passed their peak and this is becoming increasingly clear across a number of industries. The mining related industries are a clear example, as the boom of recent years is forcing companies to increase their exploration budgets and infrastructure, this at the same time as costs generally and labour costs in particular are growing strongly.
For agriculture it is more a story of survival as in the past year earnings were the lowest for more than a decade as costs have remained steady as output has fallen, while utilities continue to deal with higher costs and a resultant squeeze on margins, particularly in the electricity sector.
