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25 reasons to be confident about growth

Deloitte analyses Australia’s sectoral growth options


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24 March 2014: New research from professional services firm Deloitte has identified 25 sectoral hotspots with the biggest potential to lift Australia’s growth trajectory over the next 20 years.

The full release of Positioning for Prosperity? Catching the next wave, the third in Deloitte’s Building the Lucky Country series, analyses growth prospects across all major parts of Australia’s economy.  The report highlights Australia’s:

  • Current growth wave: mining, which presently represents about 10% of our economy.
  • Next growth waves: the ‘Fantastic Five’ sectors of gas, agribusiness, tourism, international education and wealth management.  If we address the barriers to their success, Deloitte estimates these could be worth an extra $250 billion to the economy over the next 20 years, have the potential to match mining and keep Australia near the top of the world’s prosperity charts.
  • Future growth waves: 19 growth pockets that, if they have the same relative potential to unlock growth, could contribute at least a further $150 billion to Australia’s economy.  More importantly, these growth pockets are mainly in high job creating areas of the economy.

Collectively, these sectors, the ‘Deloitte Growth 25’ (DG25), represent a group of compelling growth opportunities for Australia over the next 20 years.

Co-author of Positioning for Prosperity? Deloitte Access Economics’ Chris Richardson, said: “The DG25 reflects our analysis of those sectoral hotspots with the greatest potential to contribute to Australia’s prosperity.

“As Asia’s boom evolves and new domestic opportunities arise, our research shows that Australia’s growth options remain excellent.  Our future prosperity will come from a more diversified spread of sectors, enabling Australia to remain the fastest-growing developed Western nation in the world in the coming decade.”

The report said five big-picture advantages gave Australia a head-start: world-class resources in land, minerals and energy; proximity to the world’s fastest-growing markets in Asia; our use of English, the world’s business language; a temperate climate; and well-understood tax and regulatory regimes.

Building the Lucky Country series co-author and global thinker on growth strategy, Mehrdad Baghai, Managing Director of Alchemy Growth Partners, said:  “The commitment by the G20 to table national growth strategies in November comes at a great time.  It will be a trigger for Australia to have a national conversation about where we need to look for our future prosperity.”

The initial findings from Deloitte’s Positioning for Prosperity report of 8 October 2013 saw great prospects in the ‘Fantastic Five’ sectors of gas, agribusiness, tourism, international education and wealth management, as well as Australia’s potential to extend its run of success in mining.  

Yet these sectors only cover a fifth of the economy, and in the full report Deloitte has now extended its analysis to focus on Australia’s potential to tap both global and local growth in areas that are among the other 80% of the economy.

Additional growth pockets

Many of the domestic growth opportunities that Deloitte identifies result from the collision of health costs and ageing.  That includes obvious candidates (Residential aged care, Retirement living and leisure, Community and personal care, and Preventative health and wellness), but also the Digital delivery of health (this nation already delivers health care to remote Australia well – think of the Royal Flying Doctor Service – but new manufacturing technologies will combine with new markets to generate new potential for digital delivery more generally).

Yet there are other domestic opportunities too, including:

  • Reskilling an ageing workforce (the numbers of older Australians interested in working longer are swelling, but their skills will need updating)
  • Developing new ways of Financing the future (with home-grown demand for innovative products to assist with the challenges of an ageing population with a huge asset base)
  • Tapping into continuing rapid growth in Private schooling (birth rates have jumped, while parents are keen to get what they see as the best education for their kids)
  • Taking advantage of new buying patterns to surf good growth in Parcel delivery.

The report also identifies downstream opportunities for services and products that support mining and the Fantastic Five, including:

  • Clean coal: Coal is starting to lose the battle for global market share with gas and renewable energies, but the potential of Australia’s vast thermal coal reserves would be reinvigorated if clean coal technologies and costs were to achieve key breakthroughs
  • Gas transport:  Australia has heaps to do to bring its gas potential to fruition, and that will open huge opportunities for our transport and construction sectors
  • ICT (Information and Communication Technology) will be a gateway for our growth sectors, enabling everything from water-saving sensor systems and disease-resistant crops on our farms, to robots and automated systems in mining, to the likes of ICT-enabled lower-cost advice models in wealth management
  • Australia’s strong Finance sector can slipstream the rapid growth in Australian trade and help finance the Fantastic Five.  In 1970 total trade flows were a meagre 23% of our economy, but by 2010 that had risen to 40%, and Deloitte Access Economics estimates that Australia’s trade ratio will rise to 45% by 2015, and (a resource export-assisted) 60% by 2025
  • Food processing:  Provided that we address an outdated regulatory framework, we could match New Zealand’s success, unshackling the potential downstream opportunities of the ‘dining boom’.

A final group of growth pockets are those with the potential to play on the global stage. They share a common characteristic: because Australia is a small player in a big world, these sectors can turbocharge their development by selling into world markets:

  • We have an Exclusive Economic Zone in the world’s oceans that is larger than Australia itself – the third-largest ocean environment in the world.  That underutilised asset of Ocean resources will increasingly generate opportunities not just in offshore gas and oil development, but also in water and wind energy, as well as via rising scope to ‘farm’ the ocean
  • There is also other potential in a globe hungry for clean energy, with technologies rapidly opening new generation and storage potential around both Next-gen nuclear and Next-gen solar
  • Australia also has enormous experience in Disaster management and preparedness. Prevention pays off – it is both smarter and cheaper than ‘curing’ the aftermath of disasters.  There is much that can be done, including raising the walls of dams so as to cut the chance of floods, clearing scrub near homes, and putting power lines underground
  • Finally, Australia has world-class opportunities in Medical research.  Our research capability in neuroscience is in the top four globally. That is vital, as ‘brain health’ is set to be the dominant health need of the coming century.

Deloitte Chief Strategy Officer and Building the Lucky Country series co-author, Gerhard Vorster, noted that: “Collectively, the DG25 provides a vision of where Australia’s future growth can come from. There are big challenges for both businesses and governments to make the most of the potential on offer.  

“Despite the challenges, Australians shouldn’t lose sight of the fact that these opportunities – and their potential payoff – are huge, if we embrace diversified growth and adopt an innovative mindset.”

Positioning for Prosperity? Catching the next wave is the third edition of Deloitte’s Building the Lucky Country series, which focuses on business imperatives for a prosperous Australia.  A draft version of the full report was debated by a group of leading business and political leaders in February 2014 and the final report reflects their feedback.

Figure 1 - Projected annual growth rates of the DG25


Copies of Positioning for Prosperity? Catching the next wave are available on request.

NB: See our media releases and research at www.deloitte.com.au

Follow us – @DeloitteNewsAU

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Contacts

Name:
Chris Richardson
Company:
Deloitte Access Economics
Job Title:
Partner
Phone:
Tel: 02 6175 2000, Mobile: +61 414 466 156
Email
chrichardson@deloitte.com.au
Name:
Ben Findlay
Company:
Deloitte
Job Title:
Director Corporate Communications
Phone:
Tel: +61 2 9322 7247; Mob: 0404 157 121
Email
bfindlay@deloitte.com.au

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