The times will suit Victoria: Deloitte report
Victoria is superbly positioned to capitalise on Australia’s next boomDOWNLOAD
8 October 2013: Five super-growth sectors worth an extra $250 billion to the national economy over the next 20 years hold the key to Australia’s future prosperity, according to a new report from Deloitte. The report, entitled Positioning for Prosperity? Catching the next wave, is the third edition of the firm’s Building the Lucky Country series.
A companion press release considers the national impacts. However, Deloitte has also extended the analysis to each State and Territory. Our work finds that, while the mining boom was of particular benefit to Australia’s north and west, those benefits were less obvious in Victoria. This State has a relatively small mining sector, with its particular strengths centred on brown coal from the La Trobe Valley and oil from Bass Strait. Neither of these industries boomed when the rest of mining did – in the case of brown coal, because of environmental concerns, and in the case of oil, due to declining recoverable reserves.
At the same time as the resources boom was directly beneficial to those States blessed with rich resources, that same boom also pumped up the Australian dollar and interest rates. This strength in interest and exchange rates proved a deadly duo for Victoria’s manufacturers, weighed on its ability to sell education services to foreign students, and also affected sales of the State’s agricultural products to burgeoning markets in Asia.
That means Victoria struggled to get the most out of the resources boom of the past decade.
Yet the State is much better placed to surf the waves of the future. The drivers of growth in Australia’s economy are changing – and they are changing in a way that is particularly well suited to Victoria’s sectoral strengths. Deloitte has identified five super growth sectors, including international education (which is already Victoria’s largest export earner), gas, wealth management, agribusiness and tourism.
Central to the Deloitte report is a Positioning for Prosperity map, which assesses where the next waves of prosperity are most likely to come from by plotting expected average global GDP growth rates over the next 20 years against the level of Australian competitive advantage for each sector. Below are two versions of the map, one for Australia as a whole and one for Victoria.
Victoria might have a small mining sector, but the five super growth sectors which Deloitte has identified are bigger as a share of the Victorian economy than they are in Australia as a whole.
So while Victoria struggled to fully capitalise on the opportunities offered by the resources boom, the developing waves of future growth are much more in its favour.
For example, global demand for education services is about to soar as the emerging economies of today seek to become the knowledge economies of tomorrow. The rise of China and India, in particular, will be central to the growth in globally mobile students, whose numbers may climb by about 7% a year. That is double the projected growth of Australia’s economy, and hence a beautiful growth option for Victoria’s world class education sector.
Similarly, the burgeoning Asian middle class will seek not merely to eat more food, but to switch their diets from grains and cereal towards meat, dairy, fruit and vegetables. That switch in demand is tailor-made for Victoria’s farmers, with their great strengths in dairy and horticulture.
And although Victoria’s opportunities in gas are fewer than some other States, there are options there too – including for Bass Strait, where gas development is well underway and 30 years of reserves will hold the State in good stead – while Melbourne’s location as the home to two of Australia’s big banks is a reminder that this State will cash in on the ability to sell wealth management products and skills to Asia in coming decades as well.
The Deloitte analysis finds that differences in scale of opportunities between the last boom and potential coming waves are more stark in Victoria than in any other State. Across Australia as a whole the five super growth sectors are forecast to offer a similar size opportunity to Australia as mining once did. But for Victoria, these opportunities aren’t merely ‘similarly sized’ – they are strikingly different – with the five super growth sectors more than five times larger than Victoria’s mining sector.
“That combination spells success”, said Victorian Managing Partner of Deloitte, Geoff Roberts. “This State is far better positioned to capitalise on the opportunities now opening up for Australian industries than has been true over the past decade. Indeed, the starter’s pistol has already fired – the $A is off its peaks, and Deloitte sees even further opportunities opening up for Victoria as the dollar eases further in coming years.”
NB: See our media releases and research at www.deloitte.com.au
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