An Industry Perspective
IBISWorld Newsletter
February 2015
Phil Ruthven AM, Chairman
Australians have a general idea that most jobs are in the service industries these days, yet
often worry that the nation may suffer with the decline and loss of jobs in the traditional sectors.
But it has long been that way, as the first chart reminds us. This chart shows the relative
importance of industries over the past two centuries and on to the middle of this century.
Changing Importance of Industry Divisions
Shares of GDP
100
Primary
Sector
90
Secondary
Sector
80
Tertiary
Sector
Percentage
70
60
50
Quarternary
Sector
40
30
20
Quinary
Sector
Note: at market prices to 1940,
at factor cost thereafter
2050
2020
2000
1980
1960
1940
1920
1900
1880
1860
1840
1820
0
1800
10
Agriculture
Mining
Manufacturing
Utilities
Construction
Wholesale trade
Retail trade
Transport, Postal
Media & Telecom.
Finance & Insurance
Rental, Hiring, R. Est.
Dwelling Ownership
Prof. & Tech. Services
Admin Services
Public Admin/Safety
Ind. taxes less subsidies
Education
Hospitality
Health & Social Assist.
Arts & Recreation
Personal & Other Serv.
Year
SOURCE: IBISWORLD 03/02/2015
Long gone is the dominance of the primary sector, despite the current mining boom.
Also long gone is the dominance of the secondary sector. The tertiary sector has been the
most consistent, despite never being dominant. However, it is the quaternary sector that has
risen to a level of dominance in this new age, matching the dominance of the primary sector
in the 1820s (approximately half the nation’s GDP). This is now joined by the quinary sector
(especially health and social assistance) as we move towards 2050, when these two sectors
are likely to account for two-thirds of the economy.
Through these turbulent changes, our standard of living (SOL) has risen, not fallen. During the
Industrial Age (1865-1964) our SOL quadrupled, meaning that our population was four times
better off by the mid-1960s. By the end of this decade, only 55 years into the new Infotronics
Age, our SOL will have trebled. It will probably have quintupled by the middle of this century.
So, while nostalgia is important to individuals and society at large, it can be dangerous to
forward planning and progress.
And for those worried about job losses, it is important to know that we created six times more
jobs (945,000) than we lost (147,000) over the five years through 2014, albeit in new industries,
as illustrated above. It is likely that this will be repeated between now and 2020. Stopping the
world to get off is not an option.
This article will focus on the relative importance of our major industries through the ANZSIC
divisions that house the 509 individual classes of industry in which we work or invest. And we
do this using four different measures: value added (i.e. wealth created by labour, depreciation
and profit), employment, revenue and investment. All but one of these measures are calculated
based on their forecast position as at June 2015. The last one, investment, is calculated based
on its value as at June 2014.
The first two charts show Australia’s industry mix as a share of GDP (i.e. the value-added
measure) and as a share of total employment.
Australia’s Industry Mix
Shares of GDP, 2014-15
11.5%
11.2%
Quinary
Hospitality
Health
Arts &
Recreation
Other
Services
Primary
2.3%
6.6%
0.8%
Agriculture 2.3%
Mining
8.9%
16.9%
1.8%
Secondary
47.6%
Quaternary
Info Media &
Communications
Finance & Ins
Rental &
Real Estate
O’Ship Dwells
Prof. & Tech Serv
Admin. & Support
Services
Public Admin/
Safety
Ind. Taxes
Education
Manufacturing 6.1%
Utilities
2.6%
Construction 8.2%
2.8%
12.8%
8.5%
2.9%
Tertiary
Wholesaling 3.8%
Retailing
4.5%
Transport 4.5%
8.4%
6.0%
2.8%
5.4%
6.2%
4.6%
GDP: $1,596 billion
(2012-13 prices)
SOURCE: IBISWORLD 03/02/2015
Australia’s Industry Mix
Shares of employment, 2014-15
25.2%
4.7%
Quinary
Hospitality
Health
Arts &
Recreation
Other
Services
Primary
Agriculture 2.8%
Mining
1.9%
7.1%
12.1%
1.8%
18.0%
Secondary
4.2%
Manufacturing 7.7%
Utilities
1.1%
Construction 9.2%
33.2%
Quaternary
Info Media &
Communications
Finance & Ins
Rental &
Real Estate
Prof. & Tech Serv
Admin. & Support
Services
Public Admin/
Safety
Education
18.9%
1.9%
Tertiary
Wholesaling 3.2%
Retailing
10.6%
Transport 5.1%
3.4%
1.9%
8.6%
3.3%
6.3%
7.8%
11.72 million employed
SOURCE: ABS & IBISWORLD 03/02/2015
Yes, there are differences, but the overall picture is of an economy dominated by service
industries, and the quaternary and quinary sectors in particular. The inclusion of the imputed
value of home ownership in the first chart, treated by the ABS as a de facto industry (with
household owners being imputed renters to themselves), expands the quaternary sector
somewhat. Mining stands out as a significantly smaller employer than its importance as a
wealth generator might indicate.
The next two charts show the breakdown of Australia’s industries by revenue and investment
(i.e. capital expenditure).
Australia’s Industry Mix
Shares of revenue, 2014-15
7.8%
6.6%
Quinary
Hospitality
Health
Arts &
Recreation
Other
Services
Primary
1.7%
4.0%
0.7%
Agriculture 1.5%
Mining
5.1%
18.0%
1.4%
Secondary
Manufacturing 8.4%
Utilities
2.7%
Construction 6.9%
44.3%
Quaternary
23.3%
2.6%
Info Media &
Communications
Finance & Ins
Rental &
Real Estate
O’Ship Dwells
Prof. & Tech Serv
Admin. & Support
Services
Public Admin/
Safety
Education
Tertiary
17.8%
3.0%
Wholesaling 9.3%
Retailing
10.2%
Transport 3.8%
2.7%
3.6%
1.2%
11.1%
2.3%
Revenue: $4.8 trillion
(current prices)
SOURCE: IBISWORLD 03/02/2015
Australia’s Industry Mix
Shares of capital expenditure, 2013-14
6.1%
30.7%
Quinary
Hospitality
Health
Arts &
Recreation
Other
Services
Primary
Agriculture 4.1%
Mining
26.6%
0.9%
3.2%
1.3%
0.7%
10.3%
Secondary
38.7%
Quaternary
Info Media &
Communications
Finance & Ins
Rental &
Real Estate
O’Ship Dwells
Prof. & Tech Serv
Admin. & Support
Services
Public Admin/
Safety
Education
Manufacturing 4.4%
Utilities
4.1%
Construction 1.8%
4.2%
14.2%
2.4%
4.3%
Tertiary
Wholesaling 1.5%
Retailing
1.7%
Transport 11.0%
19.5%
2.0%
0.5%
3.1%
2.7%
Total: $410 billion
(current prices)
SOURCE: IBISWORLD 03/02/2015
With revenue, the importance of the new-age sectors – the quaternary and quinary sectors – is
exaggerated due to the substantial revenue generated by the Finance & Insurance and Public
Administration & Safety divisions.
In the case of the investment chart, the distortions are even greater. This is due to the
enormous capital intensity of the Mining, Transport (infrastructure) and Dwellings divisions. All
of these produce less wealth per dollar of investment than the new service industries, which, by
and large, are less capital-intensive.
This is another reason to embrace the new age: Intellectual property is proving to have much
greater leverage in wealth creation than physical (so-called ‘hard’) assets, and is less capitalhungry. Another case of brains beating brawn?
Well, not quite. We are humans and we like our own homes, be they owned or leased. We
are good at mining, which currently generates half our exports, and transport infrastructure is
critical to the efficient movement of both goods and people around our huge island-continent.
But, it is encouraging to know that these days, more jobs can be created with proportionally
less capital than was possible in the Industrial Age. Another reason to look forwards, not
backwards.
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