The recent ABS data on Labour Force in Australia which is a quarterly publication to May 2015 contained some interesting insights into the changes underway. Essentially, in sectors where there is strong international competition there has been a relative reduction in the number of jobs available in Australia, whilst in other sectors more shielded from the chill winds of direct international competition the relative proportion is rising. The chart below shows the change in the relative distribution of jobs on a 2 year, 5 year and 10 year horizon.
The most significant growth areas have been in Health Care and Social Assistance, Education and Training and Professional, Scientific and Technical Services. The most significant falls are in Manufacturing, Agriculture, Forestry and Fishing and Retail Trade. Mining highlights the long term growth, but short term fall in jobs as competition increases, and we move into the exploit phase. In marked contrast, Construction, which dipped in the 5 year horizon is now growing again. We also see modest falls in Financial Services due to greater efficiency and online channels, and a rise recently in Real Estate Services thanks to the property boom.
However, there is an important point to make. The rise in service related industries in general has lower wages relative to some other sectors, and it will only flourish whilst there are enough people able and willing to pay for said services. For example, the vast pool of superannuation savings will flow into the healthcare sector as households age. In essence these industries move money about the economy, but do not create things which in turn can create value. The worry is that those sectors which truly create wealth in the economy are under the most pressure. As a result, wages are flat, and the growth levers are not operating that strongly. This highlight the long-term issues we face.
Which industry sectors will be the next growth engines for the economy?
