Sole trader

BIS Shrapnel – Long Term Forecast Report: Business Planning

Building and telco sectors set to lead post-mining surge: Report

By Michelle Hammond
Monday, 27 August 2012

The building and telecommunications industries are expected to pick up in the next few years as the mining sector slows, although other businesses are set to struggle, according to a new report.


BIS Shrapnel has released forecasts for resources, health services, telecommunications, wholesale trade, building, education, retail, manufacturing, utilities and administration.


According to BIS Shrapnel, mining investment will continue to underpin activity over the next few years.


“Mining investment will continue to grow, albeit more slowly, for a few years yet,” says BIS Shrapnel chief economist Dr Frank Gelber.


But as mining investment peaks in 2014 and starts to decline, non-mining investment will stabilise and start to pick up, taking over as the engine of growth, BIS Shrapnel said in its report.


Stock shortages, population growth and lower interest rates should stimulate the housing market and dwellings investment, according to the report.


Meanwhile, non-mining businesses “are not investing enough”. Current economic growth will eventually absorb excess capacity, prompting the next round of business investment.


“That will impact on the performance of different industries,” Gelber says.


BIS Shrapnel expects the building industry to gradually improve, supported by a recovery in dwellings building from late this year.


Next year, non-dwelling building should also pick up as supply tightens after many years in the doldrums.


“And, remember, mining investment is still rising,” Gelber says.


“That means overall investment in the construction industry should grow strongly over the next year, but employment will remain subdued.”


Another area where investment is set to expand rapidly is in telecommunications.


This is consistent with recent announcements by Telstra, and will be further supported as the private sector invests to take advantage of the National Broadband Network.


This investment will be accompanied by increased output and employment in the telecommunications industry.


Meanwhile, education is likely to stabilise after contracting for several years.


The annual value of exports of education services has fallen by nearly 20% over the past two years, according to BIS Shrapnel, to below $15 billion from $18 billion in 2009/10.


This is due to the fact that the number of foreign students in Australia has plummeted, deterred by the high Australian dollar, the weak global economy and regulatory changes in Australia.


While these factors are still in play, and are therefore depressing the level of activity, BIS Shrapnel does not expect them to become any more intense.


As a result, growth in the education industry should return, supported by ongoing demand from Australian students as the population grows and government spending on education increases.


Retail should also continue its recent recovery, supported by the current low level of interest rates, increased household incomes and continued growth in domestic demand more generally.


The generally improved conditions should benefit transport, postal and warehousing industries.


The accommodation industry is a mixed bag, with CBD hotels benefiting from strong business travel, but tourism continuing to be affected by the high dollar.


The high dollar – coupled with rising production costs and weakness in key international markets – will also continue to weigh heavily on the majority of manufacturing industries.


However, some sub-sectors are benefiting from the mining investment boom, while other sub-sectors will benefit from increased building.


“Nevertheless, we expect low output growth in manufacturing over the next year, with further declines in profitability, investment and employment,” the report said.


Output growth in the electricity, gas and water industries should also remain subdued as businesses and consumers continue to look for ways to cut their energy usage amid rising costs.

Did you like this article? 

Sign up to the StartupSmart Newsletter to receive a daily news wrap-up straight to your inbox AND a free eBook!

Invalid Input

Comments (0)

Subscribe to this comment's feed

Write comment

smaller | bigger

Invalid Input

Follow us

StartupSmart on Twitter StartupSmart on Facebook StartupSmart on LinkedIn StartupSmart on Google+ StartupSmart on Youtube

Subscribe to StartupSmart RSS feeds

Sponsored Links

Our Partners

SmartSolo sign up

Private Media Publications



Crikey Blogs


Smart Company


Property Observer


Leading Company