Industry researcher, IBISWorld, has compiled a list of the fastest growing industries in Australia over the past year. IBISWorld undertakes research at a detailed level, highlighted in the fact that the database covers 487 industries.
Given all the focus on the resource sector, you would expect that mining industries are well represented at the top of the list. But not so. In fact Life Insurance was ranked as the fastest growing industry in Australia over the past year (revenue up 194.7%) followed by “Financial Asset Investors” (up 110.4%) and then Cotton Growing (up 71.2%).
So how many mining industries were in the top 20 fastest growing industries? The answer is three with the highest ranking being Silver, Lead and Zinc Ore Mining in 13th position, with revenues up 19%. Next highest was Gold Ore Mining in 17th spot, up 12.6%, with Nickel Ore Mining in 18th place, up 12.3%.
However, there were also three manufacturing sectors in the top 20 with key dependencies to mining. The highest placing was Nickel and Other Basic Non-Ferrous Metal Manufacturing in 5th position, with revenue up 50.3% on a year ago. The sector that was best represented in the top 20 fastest growing industries was finance with six industries identified.
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The bottom line is that a raft of industries grew strongly over the past year – not just mining. In addition it’s clear that the debate over the resource super profits tax shouldn’t ignore the industries that are closely dependent on mining.
But so far we have only looked backwards – at past revenue growth. IBISWorld also provide forecasts of the fastest growing industries over the next five years. On top of the list is Superannuation Funds with expected revenue growth through to 2012 at an average annual rate of 40.1% followed by Financial Asset Investors with expected growth of 24.2%.
There are four mining industries in the top 20, led by Iron Ore Mining in 8th spot, with forecast growth of 12.7% per annum. Gold Mining, Petroleum Exploration and Back Coal Mining are the other mining sectors in the top 20. But there are also four finance sectors in the top 20 grouping of fastest growing industries and three from agriculture. Interestingly Nickel Ore Mining is seen growing at the second slowest rate in the list of 487 industries.
Treasury believes it has found an easy target in Mining for a super-profits tax, but not all data backs its views.
The week ahead
Shock, horror: no Reserve Bank official is giving a speech in the coming week. And there is no major government event like a budget or taxation review. And in terms of economic data, the offerings are also quite thin. But it’s an entirely different case in the US with around a dozen indicators to grab investor attention.
In Australia, the main focus is the business investment (or private capital expenditure) figures released on Thursday. Over the past year investment has zigzagged – basically trending sideways – and we expect that continued in the March quarter with a modest 2.2% gain. As always the focus is on expectations – but if the second estimate for 2010/11 lifts 7% to around $108.5 billion then investors will be encouraged.
Earlier in the week there are two indicators to watch – car sales on Monday and construction work done on Wednesday. The car sales figures are the standout with a bumper result on the cards. The only caveat is that the relatively early timing of Easter may have had an influence on the result.
On the basis of the industry data that has already been released, CommSec predicts that car sales may have lifted by 10% in April in seasonally adjusted terms – the biggest monthly gain in nine years.
Certainly the results for January to March weren’t flash, down in aggregate by almost 8%. And the March and April results probably need to be read together given the Easter effect. Still, it would point to a gain of around 7% over March and April – an encouraging result.
Interestingly there doesn’t appear to be any special factor behind the expected surge in car sales. But the job market continues to improve, car affordability is the best in 35 years and car dealers have been discounting to move stock.
The construction work done figures also bear watching. The residential building figures plug straight into the economic growth calculations while the other figures on commercial and engineering construction will reveal how activity in the sector is faring at present.
In the US, it almost seems like every piece of economic data plus the kitchen sink will be thrown at investors over the week. There is no real standout but home sales, consumer sentiment and economic growth feature.
On Monday, data on existing home sales is released. On Tuesday, figures on home prices and consumer confidence together with the Richmond Fed survey are expected. On Wednesday durable goods orders and new home sales are listed for release. The latest economic growth estimates for the March quarter are expected on Thursday. And on Friday, personal income and spending, consumer sentiment, and regional purchasing manager gauges for Chicago and New York will be issued.
Overall, another solid batch of data is expected. Economists tip gains for all the key indicators with economic growth in the March quarter expected to be confirmed at a 3.2% annualised rate.
Many local investors have been scratching their heads about the soggy performance of our sharemarket. Australia doesn’t have a debt crisis, there is no volcanic ash cloud or oil spill and our economy is arguably the strongest in the developed world. But US and many European markets are close to square for the year while sharemarket has gone backwards by almost 10%.
We would also argue that we have political stability in Australia, unlike the UK with its new coalition government, and Thailand, experiencing social unrest. But the recent decision by the Government to impose a super profits tax on miners has caused foreign investors to re-assess the politics in Australia. Foreign investors have long regarded Australia as a good place to do business, with low taxes and tariffs and limited interference by government.
Why do the perceptions of foreign investors matter? For the simple reason that just over 40% of our listed shares are held abroad.
Interest rates, currencies & commodities
The fear-driven sell-off of commodities over the past fortnight has been nothing short of remarkable. And given that there has not been a single identifiable cause for the slide, there is enough to encourage those with conspiracy theories. The oil price has almost been in free-fall, dropping almost 20% in just 10 days. To find an equivalent period where prices were plummeting you would need to go back to late-2008 when the oil price halved in price from October to December. Of course, prices didn’t stay low for long. From February to May 2009 the oil price rebounded, doubling in value.
Did the fundamentals of oil demand and supply change that markedly in late-2008/early-2009? The short answer is no. And similarly oil producers are now at pains to point out that there is no over-supply at present whereas a fortnight ago OPEC said that the market was well supplied with oil and there was no reason for prices to be up near US$87 a barrel. Someone is making money out of all this volatility and it doesn’t appear to be either the major producers or the average consumer. And still some have the temerity to claim that the practice of ‘shorting’ improves the operation of markets.
Craig James is chief economist at CommSec.