Multi-unit construction set to fly in 2013: IBISWorld
As Australian operators prepare for the year ahead, IBISWorld unveils its annual list of the top five industries set to soar in 2013, and the five expected to sink.
Industries to fly
1. Oil and gas production
Forecast to grow by 15.9% to reach $44.4 billion in 2013, the oil and gas production industry has been highlighted by IBISWorld as this year’s top industry performer, with growth driven by higher output and substantially higher global prices.
Australia’s liquefied natural gas production and exports are expected to increase significantly over the coming year. This reflects a switch in favour of gas for electricity generation, which will be driven by more volatile demand and carbon pricing on oil, and an expected increase of 8.4% in US dollar crude oil prices.
With abundant reserves in Queensland and New South Wales, LNG output is rapidly growing and is expected to reach 6.8 billion cubic metres in 2013. Most of this production is expected to come from Queensland, where coal seam methane is already used in electricity generation, and where a number of export-oriented LNG plants are currently under construction.
Strong growth in export demand for LNG is expected to increase world prices by 15.7% over the next year.
2. Organic farming
Organic farming has grown at a compound annual rate of 10% since 2008, and is expected to continue to rise as consumers factor in the health benefits and environmental impact of their food choices. IBISWorld forecasts an increase of 12.5% across the industry over the coming year, boosting revenue to $617 million.
Consumers are becoming increasingly eco and health conscious. This means they are more willing to pay a premium price to prevent environmental degradation caused by conventional farming methods and to ensure the products they consume are free from added chemicals and hormones. Major retailers, such as Coles and Woolworths, continue to respond to this trend, increasing the convenience in which these foods are purchased.
Income growth – forecast to rise 3.4% over the coming year – will be a key factor driving demand for organic products. As Australian incomes rise, we are seeing consumers move away from conventionally farmed produce towards natural, chemical- and hormone-free counterparts.
3. Online education
IBISWorld anticipates revenue for Australia’s online education industry to increase by 10.5% in 2013, to reach just under $5.6 billion. Growth has been supported by the continued uptake of high-speed internet services, growing acceptance of online education, government support for students and efforts to expand access beyond the typical school-leaver demographic.
We are seeing an increase in demand for convenient education, particularly among working adults who wish to gain new skills and qualifications, but are too time poor to attend classes full-time or in person. The NSW Department of Education is also assisting industry growth, with technologies expanding at a rapid rate to deliver education to remote parts of Australia.
4. Online shopping
Forecast to grow by 9.1% to reach almost $11.8 billion in 2013, the online shopping industry has continued to flourish as consumers demand more of their goods and services via the online realm.
Australians are increasingly expecting traditional retailers to have an active investment in the online sphere, and to provide options for online browsing and shopping to complement their storefronts.
Over the coming year, IBISWorld expects online retailers to move into the bricks-and-mortar space, providing convenient pick-up and return locations for consumers. This phenomenon will lead to a greater increase in the convenience provided by online retail.
5. Multi-unit apartment and townhouse construction
Strong population growth in the late 2000s has fuelled underlying demand for housing, in particularly for the multi-unit apartment and townhouse construction industry, which is forecast to grow 9% over the coming year to reach $16.6 billion.
IBISWorld is seeing an urban shift towards medium to high density residential developments as occupants opt to remain close to the CBD, transport and commercial hubs.
Property investors – primarily funded from Asia – kick-started new apartment projects in 2010 and 2011. This, coupled with several interest rate cuts since November 2011 and the flow through of government assistance to both homebuyers and investors, is projected to have a buoyant effect on the industry.
Industries to fall
1. Gaming and vending machines manufacturing
The gaming and vending machines manufacturing industry is set to follow suit in the overall decline of manufacturing in Australia, with revenue expected to fall by 6.4% in 2013.
The replacement cycle for gaming machines in Australia has increased from 12 years in 2005 to 35 years since 2008. This, along with legislative limits on the number of poker machines, has restricted demand for new machines.
With high labour costs and the Australian dollar remaining strong, production is increasingly moving offshore, with hardware going to Asia and software to the US.
2. Wired telecommunications carriers
Intense competition in the mobile space continues to have a negative effect on wired telecommunications carriers. The industry is expected to fall by 5.5% in 2013, bringing total revenue down to $9.7 billion, from its peak of $21.5 billion in 2002.
Competition in the mobile sphere is driving prices down to the extent that it is now cheaper for some consumers to disconnect their landlines and rely solely on mobile services. Increased wireless broadband penetration and strong growth in the number of naked DSL internet subscribers are also eating into industry revenue.
Prices for the industry’s services continue to be cut in attempts to retain clientele. Consumer confidence with email and SMS has grown significantly over the past five years, causing customers to move away from the traditional home phone. Branding and cross-selling are becoming increasingly vital to the industry, with product bundling being a popular strategy to reduce customer turnover rates.
3. Mineral exploration
Revenue for mineral exploration is expected to fall to $3.7 billion over the coming year, a decline of 5.1% from 2012 – driven by falling investment (forecast to decrease by 6.5%) in the sector as firms shift their focus to production.
The combination of generally lower commodity prices, weak global growth, slowing demand from China and economic uncertainty is expected to result in reduced spending on mineral exploration over 2013.
4. Newspaper printing or publishing
As advertisers and consumers opt for other types of media, the newspaper printing or publishing industry continues to lose advertising market share – with revenue forecast to decrease by 4% in 2013. Printed newspapers’ share of advertising – which accounts for 75% of newspaper revenue – is expected to fall to under 30% of total advertising revenue in 2013, down from a 41.8% share in 2000.
Declining circulation over the past five years, caused by time restraints, the rising popularity of new media like the internet, pay TV, and mobile devices, and competition from consumer magazines has continued to adversely affect the industry. In the coming years, environmental concerns are also expected to affect demand for printed newspapers.
5. Recorded media manufacturing and publishing
Recorded media manufacturing and publishing, including CDs and records, has declined steadily over the past five years. IBISWorld expects this trend to continue – forecasting a decline of 2.8% in 2013.
Physical format music sales have dropped by an estimated compound annual rate of 15.9% since 2007, compared with a compound annual rise of 32.6% for digital music.
Consumers have turned away from purchasing physical media in favour of paid online subscription services, such as Spotify and Pandora, and limited free services such as YouTube and VEVO. The industry also has been dramatically exposed to high levels of music and video piracy.
Online distribution of media has allowed companies to cut bottom line costs, and has resulted in a variety of new products on the market for consumers to view new media.
Licensing and publishing services have provided some reprieve for industry participants as the use of music, sound effects and video in advertising and marketing has increased, particularly with the rise of social media.
Industries to fly | Revenue 2012 ($million) | Revenue 2013 ($million) | Growth (%) |
Oil and Gas Production | 38,314.1 | 44,422.9 | 15.9 |
Organic Farming | 548.8 | 617.1 | 12.5 |
Online Education | 5,048.5 | 5,577.6 | 10.5 |
Online Shopping | 10,790.2 | 11,771.7 | 9.1 |
Multi-Unit Apartment and Townhouse Construction | 15,225.0 | 16,600.0 | 9.0 |
Industries to fall | Revenue 2012 ($million) | Revenue 2013 ($million) | Decline (%) |
Gaming and Vending Machines Manufacturing | 434.5 | 406.5 | -6.4 |
Wired Telecommunications Carriers | 10,215.5 | 9,655.0 | -5.5 |
Mineral Exploration | 3,936.4 | 3,736.7 | -5.1 |
Newspaper Printing or Publishing | 6,673.9 | 6,407.0 | -4.0 |
Recorded Media Manufacturing and Publishing | 888.9 | 863.9 | -2.8 |
For more information on these, or any of Australia’s 500 industries, log on to www.ibisworld.com.au, or follow IBISWorldAU on Twitter.
This article originally appeared on SmartCompany.