Australia has one of the strongest economies in the world. The country has abundant access and partnerships with strong Asian, South American, and North American parties. Through these partnerships, Australia fosters a dynamic, foreign-friendly economy that can readily adapt to changes in the global market.
As the country’s economy has grown, it’s been shying away from the manufacturing sector and more to a more service-focused economy. Currently, the services sector is experiencing tremendous success. Ultimately, this success brings about a domino-effect of opportunities for foreign businesses and investors.
Overview of Australia’s service sector and its global role
Australia’s service industry is growing exponentially. Just 25 years ago, the business-to-business (B2B) service sector made up less than 20% of gross value added (GVA). Nowadays, it accounts for over 25% of the country’s GVA, which translates to astonishing industry growth rate over a relatively short period of time.
Moreover, in 2017, the market accounted for 70% of Australia’s GDP and employed 80% of the country’s able workforce. With such dominating numbers, and experts predicting even more growth, Australia will be one of the world’s most compelling service exporters.
As of now, Australia is excelling in exporting a variety of services to markets all around the world. In 2016, the top service industry exports included education (US$22 billion), recreational travel services (US$17.4 billion), professional services (US$4.8 billion), business travel services (US$4.2 billion), and financial services (US$3.5 billion). Through a series of free trade agreements and partnership opportunities with Latin America, the country’s service industry is sure to keep growing.
Australia’s strongest service exports
As of 2017, education from Australia was the country’s third largest export. This statistic includes all other services, manufacturing, and mining. Additionally, the education export industry grew over 22% in 2017 alone. Consequently, education is the country’s largest service industry export. As education abroad increases, so do opportunities for foreign investors, businesses, and off-shooting jobs.
Most notably, Australia’s strongest service sectors for investment and incorporation are in education, travel/tourism, and FinTech. Recently, this group has seen tremendous increase in FDI from countries like the United States, the United Kingdom, Belgium, Hong Kong, Singapore, and many other global powerhouses. Getting involved while investments are still on the rise is crucial to long-term success.
Recent trends in the industry
Australia’s service industry is experiencing a strong, lengthy period of continued growth. Over the past 15 years, services have collectively averaged 5% annual growth. As the size of the sector increases, so do employment opportunities for both Australia-natives and for foreigners. Currently, there is what employers are calling a ‘skills shortage’ in the country. Thus, companies are offering higher wages and more benefits to capable employees.
Not only is the industry growing, but it’s becoming stronger and more innovative. The Australian Industry Group (AI Group) measures on a monthly basis the activity levels and performance levels of the service industry with the ‘Performance of Services Indicator’ (PSI). Using this indicator, a score of 50 means that the industry is neither expanding, nor contracting from its previous state. In April of 2018, the AI Group released a PSI of 59. This signifies that the Australian services sector is growing at an increasingly exponential pace and is innovating itself constantly.
What are the effects?
With an ever-improving service sector, the effects on Australia’s national businesses and the national economy are looking positive.
Firstly, due to a projected increase in demand for Australian services, experts predict that the country will experience an average annual real GDP growth of 2.8% from 2019 until 2023. Compared to other major, developed economies, this is one of the highest consecutive rates forecast in the world.
Ultimately, investors and business people already should expect to see huge gains on their investments over the next 5 years. Those who have yet to get into the market are looking at an ideal time to enter because positive growth and high return on investments is nearly guaranteed for the country ‘down under.’
Why startup in Australia?
Incorporating a company in Australia at this time is ideal. In 2015, economists ranked Australia as the fastest and easiest country in the world to start a business. Given the foreign-investment-friendly laws and regulation, numerous trade agreements, and booming financial and business service sectors, foreign entrepreneurs can tap into the Australian market with relatively little hassle.
The services sector’s broad scope makes it a strategically sound area to consider starting up. Services inevitably intersect with many other industries, including some of Australia’s strongest, such as finance. Additionally, services complement tourism, mining, education, and manufacturing. This sector offers flexibility and adaptability, and opportunities continue to develop in industries amendable to value-add technology.
Interested in learning more?
As Australia’s service sector continues to experience growth and success, more and more global players will want to get in on the market. That is why it is important to act now. Take advantage of the opportunities the country and its service industry have to offer.
If you are interested in learning more about the industry, or you are looking for help to get started, reach out to Biz Latin Hub. Through our back-office commercial representation services, we can get you and your company on the path to success. You can reach our team at [email protected] with questions.