While the last year has proved turbulent for most businesses, a number of industries have managed to generate solid returns.
The latest IBISWorld report reveals the best (and worst) growth industries for 2009/10.
According to IBISWorld, the “top 10” sectors are:
1. Online education (24.3 percent)
2. Video games (11.4 percent)
3. Funds management (10.7 percent)
4. Grain storage (10.1 percent)
5. Electricity generation (8.5 percent)
6. Passenger rail transport (7.2 percent)
7. Waste disposal services (7 percent)
8. Welfare services and fundraising (5.6 percent)
9. Language and other education (5.5 percent)
10. Nursing homes (5.5 percent)
The online education sector comes as a surprising winner, growing from revenue of $827.3 million in 2004 to approximately $2.74 billion in 2009.
During 2009/10, IBISWorld forecasts the online education sector will enjoy 24.3 percent growth as a result of a number of key driving factors.
These include: a strong uptake of broadband internet services, technological advancements, more effective marketing and growing acceptance of online as a mainstream alternative.
Growth in the video game segment has also been extremely strong over the past five years, at 16 percent a year.
IBISWorld says it currently appears virtually “recession-proof”, having grown by a staggering 29.2 percent during the 2008/09 financial year.
Coming in at third position, funds management is reversing its 2007 slump following a rise in equity prices.
IBISWorld Australia General Manager, Robert Bryant, says returning consumer confidence will see new funds “flow into the arms of investment managers”.
“We expect that as financial market conditions improve we’ll see the return of the industry’s long-term impetus to growth – investment-savvy baby boomers and compulsory superannuation legislation,” he says.
While these three industries top the best performing list, many sectors fell into more familiar “financial crisis” territory.
The “bottom five” growth industries include:
1. Tyre manufacturing (-36.6 percent)
2. Foreign banks (-21.5 percent)
3. Automotive Electrical/Instrument Manufacturing (-7.9 percent)
4. House construction (-7.8 percent)
5. Employment placement services (-7.4 percent)
According to IBISWorld, the outlook for Australia’s tyre manufacturing industry is “extremely grim”.
Bryant predicts the value of industry revenues will decrease at an average annualised real rate of 11.4 percent between now and 2014, largely as a result of South Pacific Tyres closing its Somerton plant late last year.
“The situation for tyre manufacturers is significantly influenced by the immediate future of the local motor vehicle manufacturing industry, and the extent to which this sector uses Australian-made tyres,” he says.
“While the introduction of new domestically-produced bolstered production over the past couple of years, domestic automakers are reducing their productive capacity going forward with Ford, Holden and Mitsubishi all making cuts to local manufacturing plants in 2008.”
In August 2008, the Federal Government’s report on the Australian automotive industry recommended the Government cut tariffs from 10 percent to 5 percent in 2010.
Bryant says this will reduce the cost of imported vehicles, slow domestic vehicle production and drive down demand for locally produced tyres.
“If it’s possible to make matters worse, the ongoing opening of more car plants in China and India – to keep up with the growing demand in these populous nations – is a further threat,” he says.
A number of significant factors have helped push Australia’s foreign banking sector into second position of the worst performing industries.
These include: BankWest’s exit from the industry, lower interest rates and Government deposit guarantees on local banks.
“In addition, the Australian banking industry is experiencing greater competition in the form of national and foreign banks as well as non-bank lenders, restricting the foreign banks’ ability to charge higher interest rate margins to potential customers,” Bryant says.
Results in the automotive electrical and instrument manufacturing sector mirror those of local tyre manufacturing.
IBISWorld says falling demand from domestic manufacturers translated into hundreds of millions of dollars in lost flow-through spending among local industries supplying the domestic car manufacturing sector.
House construction came in at number four on the list, following a collapse of the American market.
“We estimate the value of new single unit housing construction will contract by 9.1 percent to $20,000 million in 2009/10, while work on alterations and additions will shrink by 2.2 percent over the same period, leading industry revenue to fall by 7.8 percent to $23,050 million, and direct employment to shed 5 percent to 80,000 people employed by 32,500 establishments,” Bryant explains.
Finally, employment placement services managed a mention due to rising unemployment, which is estimated to reach 7.4 percent by the end of the 2009/10 financial year.
IBISWorld reports that fewer companies will require the services of employment agencies, while many will refuse to pay recruitment fees to source new staff.
As a leader in business information, IBISWorld provides independent, accurate and comprehensive research on over 500 industries, including statistics, analysis and forecasts.