Industries to fly and fall in 2013-14
As Australian companies begin the new financial year, business information analysts at IBISWorld reveal the industries set to soar and sink in 2013-14.
Superannuation funds top the list of growth industries with an impressive 40.5 per cent rise anticipated in 2013-14, followed by iron ore mining, wind and other electricity generation, online shopping and internet publishing and broadcasting.
The industries that might prefer the new financial year not to have started at all include video and DVD hire outlets, automotive electrical component manufacturing, heavy industry and other non-building construction, book publishing and mineral exploration, as these industries are forecast to decline.
Industries to fly
One of the key performers in recent years, online shopping is forecast to post solid growth of 13.3 per cent this year. Demand will be influenced by factors such as rising rural high-speed internet penetration thanks to the roll out of the National Broadband Network, the number of traditional retailers joining the online space and measures to boost the convenience of product collection.
"A number of initiatives to expand product delivery and collection options are adding to the appeal of the e-tailing sector. Some online retailers have set up traditional outlets to act as collection points, while established players are providing lockers at convenient locations so customers can collect their goods in their own time – particularly appealing for those not able to be home to collect deliveries during office hours," Dobie said.
Internet Publishing and Broadcasting
In 2013-14, IBISWorld anticipates Australia's internet publishing and broadcasting industry will grow by 12.7 per cent.
"Success in this industry is largely a result of developments in internet access and speeds from newer devices and rising internet penetration," Dobie said.
Accelerating internet speeds and growing accessibility are allowing segments such as audio and video streaming to attract additional users, while increasing consumer and business expenditure will generate more revenue for paid subscription services. The simplicity of setting up operations makes it an increasingly viable business proposition for existing publishers to move online.
Wind and Other Electricity Generation
Strong industry assistance via the Federal Government's Renewable Energy Target scheme (which mandates a minimum amount of energy key users must purchase from renewable sources) is driving growth for wind and other electricity generators, which IBISWorld forecasts will be 11.3 per cent in 2013-14 – unless there is significant policy change.
"Lack of community support is still an issue for this industry, with many people concerned about the physical and aesthetic impact these projects will have on their living environment. Large energy users are also concerned about the commercial impact on large-scale projects," Dobie said.
"If a change in government alters the Renewable Energy Target, incentives for investment in renewable energy will decrease, minimising the scale of the industry's activities."
Analysing the latest forecasts, IBISWorld general manager (Australia) Karen Dobie said superannuation funds' revenue will be closely linked to the growth of Australian and global share markets.
"Though these markets are highly volatile, the share market drops in 2012-13 mean we're starting the new financial year from a low base – a good position from which to generate solid returns. Rising superannuation revenue will also be a result of low unemployment and the 0.25 per cent increase in compulsory contributions this financial year," Dobie said.
Iron Ore Mining
IBISWorld forecasts revenue growth of 22.9 per cent for iron ore mining this financial year due to growing demand for steel from emerging nations like China. "While there's currently an oversupply of iron ore, we expect that this capacity will be absorbed this year and demand will outpace supply. This will cause a rise in prices – the primary driver of forecast revenue growth," Dobie said.
Mining capacity is also likely to rise this year as a result of increased industry investment in mining sites, such as BHP Billiton's Jimblebar mine and Rio Tinto's Brockman 4 and Western Turner Syncline sites.
Industries to fall
Video and DVD Hire Outlets
Tipped to decline by 12.3 per cent this year, the video and DVD hire industry is facing huge competition from online rental services, piracy and services such as iTunes that provide cheaper and more convenient access to movies. "It's a classic case of new technology squeezing out the old and to compete on price, video and DVD hire outlets have had to significantly slash margins, making it nearly impossible to operate profitably", said Dobie.
Automotive Electrical Component Manufacturing
An overall economic slowdown and poor demand for new vehicles have affected sales for automotive electrical component manufacturers, as has the consumer shift towards smaller, more fuel-efficient imported cars. "Falling demand for domestic vehicles has hurt specialised equipment manufacturers, since their products are mainly used in new vehicles," Dobie said.
"Overall, the Australian supply chain is uncompetitive compared with overseas manufacturers", said Dobie. "While the government is making efforts to support the local manufacturing sector, its future performance is on shaky ground and the exit of Ford from local manufacturing will have a negative knock-on effect on component manufacturing industries."
Heavy Industry and Other Non-Building Construction
In 2013-14, IBISWorld expects that a reduction of investment in new mining projects will have a negative effect on demand for new rail, port and sorting facilities, leading heavy industry and other non-building construction to decline by 5.4 per cent this year.
"As investment in new mining infrastructure is wound back, this industry's revenue will become more dependent upon traditional sources such as telecommunications, so revenue will fall before the industry finds its feet again," Dobie said.
A structural shift in favour of online book stores is hurting domestic book publishers, with many consumers preferring to buy from foreign retailers that have exceptional bargaining power and offer fast postage and heavily discounted prices.
"The collapse of major book store owner REDGroup has had a detrimental effect on the industry, as has the competition books now face from other sources of entertainment. These factors are expected to result in a 4.3 per cent decline in revenue this year," Dobie said.
Mineral exploration rounds out the five industries with the lowest growth prospects in 2013-14. Dobie said the industry's decline will be largely cyclical as a number of mining investments made in the past five years reach completion and ramp up production, meaning that capital expenditure on new products will decrease – directly reducing demand for exploration services.
Additional economic uncertainty around commodity prices and growth rates for developing economies means undertaking new exploration projects will carry additional risks.
"While current production is high, exploration is subdued for the time being. The growth rate is anticipated to pick up in the long run thanks to growing resource demand in developing countries, but as more exploration services are required abroad – such as in Africa – domestic participants may face new threats," Dobie added.
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