The 3 industries behind Australia’s Covid resilience

09 Apr 2021

Tags

  • Edmund Tang
  • Australian Economy
  • World Economy

Australia is a world leader in three major industries that have helped to keep our economy strong over the past 12 months – compared to other advanced economies.

  • Energy & resources. Australia is now one of the world’s top three exporters of energy and resources.
  • Food & agriculture. Australia’s farmers are world leaders in the production of clean, green premium produce.
  • The finance sector. Australia’s highly dynamic financial services have amassed the world’s eighth largest pool of investment fund assets.

While education and international tourism have taken a COVD-related hit in 2020, these three industries are powering exports and competitive advantage. They underpin Australian prosperity in challenging times – and they are also evolving. In this blog I examine all three.

1. A leader in energy and resources

The outlook for Australia's minerals exports continues to improve in 2021[1]  as the world economy rebounds from the impact of the COVID-19 pandemic.

Forecasts by the Department of Industry, Innovation and Science (DIIS)[2] now predict a record A$296 billion in exports in FY2020-21. This will be due to strong export growth in iron ore, gold and copper. The value of these exports will offset declines in other export commodities, especially coal.

Iron ore earnings are now projected to increase by one third to hit a record A$136 billion in FY2020-21. This is partly owing to high, sustained iron ore prices. Gold exports are forecast to grow by 18% to A$29 billion.

The March quarter DIIS report confirms the benefits of diversification. Australia's exports of lithium, nickel and copper are expected to surge in the coming five years, thanks to demand for low emission technologies.[3]

And the future looks solid. Australia has the world’s largest reserves of iron ore, gold, lead and zinc, as well as the second largest reserves of bauxite, copper, cobalt, lithium and nickel. With the world’s largest uranium reserves and huge LNG exports, Australia is now a major global energy supplier.[4]

2. A top agri-exporter to Asian markets

Australia is a major global producer of beef, fruit and nuts, wheat, milk, vegetables, lamb, wool, poultry, barley, cattle exported live and canola. Together, these commodities make Australia a major agri-exporter. In FY2019-20, the value of Australian food and fibre exports rose to about A$48 billion.

Australia’s network of regional free trade agreements gives Australian growers preferential access to markets across Asia-Pacific region. This is a crucial advantage. Of Australia’s 15 top export markets, 12 are in the Asia region[5], taking almost three quarters of the nation’s agri-foods exports.

Quality is a big factor in Australia’s agri-exports. With a reputation for high agricultural standards, Australian produce commands premium prices in Asia.

3. Strong and sophisticated financial markets

Financial services is also a powerhouse sector. Currently, Australia has the world’s eighth largest over-the-counter foreign-exchange daily turnover, ninth largest stock market, and tenth largest debt securities market.

Pensions are a huge asset. Australia’s US$2.2 trillion managed funds sector is underpinned by a mandated retirement savings scheme – called superannuation – that has created the fifth largest pension system in the world.[6]

Australian financial markets are large relative to the overall size of the economy. The total estimated value of all financial assets rose to A$10 trillion (about US$7 trillion) in FY2019–20, after growing by an average 9% per year for two decades. The financial sector is now the largest contributor to the country’s gross value added.[7]

Benchmark 2021

This analysis shows that a balance of export industries has helped Australia stay resilient through the pandemic. For a more in-depth analysis, take a look at the Benchmark Report 2021. Please download and re-use the charts and graphs.

In my next blog, I’ll take a look at how Innovation and Skills power Australian growth.

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[1] Department of Industry, Innovation and Science (DIIS), Office of Chief Economist, Resources and Energy Quarterly, March 2021 (Released on 29 March 2021)

[2] Total export value of resources and energy in FY2020-21 was revised, according to Resources and Energy Quarterly, March 2021 released by the DIIS

[3] DIIS, Resources and Energy Quarterly March 2021, page 13

[4] Why Australia Benchmark Report 2021, page 18

[5] The Asian region is defined as Asia, ASEAN and Oceania.

[6] Willis Towers Watson, Global Pension Assets Study 2021 (Released 16 February 2021)

[7] Gross value added provides a dollar value for the amount of goods and services that have been produced in a country, minus the cost of all inputs and raw materials that are directly attributable to that production.