China will be Australia’s main driver of growth over the next decade and beyond but it won’t be our resources bringing the boom, says one of the globe’s most respected forecasters.
IBISWorld Founder Phil Ruthven was a keynote speaker at the NIBA Convention in Melbourne yesterday, and used his decades of business analysis experience to give delegates a “warts-and-all” look at Australia’s economic prospects.
Although bemoaning the poor political leadership of recent years, Ruthven says Australia’s economic position is very strong and that people had no reason to be as worried as the newspapers suggested they should be.
He says the downturn in China was inevitable as it transitions from an investment economy to a consumption economy.
“The sharemarket has collapsed of course, but it never deserved to be where it was anyway, so it’s just coming back to where it should be,” he says.
The shift away from capital expenditure has meant trouble for the mining sector but Ruthven says within the coming few years mining will be comprehensively overtaken by a new export.
“By the end of the next decade the biggest single export Australia will have will not be mining, or agriculture or manufacturing as it once was,” he says.
“It will be inbound tourism, and that will earn us more money than the mining industry does today.
“There are something like 100 million Chinese leaving their shores each year to travel as tourists. They are the biggest travelling nation in the world today. We only get 1% of those people at the moment; we get about 1 million Chinese tourists each year.
“If we get 10% of them, and over the next decade it is predicted to grow to 15%, plus tourists from elsewhere, we’ll probably have 25 to 30 million tourists a year. We have six million now.
“That will provide us with more income than the mining industry does today. The world changes and it moves forward; it’s not the end of the world when old industries begin to fade away.”
In the shorter term, Ruthven says the industries that are the strongest bets for growth are:
- professional and technical services,
- administrative and support services,
- media and telecommunications, and
Ruthven also issued a stirring call for greater gender diversity in boardrooms, laying the blame for recessions squarely at the feet of men, with his trademark dry wit.
Discussing the fact that it is falls in capital expenditure rather than consumption expenditure that trigger recessions, Ruthven says diversity could help boards make better decisions in times of economic stress.
“You get companies that agree after a year’s research to spend $300 million on a new project and open a bottle of champagne around the board table but then the news in the papers get them all nervous six weeks later,” he says.
“So then they have a board meeting about whether they should go ahead with it or defer it or cancel it, and they usually want to defer it.
“Unless there is a woman on the board, and she’ll say ‘Hang on. I thought we did a year’s research and we agreed to go ahead with it. Now you want to cancel it. One of those decisions is stupid. Which one do you want to take?’.”