Jul 30 2020
Australia’s mix of industries is constantly changing, as happens in virtually all of the world’s 230 nations and protectorates.
To revisit 1960, when less than 4% of today’s population was of working age, is to get an appreciation of what the Industrial-Age economy was like. It was a fabulous age that displaced the previous modern- Agrarian Age in our country in the 1860s, and saw our standard of living rise four-fold in the subsequent 100 years.
Our economy today is almost eight times bigger in GDP terms, and we employ over three times as many employees. The numbers of part-time and casual employees have increased from around 10% of the workforce in 1960 to about 32% today.
The chart above shines a light back 60 years to the near-end of the Industrial Age, and the industries that gave us our jobs and wealth (GDP). It shows the previous dominance of the goods-producing and goods-distributing industries. These eight industry divisions—spanning the primary, secondary and tertiary sectors—accounted for almost 70% of the economy. Manufacturing was king, contributing a whopping 29% of GDP. Agriculture was still a very significant player at 11%, and construction was our third largest player at 8%.
Of course, our manufacturing industry was heavily protected against imports, which accounted for just 15% of our GDP in 1960, and had been progressively buttressed from 1908 until the 1970s and 1980s, when successive Labor governments began to dismantle the barricades. Imports now account for 20% of our GDP.
In 2020, discounting some interim distortions due to the COVID 19 shutdowns and lockdown measures, we have a vastly different mix of industries, as shown below.
As mentioned earlier, the current economy is nearly eight times larger than that of 1960. Our service industries now contribute 62% of the economy, with goods contributing just 38%. Of course, if we treat the tertiary (or commerce) sector that distributes goods as a service sector—which it is—then the pure goods sectors account for just 26% of our economy. Another notable juxtaposition is that mining is over four times bigger than agriculture these days. In contrast, agriculture was nearly six times bigger than mining in 1960.
We still hear, from time to time, the suggestion that some industries are more wealth-producing than others. For a long time that claim was credited to manufacturing, which once accounted for 29% of GDP, but now accounts for close to 5%. However, it is always well to remember that the only wealth-creating industry is one that produces products (goods or services) free of feather-bedding and protection, and that customers here, or overseas, are prepared to pay for. We need only to look at inbound tourism as an export, which is now far bigger than agricultural exports. Or at food services (takeaway, restaurants, cafes and catering), which collectively generate revenue of close to $60 billion.
As to whether goods producers are more valuable than service producers, it is a silly debate, since all industries are, in fact, service industries. No business has the right to take credit for tangible components that are part of any product, given that they come from nature and are not created by humankind. They are only transformed using labour and equipment (which are derived from nature). Lest we forget!
The new age that has given birth to this change of industries is described as the post-Industrial Age, or the Infotronics Age (in deference to the underpinning importance of information and electronics).
In the above chart, it is the quaternary sector (and its many service industries that are either information-intensive or finance-intensive) that now dominates our economy. Indeed, the quaternary sector accounts for almost half of the economy.
Where to from here?
The chart below aims to provide a satellite perspective of industry changes over three centuries: the 19th, 20th and 21st.
As we head to yet a new economic age in the middle of this century, we can see the quinary sector—dominated by the health industry—joining the quaternary sector, to further dominate the economy with service industries. It is a similar story around the developed world.
The advent of the Digital Era (Stage 2 of the ICT Utility) in 2007 has made our current century both more convenient and more complex by introducing a fascinating and powerful mix of big data, AI, analytics and fast broadband. A brave, or at least very different, new world.