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IBISWorld Reveals Industries Set to Fly and Fall in 2020

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by Tom Youl
Jan 28 2020

As the new year gets quickly underway, IBISWorld analysts have highlighted key industries which are set to boom and bust in 2020. In the 11th annual edition of Fly & Fall, several new industries feature among the Australian economy’s risers and fallers.

“In 2020, National Disability Insurance Scheme Providers is projected to be a standout industry, in terms of revenue growth. Technology-based industries feature heavily in the ‘fly’ list, with Online Food Ordering and Delivery Platforms, Solar Electricity Generation and IT Security Consulting forecast to report strong growth over the year” said Tom Youl, IBISWorld Senior Industry Analyst.

“Declining industries include Cotton Ginning, Diamond and Gemstone Mining and Electricity Retailing, which are likely to face varied headwinds and structural changes. Interestingly, Multi-Unit Apartment and Townhouse Construction features on the ‘fall’ list, highlighting the construction sector’s worrying decline over 2020.”

National Disability Insurance Scheme

The National Disability Insurance Scheme is expected to perform strongly in 2019-20, growing by 33.3% in the current year as government funding rises and the scheme is rolled out to more eligible individuals.

“Most individuals previously supported by other disability support payments have moved to the NDIS. In addition, over 300,000 individuals are expected to receive support for the first time during 2019-20, boosting overall expenditure on the scheme” said Mr Youl.

Elements of the scheme, such as the Early Childhood Early Intervention program, have required disability services to expand compared to previous models, and consequently boosted revenue compared to the former National Disability Agreement. The scheme has also become a significant generator of jobs, with over 100,000 individuals expected to be either part-time or full-time employed to provide NDIS-related services in 2019-20.

Online Food Ordering and Delivery Platforms

The Online Food Ordering and Delivery Platforms industry is projected to grow by 26.5% in 2019-20, largely due to continued strong growth in platform adoption. Growth in demand for convenience and the premiumisation of food is also projected to support the industry.

“Australians are increasingly leading busy lives due to work and family commitments. Consumers have been seeking more leisure time, which has encouraged substitution of home-cooked meals for takeaway meals. Industry operators are expected to continue to benefit from this trend, as they offer consumers a convenient method of food delivery” said Mr Youl.

Rising smartphone penetration in Australia is also likely to contribute to the growing number of online food delivery platforms users, contributing to growth in industry revenue. Australians are increasingly demanding high quality foods, largely from independent restaurants which have not traditionally been available for home delivery.

Solar Electricity Generation

The Solar Electricity Generation industry, which includes large-scale power stations and excludes household solar systems, is expected to grow by 16.5% in 2019-20, to $679.9 million. This growth is expected to be driven by an influx of new generation capacity, as multiple large-scale solar projects come online.

“While revenue gains are anticipated to be strong, the scale of growth is expected to decrease in 2019-20 relative to prior years. This slowdown in growth is attributable to a decline in the price of renewable large-scale generation certificates, which contributed an estimated 45% of industry revenue in 2018-19” said Mr Youl.

One certificate (LGC) is created when a renewable power generator supplies 1 MWh of electricity to the wholesale market. Under the Federal 2020 Renewable Energy Target scheme, electricity retailers are required to purchase LGCs, to ensure they secure an increasing share of their power from clean energy sources. In 2019, the required share was 18.6%, and is expected to peak in 2020.

“Prices for LGCs are expected to be lower in 2019-20, as additional LGC supply comes onto the market and demand for LGCs stabilises once the 2020 RET is met” said Mr Youl.

IT Security Consulting

The growing threat of cybersecurity attacks is expected to increase demand for IT security consulting services in 2019-20, with revenue anticipated to grow by 14.3%. As malicious cyberattacks, such as ransomware attacks, become more devastating for both small and large businesses, investment in IT security consulting is expected to rise.

“Smaller businesses in IT security consulting are anticipated to generate increased demand from issues such as the obsoletion of the Windows 7 operating system, which is likely to require some businesses to develop security workarounds or seek assistance in upgrading to later operating systems” said Mr Youl.

The growing prevalence of cloud storage and cloud computing has significantly increased demand for IT Security Consulting services, as businesses develop strategies to protect their data both on-site and on the cloud. Larger businesses have also increasingly moved sensitive materials to the cloud, which can potentially expose these materials to malicious cyberattacks and generate further demand for services to protect this data.

Pig Farming

Revenue for the Pig Farming industry is expected to rise 13.9% during 2019-20, to total $1.1 billion. This rise follows a period of oversupply over the past three years, which constrained prices.

“The farmgate price per pig is expected to shoot up by over 25% in 2019-20, as oversupply issues come to an end. In addition, rising demand from China, stemming from African swine fever that has affected the country’s pig meat production volumes, is likely to further drive up prices during the year” said Mr Youl.

Previously, exports only accounted for 10% of domestic pig meat production in Australia. In 2019-20, there is likely to be increased demand from China as global pig meat supply declines. As a result, there are likely to be more opportunities for new supply channels for Australian pork exporters in China and across other Asian markets.

Cotton Ginning

In 2019-20, the Cotton Ginning industry is expected to be adversely impacted by the widespread drought which has been affecting many regions of Australia for several years. Industry revenue is expected to decline by 61.4% over the current year, to $1.2 billion. Cotton gins are the buyers of almost all Australian-grown cotton.

“The Cotton Ginning industry is entirely reliant on Australia’s Cotton Growing industry, as it is not economical to import cotton lint. In 2018-19, cotton production fell by almost half. This remarkable decline was attributable to extremely low water availability in the Murray Darling Basin, the host of almost 92% of cotton farms” said Mr Youl.

Low water supply in the Basin followed several years of limited rainfall in the region. In addition to the severe decline in supply to the Cotton Ginning industry, gin-gate cotton prices are also projected to fall in 2019-20.

“Domestic cotton lint prices are affected by global prices, which are projected to decrease strongly over the year. These price declines are anticipated to be driven by rising production in the United States, India and Pakistan” said Mr Youl.

Diamond and Gemstone Mining

The Diamond and Gemstone Mining industry is expected to collapse in 2019-20, with revenue expected to decline by 46.1%, to $387.7 million. This fall is attributable to the planned closure of the Argyle diamond mine, the last major diamond mining operation in Australia.

“The Argyle mine, which is operated by Rio Tinto, has accounted for more than 80% of industry revenue over the past decade. The closure is attributable to the exhaustion of viable diamond deposits. Although diamonds are likely still present beneath the mine, the cost of extraction has simply become too great to continue operations” explained Mr Youl.

The upcoming closure of the mine represents a turning point for the industry, as a reduction in supply from Argyle may drive up global coloured diamond prices. This could potentially breathe new life into previously unviable operations, such as the Ellendale diamond mine which went into administration in 2015.

Electricity Retailing

The Electricity Retailing industry is expected to decline significantly in 2019-20, as electricity prices begin to fall after years of growth. Industry revenue is expected to decline by 12.8%, to $40.6 billion.

“The primary driver behind the fall in electricity prices is the influx of new generation capacity into the network, particularly from solar and wind generation plants” said Mr Youl.

This is expected to drive down wholesale energy costs, which previously spiked due to growth in natural gas prices and the unexpected closure of the Hazelwood coal-fired power station in March 2017. In addition, electricity retailers are expected to continue to lose demand due to rising adoption of household solar panel systems.

Multi-unit apartment and townhouse construction

Apartment and townhouse construction is expected to decrease by 10.3% in the 2019-20 year, to $49.0 billion. Residential property values fell over 2018-19, reducing the profits property developers were able to generate on each apartment sold.

“The total numbers of new dwelling construction commencements has fallen over the past year, driven down by a decline in unit values” said Mr Youl.

However, residential property values have returned in recent months. As a result, dwelling approvals appear to have bottomed out in August 2019, with measures beyond this point showing growth. This is unlikely to benefit industry revenue in the current year, due to the significant lag time from approval to commencement.

Aluminium Smelting

The Aluminium Smelting industry is expected to decline by 10.1% in 2019-20, due to falling prices and output volumes. Industry revenue is expected to total $4.7 billion during the year.

“Rising global supply of aluminium, in combination with a slowdown in global demand, is expected to cause a decrease in Australian aluminium export prices. Exports are expected to account for 79.5% of industry revenue in 2019-20” said Mr Youl.

In an effort to improve air quality, China curtailed domestic aluminium output over the two years through 2018-19. This increased reliance on Australian supply. However, amid slowing economic growth in 2019-20, China is likely to remove limits on aluminium smelting in order to stimulate industrial production.

“The resumption of Chinese output is expected to drive down global aluminium prices. However, Australian smelters are likely to be partially supported by a depreciation of the Australian dollar, which will lower the price of Australian aluminium in foreign currency terms. The industry is also likely to benefit from a reduction in electricity prices, which have threatened the viability of smelters on the east coast over the past five years” said Mr Youl.

IBISWorld reports used to develop this release:

For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Jason Aravanis
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647