As mining investment continues to decline, investors are looking for industries which are expected to grow and inject extra billions into Australia’s economy. For investors taking a top down approach to investing, we have complied a list of sectors to start focusing on. The list below highlights these booming sectors for growth. These growth spots will enable Australia to remain the fastest growing developed Western nation in the world in the next decade.
Gas: The world is looking for an energy source which is cleaner than coal or oil. Greener energy will increase in demand as air quality has become a priority for some countries such as China. The exportation of gas is expected to be the fastest growing sector in the next two decades. Australia’s third largest energy resource is gas. As gas is difficult to store and move, Australian’s proximity to Asia will give it a significant advantage over its competitors. Look out for stocks the LNG space.
Agribusiness: Global markets for agribusiness is expected to grow 10% faster than global GDP as a whole. As the world’s population grows by 60 million a year so does the demand for more food. Australian goods have an edge over their competitor’s due to the freshness of the product, high the high quality, and the lowering of the dollar. Asia’s growing middle class in particular are predicted to raise their consumption of protein.
Tourism: This sector is expected to double in size in the next 20 years mainly from the Asian middle class expanding. IBISWorld forecasts the Australian tourism industry will grow at an annualised rate of 2.7% over the next five years. A fall in the A$ and more low-cost carriers offering more flights to Australia has made it more assessible for tourists to visit. The increase of foreign students has also increased the number of tourists as their family and friends come to visit. Look out for stocks which are leisure or travel related.
International Education: International Education currently is our fourth biggest export. The majority of foreign students come from China and India. International student enrolment is now at an all-time high. The lowering of the Australian dollar and the close proximity to Asia has made Australia an attractive place to study. The Australian climate and lifestyle has been drawcards to alluring students to the country. Look for stocks involved in international education.
Aged care – Retirement Living and Leisure: The number of people coming into retirement will be sizable in comparison to the figures in the past. This change in demographics will have a huge impact on the growth sectors of Australia. This new group will have greater purchasing power than previous generations as they have benefited from the appreciation of property and shares. The influx of these retirees will change retirement living, making them more luxurious. Market growth in this sector is almost certain. Look for stocks involved in retirement living and leisure
Preventative Health and Wellness: Preventative health and wellness companies will see growth as the population become more health conscious. Business which provide treatments to prevent diseases will be in high demand from the aging population. Such growth areas may include vitamins and supplements, naturopathy, acupuncture, remedial massage, tai chi, pilates, and yoga.
Healthcare and Medical : As people are living longer and the aging population increases, the demand in the health care industry will also increase. For the last 10 years, it has been one of the best industries to be invested in and this sentiment is set to continue for another decade or two. Biotechnology, pharmaceutical and medical device companies which are working towards finding better treatments for chronic illnesses will see high demand. Hospital operators will also see high demand from the ageing population.
Re -Education: Another industry likely to grow from the impact of the expanding aging population is education. Older Australians are opting to work after the retirement age due to voluntary or involuntary reasons. Some of these Australians are choosing to re-skill and move into a different career or to upskill from their current vocation. Look for stocks in adult education.
Finance: Australia’s finance sector doubled the size of its economic contribution over the last 30 years and this growth is expected to continue. The finance sector is also predicted to replace mining as the next major export industry. There are two subsectors within finance that are worth considering:
i) Wealth Management: As the aging population reaches retirement, many will enlist the services of Wealth Management services to secure their finances. It is not only the ageing population which will cause the wealth management sector to grow but Asia’s growing middle class. As this group grows, Australia can benefit by becoming the financial services hub of Asia.
ii) Funds management: The growth of Australian funds management is stronger than global competitors. This area is also expected to continue to grow as the population grows. Australia is the fourth largest asset pool in the world and the Funds Under Management (FUM) is expected to triple in size to reach $7.6 trillion by 2033. Australia was not impacted by the GFC to the same extent as many other countries which has secured our reputation as a safe investment location. We have had a stable economic environment with 22 years of consistent growth.
Internet Growth – Online shopping: As retail stores are recording sluggish sales, the online shopping industry has had an annual growth rate of 16.2 % between 2012-2017. Australians spent $41.3 billion on online shopping in 2016 with 65% of Australians shopping online. This enthusiasm for online shopping is expect to grow. Look out for stocks which have an online shopping platform. Another area online which is expected to grow is online auctions.
Food Processing: Asian countries will pay a higher price for their product to have their food processed and packaged here in Australia. This is because Asia places a high value on Australian food safety. There is still room for the food processing sector to grow in Australia as the Australian dollar has fallen over time. Look for stocks where food is processed in Australia and sold overseas, such as baby formula.
Third Party Administrators: Third party administrators are experiencing growth as companies are looking to cut costs and improve profitability. This growth is set to continue as companies look for ways to still be profitable in a slowing economy.
Wine: Australian wine exports are at their highest level in 10 years. Chinese exports were up 66%, while exports to the US rose 4%. With the middle class of Asia expanding, so too will their consumption of these products. Look out for wine stocks.
Lauren Hua is a private client adviser at Fairmont Equities.
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