Australia's consulting market punching above its weight

23 March 2020 5 min. read
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Australia’s management consulting industry outsizes that of its counterparts in numerous larger developed economies. explores why.

Already a mature market, the consulting industry of Australia has in recent years continued to punch well above its weight. Remarkably, the country boasts the fourth largest industry in terms of revenue worldwide, behind only the economic giants of the US, UK and Germany – all of which are among the globe’s six largest nations by GDP. Here, Australia ranks only 14th globally, with a population well shy of every nation above it and many of those following below.

This begs the question of how Australia’s consulting industry has managed to outshine so many of its counterparts in larger developed countries, for example performing ahead of France, Canada and Japan, with several immediate if not entirely satisfying responses. The first of those; Australian companies simply dig consultants. This contention is backed by a previous report from specialist industry analysis and consulting firm Source Global Research.

Australia is the globe's fourth largest consulting industry

The survey report, ‘Planning for Growth’ identified Australian companies alongside their counterparts in Britain as displaying roughly the equal greatest propensity to call in the professional advisors. “This tells us something about how well established consulting services are in the minds of clients,” the report ventures, noting that companies Down Under are well aware of the value of external support and the procedures used to source external staff.

Still, a stable economy certainly helps. Often touted for its record run without a recession (some 28 years up until 2020), Australia also experienced a number of economic glory years from the late 90s on, driven largely by a mining and resources boom. Already generally one of the larger segments worldwide, Australia’s energy & resources consulting market is at a value of more than $1 billion now the second largest on the planet, behind only the massive US domain.

But then Canada, which according to various data sources has a natural resources industry directly and indirectly contributing almost double the percentage to nominal GDP as compared to Australia – yet sits several rungs below it on the international consultancy market ladder. That brings us to the crux, and another of the traditionally larger segments across nations; the public sector, which in Australia is the third biggest contributor behind financial services and resources.

Australia's management consulting industry size

Public sector fees

It’s difficult to ascertain an exact dollar figure on public sector consultancy spending in Australia, but in percentage terms it contributes just one fifth of estimated $6 billion local consulting industry, which in itself is a conservative figure focused on the upper end of the market. According to figures from the Auditor-General’s office, government spending on consultants totaled $647 million in the 2018/19 year the, up from under 400 million in 2013/14.

Yet, the outlay is almost certainly much higher. The data is based on only those contracts which formally have been tagged as ‘consultancy’ on AusTender, but certain contract types are not sourced through the formal procedures (in particular highly strategic or politically sensitive work). Also, many contracts remain under the threshold of AusTender notification requirements and while they may be very small in size, the high volume equates to a significant overall sum.

Government spending on consultants

Illustrating the discrepancy, in 2018-19 a select group of just eight large consultancies received close to $1.2 billion from public service departments, which is already double the reported figure. What is for certain, government spending on external advisors has jumped in recent years alongside the fast-growing consulting industry at large, and unashamedly so. Yet, a campaign to reduce the public service under consecutive Liberal governments has doubled the advisory bill.

As an example, the average annual value of contracts won by the Big Four more than doubled from $240 million under Labor to some $530 million today. Finance Minister Mathias Cormann has consistently defended the approach, describing it as “an efficient way to keep the overall cost of government administration low when the need to access relevant skills and expertise is temporary, or the expertise and skills are more efficiently obtained and maintained in the private sector.”