Professional services grow to become one of Australia’s largest industry groups

24 July 2018

The Australian professional services industry has grown by 30% since the beginning of the decade to become the fourth largest industry group in the country. New data released on Tuesday by the Australian Bureau of Statistics has revealed that the professional, scientific and technical services sector now employs over 1.1 million people.

As Australia’s economy has been shifting since the end of the mining boom roughly 20 years ago, there has been a growing number of white collar workers. The professional services sector currently sits behind healthcare, retail and accommodation, and food services which have been driven by an ageing population and growing levels of tourism across the country.

Data released by the ABS shows that 1 out of every 11 Australian workers is a white collar worker. Out of the country’s 13.7 million workers, 1.1 million are employed within the professional services sector. The sector has overtaken both manufacturing as well as construction in the seven years to September 2017 to make it one of the largest sectors in the country. 

Whilst Australia is still a large commodity exporter and the construction industry has recently been experiencing sustainable growth, the economy as a whole is beginning to diverge. This shift marks the beginning of a transition towards an information society or digital economy, the likes of those seen in North and Western European nations or the city states of Asia. 

Digital economic transition is also a key driver of the growth in professional services, particularly in the high-end, prestigious consulting industry. With jobs across all sectors from tax and audit to human resources becoming increasingly automated, traditional accounting firms are extending into digital and consulting. 

Although data was not available on the breakdown of jobs in the professional services sector, the Australian consulting industry is currently one of the most profitable in the world in relation to the country’s national income. Currently worth over $4.6 billion a year, the consulting market of Australia relative to GDP is now 0.39%, which is higher than both that of the UK (0.38%) and the US (0.32%).

Professional services grow to become one of Australia’s largest industry groups

Australian consulting industry 2018

Australia’s consulting industry is growing at an exponential rate with the Big Four consulting firms – KPMG, EYPwC and Deloitte – all posting double digit growth in the past year. Growth has been based both locally and internationally due to a number of factors including heavy public sector funding, broad competition and international expansions. 

As Australia is on Asia’s doorstep, the consulting industry is profiting from a growing number of expertise seeking companies which see Australia as a reputable business centre. Australia is also a logical step for many Asian firms looking to expand their international footprint whilst still being close to home.

At home, many firms – both local and international – are looking to capitalise on the growing number of businesses looking towards digital transformation. “Clients' desire to undertake major cross-functional digital transformation projects are now translating into an uplift in consulting spend across most sectors, but particularly in healthcare, the public sector and financial services," said Source’s director Edward Haigh.

Professional services growth 

Professional services as a whole grew to a record high in the past year with the number of hours worked in professional services jumping 11.8% to 481.2 million hours. The ABS statistics show that whilst the total labour income from the entire economy only grew 3.4% over the year to September 2017, the total labour from professional services grew an astonishing 16%.

Chief economist at the ABS, Bruce Hockman said the report confirms the shift in the largest industry sectors in the country. Professional services now account for 8.6% of total employment in Australia and make up more than 1.1 million jobs.

"These new estimates show that, through the year to September 2017, the professional, scientific and technical services industry increased by over 13 per cent, the fastest of any industry in the economy," Hockman said.

Interestingly, Hockman also touched on the fact that a large minority of these jobs were not full time, but rather side jobs. “The Australian Labour Account showed that over 70,000 of these jobs in the professional, scientific and technical services industry were secondary jobs, where the person had another main job.”

Related: Best | most popular consulting firms for graduates in Australia.


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Chinese investment into Australia plunges to eight-year low

09 April 2019

Chinese investment into Australia plunged to US$6.2 billion last year according to the latest KPMG analysis, down by more than 35 percent to an eight-year low. 

A study from global professional services firm KPMG in conjunction with The University of Sydney has found that Chinese investment into Australia dropped by 36.3 percent in 2018, despite Chinese outbound direct investment growing by 4.2 percent globally to nearly US$130 billion. Taking in mergers and acquisitions, joint ventures, and green-field projects, Chinese investment into Australia totaled US$6.2 billion in 2018, down from US$10 billion the previous year.

As part of an ongoing collaboration between the Big Four firm and Sydney Uni, the latest release in the ‘Demystifying Chinese Investment in Australia’ report series (now into its fifteenth edition) points to Chinese domestic policy changes for the decline, with the local downward rate of investment now coming into line with trends seen in the US and Canada, which last year recorded respective Chinese inbound investment drops of 83 percent and 47 percent (in USD terms).Value of Chinese ODI into US, Europe and Australia 2012-2018

Designed to reduce its international exposure, the policy measures being implemented in China since early 2017 require overseas investments by Chinese firms to be non-speculative, only undertaken after fully considering major potential risks, and consistent with the company’s strategy and the country’s socio‑economic development goals – with certain categories of investment encouraged and others prohibited or restricted.

With 80 percent of Chinese executives stating that it was more difficult to get capital out of China in 2018 compared with 65 percent the year prior, the result is the second-lowest Chinese inbound investment in Australia since the mining & gas driven investment peak of 2008, with over US$16 billion coming into the country. Outside of the US$3.9 billion figure in 2010, the investment sum hasn’t dipped below US$8 billion in a decade.Chinese investment into Australia - 2007 to 2018

Yet, despite the domestic policy measures and downturn in inbound investment, Australia is still seen as a relatively safe investment destination according to a cross-sector survey of Chinese executives, with an improving political climate (those cautious due to the local political debate dropped from 70 percent in 2017 to 59 percent last year) and slight increase in the sense of being welcomed – up three points to 38 percent, although those feeling ‘unwelcome’ also rose by four points to 19 percent.

“Whilst Chinese investors confirm they remain positive about many aspects of the Australian market and its prospects compared with many other countries, there is an increasing concern around transparency of regulations, high costs and their continued perception of being unwelcome as reflected by negative Australian media coverage.” the report states.  “We need to be aware of the very real impact that poorly received, politically motivated public discourse and unbalanced media coverage can have on the future level of Chinese capital entering Australia.”2018 Chinese investment into Australia by sector

As an investment breakdown, private Chinese companies accounted for 87 percent of the deal value in 2018 and over 92 percent of deal volume, with state-owned entities contributing only 13 percent of value and 8 percent of the volume – which in total, dropped by 28 percent from 102 transactions in 2017 to 74 last year. As per those deals, over 40 percent of the investment total was made in the Australian healthcare sector, a more than 110 percent increase on the prior year.

According to the analysts, Chinese investors are primarily interested in scalable medical services and healthcare products which can be scaled in their home market, and the Australian healthcare sector has gained increased interest due in part to the ‘Australia package’ – ‘the combination of transferable management know‑how, high‑level care service experience, state of the art technology, the ‘clean, green and healthy’ image of Australian products.”

Meanwhile, new mining investment has dropped sharply – down 90 percent from a spike last year for just 5.6 percent of the total – opening the door for commercial real estate (predominantly mixed-use development and office stock according to figures provided by Knight Frank) to claim the second highest levels of Chinese investment at ~37 percent (albeit down 31 percent on 2017 levels). The remaining deal value was mostly in oil & gas (8.8 percent, up 295 percent) and renewable energy (4.8 percent, up 217 percent) sectors.2018 Chinese investment into Australia by geography

Perhaps of further note, at least in terms of demystifying Chinese-Australian investment, ‘Northern Australia’ attracted at most just 8 percent of total investment, with Queensland accounting for only 5 percent, Western Australia 3 percent, and zero deals made in the Northern Territory. Here, the bulk of the inbound investment was made in New South Wales (56 percent) and Victoria (27 percent) with South Australia (8 percent) claiming the majority of the remainder.

“While this annual result brings Chinese ODI in Australia back to the second lowest level since 2008, there is no reason why Australia can’t return to higher levels seen historically,” the report concludes. “2018 need not define a trend, but it is a period to reflect upon. There are a great many opportunities for Chinese companies to contribute towards the development and internationalisation of Australian industries and supply chains in the coming years and there is much that can be done to improve the perception of the Australian market to Chinese investors and vice versa.”