Australian services ranging from education to healthcare are poised to take on a far greater share of exports to Asia in the coming years, according to a new report.
Goods, particularly natural resources and agricultural products, are set to remain the cornerstone of exports. But the report predicts services can become Australia's top export to Asia in terms of value added by 2030 as Asian economies develop and middle classes swell.
"An immense prize awaits Australia with the growth that is occurring on our doorstep," the report from Australia & New Zealand Banking Group Ltd, PricewaterhouseCoopers and AsiaLink Business said.
Goods and services exports to Asia could support up to one million jobs in Australia and realise $163 billion a year with the next 15 years if Australia continues to pursue existing opportunities, the report predicts.
Mr Mike Smith, the chief executive of ANZ, said Australia is “at the early stages of a strategic shift to a much deeper, more multifaceted engagement with the (Asian) region”.
The benefits of this transition were “much wider than currently understood”, he said.
“While resources and agriculture will continue to be central to Australia’s exports, this report highlights that services will play an increasingly important role in generating jobs, diversifying the economy and helping recognise the potential of the Asian century,” he said.
Services industries such as banking, telecommunications and tourism collectively accounted for almost 73 percent of Australia's gross domestic product in the last financial year, according to government data. But this was just 17 percent of total exports, with a gross value of $57 billion.
But the weighting of services is considerably higher in value-added terms, which factors in the use of services to produce goods. The federal government, which in March launched a review of barriers to boosting services exports, said services accounted for more than 35 percent of exports on this basis in 2009.
The report estimated that services generated $112 billion in value-added export earnings in 2013, supporting 1.1 million Australian jobs. By comparison, mining exports were worth $101 billion and supported 227,000 jobs.
And the sales of services by overseas branches of Australian companies, such as Toll Group, Qantas, Westfield, Linfox and ANZ, are massive, worth about $138 billion worldwide in 2013.
With a rise in Asia's middle class from about 500 million today to 3.2 billion by 2030, it projected that Australia's annual services exports to Asia could be worth $163 billion in that time, and become the number-one export to the region.
Also, sales by Asian branches of Australian services companies could grow to as much as $78 billion by 2030 from $14 billion in 2013, the report said.
The shift can already been seen in Asia. China's demand for iron ore, Australia's most valuable export, fell for the first time in 2014, although the country remains the world's biggest consumer of the steel-making commodity. But at the same time, China displaced the UK as Australia's most valuable market for leisure-travel exports last financial year.
Still, the report cautioned the growth won't happen automatically and that companies face stiff competition from local service providers and international rivals.
"Australians are familiar with the idea that the resources sector has powered economic growth over the past decade. They are less familiar with the huge contribution of Australia's services enterprises," the report said.
The Minister for Small Business Bruce Billson said although just a seventh of export earnings now come from services, Australia “is in the midst of a transition from a mining base to a broader-based economy with enormous possibility.”
“But it’s not going to be easy, Mr Billson said. “These opportunities are not reserved for us alone.”