Despite unprecedented uncertainty driven by COVID-19, Australia is projected to increase its total services exports by $45 billion by 2025, a new report finds.
And Information and Communications Technology (ICT) will account for 7.4% of the growth, according to the report.
Forecasts project the value of international, cross-border trade in services rising from US$6.1 trillion in 2019 to $8.0 trillion by 2025 – a 31% increase in value.
US, France, and UK set to see largest increase in value of cross-border trade in services by 2025.
The Western Union Company, a leader in cross-border, cross-currency money movement and payments this week launched the report The Global Services Trade Revolution: Fuelling post-pandemic economic recovery and growth” in partnership with Oxford Economics, a leader in global forecasting and quantitative analysis.
The report finds the ICT industry will play a vital role in driving growth and jobs locally as Australia faces a recession.
Australia lagging behind UK and US
The report estimates that services currently account for more than half (55%) of all global trade flows, equating to US$13.7trn of cross-border transactions in 2019. Official statistics show the share of services in total trade amounted to 24% in 2019, up from 19% in 1995.
It found that Australia’s services industry is only 1.1% of the GDP, lagging behind the UK at 9.2% and the US at 2.41%.
However, Australia is well-positioned to grow exports in knowledge-intensive services industries as distance becomes less relevant to trade.
“For far too long the global service industry has been undervalued and its importance underestimated. This report shows that this needs to change,” says Andrew Summerill, President, Payments at Western Union.
“The economic impact of COVID-19 will be felt for years to come, but we can clearly see that the regions and industries that recognise and appreciate the value of global services will be in a better position to drive future success and ultimately, recovery.”
The report also found:
B2B services have become the fastest-growing export category by industry, with Australia leading the world average in employment in services at 77% compared to 49% globally.
The value of global trade in services increased by 50% between 2010 and 2019, double the pace of growth in merchandise trade.
There is a potential increase of $890 billion in the global value of services trade by 2025 through trade liberalisation.
Amongst developed economies, the adoption of new technology and digitisation of working practices likely to further fuel post-pandemic economic recovery and growth of cross border trade in services
The analysis suggests while the global economy is suffering in the short-term, trade in modern digital services will prove comparatively resilient through the current crisis.
It estimates that the value of cross-border flows of B2B, ICT and financial services will decline by just 6% in 2020, compared to the value of goods trade, which will decline an estimated 13%.
However, hard-hit traditional services categories such as tourism will decline by around 40% in 2020, while air passenger transport will decline by over 50%.
As a share of total services trade, these categories are projected to slide to 39% by 2025 – down from 41% in 2019.
“The pandemic has already super-charged the growth in digital services and highlighted the potential for remote services to transcend global borders,” Mr Summerill says.
“Over the next decade, we’re going to see swathes of new business models redefine the possibilities for cross-border transactions. And in the short-term, global trade in services while being a vital component of recovery, and it will be digitally focused industries that will be the driving force.”
To access the full report click here.