Australia: Don’t forget services sector - HSBC

Paul Bloxham, Chief Economist at HSBC, explains that services are over 70% of Australian GDP and are driving more and more growth and services are also generally quite poorly measured in the statistical frame.

Key Quotes

“Bulk of Australia’s economy is outside the mining sector. Although commodities loom large in Australia’s trade, exports are only around 20% of GDP. In terms of gross value-added, mining is only 6% of the economy. By comparison, the services sectors account for over 70% of GDP.”

“Throughout the period there have also been secular trends that are driving the increased importance of services. An aging population has driven increasing demand for health services, with gains in health jobs the single largest contributor to employment growth over the past decade. Technology is also favouring services. For example, music and movies are no longer consumed on disks purchased from a physical store, but downloaded as services. An increasingly sophisticated work environment is demanding higher skills and thus more spending on education services. Services account for 48% of household consumption, up from 40% two decades ago.”

“While some observers are getting worried about the possibility of a very weak Q1 GDP print (due on 7 June), and it is still too early to be certain, it is worth keeping in mind the services story and the limitations of many of the partial measures.”