Australia has 509 classes of industry, housed under 19 industry divisions and five sectors. These classes are all cyclical at the macro and micro levels of our Australia and New Zealand Standard Industrial Classification (ANZSIC) definition of industries. In this newsletter we will focus mainly on the macro level (divisions).
Some of the divisions, such as Agriculture and Manufacturing, have very long cycles, or eras of 80 years or more. The Agricultural eras are shown below.
Agriculture may enter its fourth era in the 2030s, while Manufacturing may enter its fourth era in the 2040s. However, neither will reach their past peak shares of GDP (Agriculture’s 50% of GDP in the 1820s, and Manufacturing’s peak of 29% in the early 1960s).
Mining has much shorter cycles, averaging some 45 years. The present cycle is due to peak during this decade, and will likely end in the late 2040s. Mining is forecast to begin its seventh cycle in the second half of this century, as shown below.
One of our service industries, Finance and Insurance, has cycle or era lengths of around 55-60 years, as shown below.
So, what has led to the creation of these industries? Two words: outsourcing and utilities.
The hundreds of classes of industries have grown from less than 50 in the early years of British settlement, to over 10 times that number, in just over two centuries. Our agricultural industries came about because households were prepared to outsource the necessities of self-sufficiency and bartering to farmers. Indeed, as mentioned earlier, agriculture grew to half the colony’s economy by 1820, feeding the then small population, along with hundreds of thousands of Brits via our exports to the UK. This was Australia’s Agrarian Age. Transport became the ubiquitous utility for moving people and goods, especially domestically.
The outsourcing of manufacturing accelerated in the 1860s. Households began outsourcing food preservation, furniture-making and clothes to factories. This became Australia’s Industrial Age. Power (water, steam, then electricity) became the ubiquitous utility.
From the mid-1960s, we entered the post-industrial age, sometimes called the Infotronics Age, of service industries growth. In this current era, households have been outsourcing services, spending over $500 billion in 2020. The business sector has also been outsourcing non-core functions, spending over $750 billion in 2020. And the new utility is, of course, IT (now in its second phase, which is the Digital era of fast broadband, big data, AI and analytics).
The ANZSIC structure’s 19 industry divisions are listed below. These divisions are divided into five sectors that collectively generate around $5.4 trillion in revenue in Australia.
The importance of these 19 divisions has changed dramatically over the past 232 years, and will continue changing through to 2050 and beyond, as shown in the chart below.
Some divisions have very long cycles or eras, while others (such as Mining, Construction, and Transport) have shorter cycles. Nevertheless, one way or another, industries run in cycles.
Cycles occur at the industry class level too, which is where IBISWorld’s reports lie. Industry classes run in cycles (or lifecycles, as we term them), just as industry divisions do. However, most of these 509 classes of industry run for around 40-45 years on average.
We let our subscribers know where each industry class is on its own unique lifecycle. Because it is important to know whether the industry is growing (relative to our GDP growth rate), topping out, maturing, or entering a new lifecycle.
Nothing stands still, as it is said.
