Service sector—world class tertiary industries

Australia has a competitive, world-class service sector that is underpinned by a skilled, multilingual workforce, a stable liberal democratic political system, a strong economy, and proximity to the major financial markets of Asia.

The service sector—or tertiary economy—accounts for 70 per cent of the country’s economic activity. It includes: banking, insurance and finance; the media and entertainment industries; consulting, tourism and retail; services provided by government, such as education, health and welfare; and other personal and business services.

Banking, insurance and finance

Finance and insurance is the third largest sector in the Australian economy, generating 7.9 per cent of real gross value-added in 2006–07. This sector has been one of the country’s highest performing industries, achieving an average annual growth rate of 4.8 per cent a year between 1987 and 2007. This growth rate is well above the combined average for all industries (3.5 per cent) and reflects the strength of the Australian service-based economy.

The growth in investment funds has been a key driver of the Australian financial services sector. At the end of the December quarter in 2007, the sector had a total investment fund pool of around $1.4 trillion. This is the fourth largest contestable investment fund asset pool in the world. Since 1992, investment fund assets in Australia have recorded a compound annual growth rate of 12.5 per cent. Conservative industry estimates forecast that the Australian investment fund pool will exceed $2.5 trillion by 2015.

The Australian share market is the largest in the Asia–Pacific region behind Japan’s, based on free-float market capitalisation. It overtook Switzerland’s as the world’s seventh largest with total market capitalisation of floating stocks of around US$1.1 trillion, according to the Standard & Poor’s September 2007 survey.

The Australian Securities Exchange is in the top ten listed exchanges in the world, as measured by market capitalisation. Its diverse domestic and international customer base includes corporates, investment banks, trading banks, fund managers, hedge funds, commodity trading advisers and proprietary and retail traders. Regulatory oversight is provided by the Australian Securities and Investments Commission.

The Australian international debt securities market is by far the largest in the Asia–Pacific, while the Australian domestic debt securities market is the fourth largest behind those of Japan, China and South Korea. Reflecting the maturity and sophistication of Australian markets, almost half of the Australian debt securities market consists of international debt (US$488 billion in September quarter 2007).

Australia has the fastest growing foreign exchange (FX) market in Asia. In terms of global turnover, the Australian FX market is the seventh largest in the world, the Australian dollar (A$) is the sixth most traded currency and the US dollar–Australian dollar is the fourth most traded currency pair. Total turnover has risen 110 per cent since 2004. It averaged US$170 billion per day in April 2007, compared with US$81 billion per day in April 2004.

Australia has become an important financial services hub. The time difference between Australia and most of Asia is only two to three hours and the 14 hour difference between the US and Australian east coasts means that as the work day is finishing in New York, it is starting in Sydney. Australia’s banking sector, regulated by the Australian Prudential Regulation Authority, offers world-class expertise and standards of service

Media and entertainment

Australia is well served by diverse news media. There is a strong tradition of print journalism: a number of Australian newspapers such as The Sydney Morning Herald and The Age rank among the oldest continuously published newspapers in the world.

There are five national television broadcasters, three of which are publicly listed companies and two of which are government-run and funded. The Australian media is governed by strict cross-media ownership laws and is overseen by the Australian Communications and Media Authority. Overall, the television industry spent $1.16 billion on programming in 2005–06, with $813 million going to local content. It generated advertising revenue of $3.5 billion in the same period.

Radio broadcasting began in Australia in 1918, when the first official radio message was broadcast from the United Kingdom. Radio coverage in Australia is universal, with the government broadcaster, the Australian Broadcasting Corporation (ABC), servicing the entire continent on both the AM and FM bands. There are 5000 people employed in the industry, with nearly three quarters of that number working for commercial stations.

Overall, 80 per cent of Australians have regular access to the Internet, with 30 per cent being heavy users. In 2006, approximately 63 per cent of households had Internet access and a third had broadband connections.

Despite Australia’s geographic isolation, the country has long been an attractive destination for overseas touring acts. They are drawn here by the first-class entertainment venues, sophisticated and receptive audiences, and the hospitable climate and great natural beauty of the country.

The local live entertainment industry is vibrant and energetic, with many festivals and concerts, featuring local acts, held around Australia throughout the year. For more information see the fact sheet on the performing arts in Australia.

Tourism and retail, food and beverage industries

Australia has a well-developed tourism industry that welcomes more than five million visitors to the country each year and contributes around $20 billion to the economy annually. Additionally, Australians spend annually around $60 billion on domestic tourism, making 208 million trips in 2006–07. Overall, tourism accounts for 3.9 per cent ofgross domestic product. The industry employs 464 500 people nationally, or 4.5 per cent of the total workforce.

The retail industry is the largest employer in Australia, accounting for 920 000 jobs, or 12 per cent of the workforce. It typically accounts for around $150 billion in transactions annually. The majority of workplaces in the sector employ fewer than 20 people. The larger retail stores are mainly sellers of clothing and soft goods, supermarkets or grocery stores, and department stores. Around 44 000 of the people employed in the industry are working proprietors and partners.

The Australian food and beverage industry is recognised worldwide for its variety, high quality, healthy image, innovative manufacturing and packaging technologies. The diversity of foodstuffs available from Australia is huge and comprises grains, meats, dairy products, seafood, fruit and vegetables, bakery goods, olive oil, wine and other beverages, and confectionery, plus a host of individual gourmet treats and specialty lines.

The government sector

Services provided by government comprise an important part of Australia’s tertiary sector. Three of the largest areas, in terms of public spending, are health care, education, and welfare.

Most medical, optometry and hospital care in Australia is covered by Medicare, Australia’s universal health care system. Medicare ensures that all Australians have access to free or low-cost health care while being free to choose private health services. Medicare is funded through the Medicare levy, which is assessed at 1.5 per cent of an individual’s taxable income. Hospitals are funded jointly by the federal and state and territory governments and are administered by state or territory governments. In addition, private health insurance companies provide cover to around 10 million Australians.

Australia’s high-quality education system is funded jointly by the federal and state and territory governments, and administered by the state and territory governments. Primary and secondary schooling in Australia typically lasts 13 years. Free public education is available to every child up to the end of secondary school, generally reached at age 17. A diverse range of schools—government and non-government—give parents and students choice in selecting a school that best suits their needs.

There are two types of tertiary education programs: those offered by institutions and industry in the vocational and technical education sector, and those offered by universities and other higher education providers. Australia’s universities are world-class and are attracting an increasing number of overseas students. For more information, see the fact sheet on education.

Australian Government expenditure on welfare and social security represents the single largest outlay of the government sector, budgeted at $96.4 billion for the 2007–08 financial year. Government spending on the health sector is estimated to be around $45.9 billion in 2007–08. Expenditure on education will be around $17.8 billion in 2007–08.

Further information

• Australian Bankers’ Association
• Australian Communications and Media Authority
• Australian Prudential Regulatory Authority
• Australian Retail Association
• Australian Securities and Investments Commission
• Department of Innovation, Industry, Science and Research
• Tourism Australia

Note: Unless otherwise stated, all dollar amounts are in Australian dollars. The term ‘billion’ means ‘a thousand millions’ (one billion therefore equals 1,000,000,000); the term ‘trillion’ means ‘a million millions’ (one trillion therefore equals 1,000,000,000,000)

Updated Dec 2009