HSBC Global Research: Australia's next growth driver - The rise of the services sector
As mining investment falls, growth is rebalancing to the other industries. Low interest rates are supporting rising housing prices and construction and encouraging greater household spending. The next stage of the rebalancing act is expected to entail a strong pick-up in the services sectors, which account for the bulk of Australia's economy. Domestically, demand for services is set to be driven by low interest rates, rising asset prices, shifting preferences and solid population growth. Foreign demand is also rising, as Asia's middle class incomes grow and the AUD falls. Tourism and education exports are growing strongly and are set to continue doing so. Jobs growth, which is running at 1.9% y-o-y, up from 0.5% 18 months ago, is being driven by the services sector, led by healthcare, professional services and tourism. What would help is a focus on tax and regulatory reform and building infrastructure to improve local competitiveness and support a services-driven upswing in growth. Full report attached via the third tab under the chart below.