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ABOUT THIS PUBLICATION

This publication presents estimates of the economic and financial performance of Australian industry for 2004-05, together with data on a comparable basis from 2001-02 and intervening years. These data are compiled from the ABS Economic Activity Survey and from business income tax data reported to the Australian Taxation Office.

Some of the estimates in this publication are derived by prorating data from taxation sources with data collected by the ABS. Due to the nature of this estimation process, the ABS's current methods of measuring standard error may understate the variability of the estimates. For details, see Technical Note 2.

CHANGES TO THIS PUBLICATION

This publication includes the first release of employment estimates (and related ratios) using the current statistical infrastructure. These estimates are derived from reported data and from modelled data based on wages and salaries reported in business income tax returns. As such these estimates should be regarded as experimental. See Appendix 1 for details.

REVISIONS

Estimates for earlier years have been revised since the previous issue of this publication. The revisions are incorporated in this publication and in the extended data spreadsheets available free on-line.

The effect of these revisions on the 2003-04 national estimates of indicative key variables at the Total selected industries level has been a decrease of 0.2% (or $3.5b) in sales and service income, a decrease of 0.2% ($0.4b) in wages and salaries paid, and an increase of 0.2% ($1.2b) in industry value added. The extent of revisions may be greater for individual industries and/or for other variables.

INFORMATION AVAILABLE ON-LINE

The text components of this publication are available free on-line. A PDF publication and extended data spreadsheets are also available free on-line. To access this information, go to the ABS website home page <https://abs.gov.au>.

INQUIRIES

For further information about these and related statistics, contact the National Information and Referral Service on 1300 135 070 or John Ridley on Sydney (02) 9268 4541.

CHAPTER 1 OVERVIEW


INTRODUCTION

This publication presents estimates of the economic and financial performance of Australian industry. The estimates are based on data collected in the ABS Economic Activity Survey, and business income tax data reported to the Australian Taxation Office.

KEY DATA

Table 1.1 presents a time series for selected items, from 2001-02 to 2004-05. All value data in this table are shown at current prices.

For the Total selected industries, the key aggregates of income, expenses and industry value added increased by 9% or 10% between 2003-04 and 2004-05, while operating profit before tax increased by 12%. Commentary about these variables, and analysis by industry, is presented in Chapter 2.

For information about survey methodology, see Technical Note 1.

The Glossary provides definitions for terms used.

GROSS VALUE ADDED

Table 1.2 presents estimates from the Australian National Accounts and illustrates the growth of Australian industries over time using chain volume measures of their gross value added. Chain volume measures provide estimates free of the direct effects of price change.

Cultural and recreational services recorded the highest growth rate in 2004-05 (7.9%) followed by Health and community services (5.1%) and Transport and storage (5.0%). The highest growth rates for the last 10 year and 25 year periods were recorded by Communication services, with annualised rates of 5.9% and 7.0% respectively and Property and business services with 4.9% and 5.0% respectively.

TOTAL FACTOR INCOME

Table 1.3 shows the contribution of industries to the production (as measured by total factor income) of each state and territory, as well as Australia, in 2004-05. For the purposes of this table, the activity of general government and the ownership of dwellings are each treated as industries.

Of the nineteen industries in the table, Property and business services ranked first (at 12.6%) in its contribution to Australian industry. Property and business services was the largest industry in New South Wales and Victoria, and ranked second in four of the six remaining states and territories. Manufacturing ranked second in its contribution to Australian production (11.0%) and was the largest industry in South Australia and Tasmania. Contributing 7.7% to total factor income nationally, Mining was the largest industry in Queensland, Western Australia and the Northern Territory.

CHAPTER 2 INDUSTRY PERFORMANCE


INTRODUCTION

Statistics in this chapter relate to the performance of Australian industry at the industry division level, as defined by the Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993 edition. ANZSIC Divisions K Finance and insurance and M Government administration and defence are excluded. Aggregates excluding these industries are presented at the Total selected industries level. Please note that the Education and Health and community services industries, where shown (or included in totals) in this publication, exclude any public sector components. Data for Agriculture, forestry and fishing are only available from 2002-03, so aggregates excluding this industry (as well as Divisions K and M) are presented at the Selected industries level to facilitate comparison between 2001-02 and later years.

Definitions of terms used are shown in the Glossary.

OPERATING BUSINESSES

The total number of businesses operating in the Total selected industries of the Australian economy increased by 4% between 2003-04 and 2004-05. In 2004-05 these industries consisted of 2,365,200 operating businesses, 99,700 more than in 2003-04.

Refer to Technical Note 1 paragraphs 3-5 for detailed descriptions of the business units used.

Thirteen of the fifteen industry divisions that comprise the Total selected industries grew in number of operating businesses, Mining and Manufacturing being the exceptions.

In 2004-05, the industries with the largest number of operating businesses were Property and business services (with 674,700 businesses, or 29% of the Total selected industries), Construction (16%), and Agriculture, forestry and fishing and Retail trade (each with 10%). These proportions are virtually identical to those of 2003-04.

INCOME AND EXPENDITURE

For the Total selected industries, total income increased in current price terms by $171b (9%) between 2003-04 and 2004-05, to $1,969b. Of this increase, sales of goods accounted for $93b and income from services (excluding rent, leasing and hiring income) $64b. In percentage terms the largest increase (23%) was in interest income (from $15b to $19b), more than offsetting a fall in the previous year. The total income of large (employing) businesses increased by $77b (11%), and for other business types it increased by $93b (8%). All industries increased total income in current price terms, the largest percentage increase (16%) having occurred in the Mining industry.

Total expenses of the Total selected industries increased in current price terms by $156b (10%) between 2003-04 and 2004-05, to $1,795b. Of this increase, cost of sales accounted for $119b and selected labour costs $24b. The increase among large (employing) businesses amounted to $70b (11%); for other business types, total expenses increased by $86b (8%). All industries recorded increases in total expenses in current price terms. The largest percentage increase, of 14%, occurred in the Communication services industry. Wholesale trade incurred the largest increase in value of total expenses (up $31b, or 10%), followed by Retail trade (up $26b, or 9%).

In 2004-05, the industry with the largest share of total income for the Total selected industries was Manufacturing, with 18%, followed by Wholesale trade (17%) and Retail trade (16%). On the expense side, the same industries predominate: Manufacturing and Wholesale trade account for 18% each, and Retail trade 17%, of the total expenses of the Total selected industries.

The contribution of large (employing) businesses to both total income and total expenses of the Total selected industries was 38% in 2004-05. Small (employing) businesses contributed 28% to both variables, medium (employing) businesses accounted for 23% of total income and 24% of total expenses, and non-employing businesses contributed 11% and 10% respectively.

INDUSTRY VALUE ADDED

Industry value added (IVA) for the Total selected industries increased by 9%, or $49b, between 2003-04 and 2004-05. All industries increased IVA in current price terms. Mining recorded the largest percentage increase, rising 16% from $34b to $40b. Property and business services registered the largest increase in dollar terms ($12b, or 11%), from $106b to $118b.

As measured by IVA, the largest industries in 2004-05 were Property and business services (contributing 20% of the value for Total selected industries), Manufacturing (16%) and Retail trade (9%).

In 2004-05, large (employing) businesses generated 40% of the IVA of the Total selected industries. Small (employing) businesses contributed 28%, medium (employing) businesses 21%, and non-employing businesses 11%.

EMPLOYMENT

The Total selected industries are estimated to have employed 8.1m persons at the end of June 2005. Almost half of this total employment is accounted for by three industries: Property and business services (with 1.5m persons, or 18%), Retail trade (1.4m, or 17%) and Manufacturing (1.1m, or 13%).

PROFITABILITY AND EARNINGS

Operating profit before tax (OPBT) of the Total selected industries in 2004-05 was $184b, an increase in current price terms of $19b (12%) from 2003-04.

In 2004-05, OPBT of large (employing) businesses in Total selected industries was $68b, an increase of $10b (16%) from 2003-04. For other business categories, OPBT increased by $10b, or 9%, to $116b in 2004-05.

The largest increases between 2003-04 and 2004-05 in OPBT occurred in Mining ($5b), and Manufacturing and Transport and storage ($4b each). The only industry in which OPBT declined in 2004-05 was Agriculture, forestry and fishing (down 2%, or $0.1b).

In 2004-05, 37% of OPBT of the Total selected industries was earned by large (employing) businesses. Small (employing) businesses generated 25%, medium (employing) businesses 14%, and 24% was attributable to non-employing businesses. Non-employing businesses make a higher contribution to OPBT than to most of the other variables presented, as the drawings and/or labour costs of working proprietors and partners are not reflected in estimates of business expenses.

The Property and business services industry was the largest contributor to OPBT of the Total selected industries in 2004-05, accounting for 24%. This was followed by Manufacturing (16%), and Mining (11%).

GROSS FIXED CAPITAL FORMATION AND CAPITAL EXPENDITURE

Gross fixed capital formation (GFCF) by the Total selected industries increased by 13% between 2003-04 and 2004-05, rising by $9b to $78b in 2004-05. Of this increase, $3b is attributable to Manufacturing, and $2b to each of Electricity, gas and water supply and the Communication services industry.

An increase of $23b (or 22%) in capital expenditure at the Total selected Industries level was moderated by an increase of $4b (or 14%) in the value of disposals of assets to produce a $19b increase ($76b to $95b, or 25%) in net capital expenditure for the year.

Substantial contributors to the increase in net capital expenditure were Manufacturing ($3b), Electricity gas and water supply ($2b), and Mining ($2b).

BUSINESS AVERAGES

Between 2003-04 and 2004-05, most average values presented for the Total selected industries showed increases. Average OPBT improved by 7%, slightly greater than the 4% or 5% by which the other financial averages and average IVA increased.

INDUSTRY RATIOS

A range of performance measures, mainly expressed as ratios, can be produced from the data available from businesses' financial statements. A selection of these are presented in table 2.2 for each industry. Definitions are provided in the Glossary. Information about the uses and limitations of these measures can be found in Explanatory Notes paragraphs 24-29.

At the Total selected industries level, most of the industry ratios presented either changed little or showed moderate increases over their values in 2003-04.

The industry which recorded the largest profit margin in 2004-05 was Mining (29%), followed by Health and community services (private) (19%), and the smallest profit margins were returned in Retail trade and Wholesale trade (both 4%).

Values for interest coverage ranged from 12.2 times in Health and community services (private) to 2.3 times in Electricity, gas and water supply.

The industry which devoted the highest proportion of IVA to acquiring capital assets in 2004-05 was Electricity, gas and water supply (with an investment rate (value added) of 49%, up from 41% in the previous year), followed by Mining (at 40%). Wholesale trade recorded the lowest value (9%) for this ratio.

INDUSTRY ANALYSIS

An analysis of performance by industry follows.

Agriculture, forestry and fishing

In 2003-04, this industry consisted of 239,400 operating businesses. They contributed 3% to total income, total expenses and industry value added of the Total selected industries.

A $1.2b (25%) rise in income from services plus a $2.6b (5%) increase in sales of goods resulted in a $4.1b (8%) increase in total income during the year. IVA increased by the same percentage (8%), while OPBT fell slightly.

This industry's average values of sales and service income, total income and total expenses are all lower than for all other industries except for Personal and other services. Average OPBT and IVA in Agriculture, forestry and fishing is the lowest of all industries shown.

Agriculture, forestry and fishing is the industry least dominated by large (employing) businesses, which accounted for only 10% of wages and salaries, 3% of total income, and 4% of IVA in 2004-05. By contrast, the contributions of small (employing) businesses to these aggregates were, respectively, 59%, 53% and 57%, the highest for each variable for any of the Total selected industries.

Mining

Favourable commodity prices, strong overseas demand and increased output combined to substantially improve the performance of the Mining industry in 2004-05. An increase of $11.0b (16%) in total income exceeded an increase of $6.7b (13%) in total expenses, resulting in a $4.7b (30%) increase in OPBT and a $5.4b (16%) increase in IVA. Net capital expenditure also increased, by 19% (or $2.2b).

Depreciation and amortisation is a significant element of the cost structure of Mining, representing 14% of its total expenses in 2004-05, the second highest proportion (after Communication services) of all the Total selected industries.

Manufacturing

Manufacturing OPBT increased by $4b (or 17%), resulting from a $24b (8%) increase in total income, a $23b (8%) increase in total expenses, and an increase of $2.5b in the value of the change in inventories.

GFCF and net capital expenditure in Manufacturing both rose by $3b, or 28% and 24% respectively, in 2004-05.

The Manufacturing industry accounted for 18% of total income and sales and service income of the Total selected industries in 2004-05, and was the largest contributor to these aggregates.

Average OPBT in Manufacturing rose by 18% during 2004-05, much greater than the 8% increase in most other financial averages and average IVA.

Electricity, gas and water supply

IVA of the Electricity, gas and water supply industry increased by 6% (or $1.2b) in 2004-05, after two years of modest growth.

Selected labour costs represented 9% of total expenses in 2004-05 for this industry, the second lowest proportion (after Wholesale trade) of any industry. The Electricity, gas and water supply industry also has the highest proportion of its total expenses represented by interest expenses: 11% in 2004-05, compared to 2% for the Total selected industries.

Capital work done by businesses for their own use accounted for 42% of this industry's capital expenditure in 2004-05, the second highest proportion of any industry. Capital expenditure increased by 28% (or $2.2b) during the year, and represented 49% of the industry's IVA.

Of the Total selected industries, Electricity, gas and water supply is the second most heavily dominated (after Communication services) by large (employing) businesses in 2004-05, as measured by their contribution to IVA (79%), OPBT (81%), and total income (72%). In terms of wages and salaries and employment Electricity, gas and water supply is the industry most heavily dominated by large businesses, with 84% and 77% respectively. Conversely, it is also the industry to which non-employing businesses contribute least: 2% or less in 2004-05 to all financial variables and IVA.

Construction

In 2004-05, total income in Construction increased by 9% and total expenses by 8%. OPBT rose by 6% and IVA by 8%. Since 2001-02, these aggregates have increased by 40%, 39%, 48% and 47% respectively.

Reflecting a 30% increase in interest expenses (to $2.2b), the interest coverage ratio for this industry declined from 10.3 times in 2003-04 to 8.5 times in 2004-05.

Apart from Agriculture, forestry and fishing, Construction was the industry most heavily dominated by small (employing) businesses in 2004-05. They contributed 33% of the OPBT in this industry, compared to 25% at the Total selected industries level, between 45% and 49% of all other financial variables shown, 44% of IVA, and 37% of employment at the end of June.

Wholesale trade

Total income of the Wholesale trade industry increased by 9% ($28b), and total expenses by 10% ($31b), in 2004-05. IVA increased by $3b (7%), $2b of which was generated by the Personal and household goods wholesaling subdivision. After declining over the previous three years, income from services in Wholesale trade increased by 11% to $9.4b.

At 8%, the proportion of selected labour costs to total expenses in Wholesale trade in 2004-05 was the lowest of all industries shown. The proportion for the Total selected industries was 17%.

Retail trade

Total income and total expenses in the Retail trade industry both increased by 9% in 2004-05. OPBT rose by 10% and IVA increased by 7%.

Capital expenditure increased by 16%, and by 22% net of disposals.

Apart from Agriculture, forestry and fishing, Retail trade is the industry with the lowest wages and salaries costs per person employed ($22,400) in 2004-05. This is consistent with the prevalence of part time and casual employment in this industry.

Accommodation, cafes and restaurants

Increases of 4% were recorded in both total income and total expenses of Accommodation, cafes and restaurants in 2004-05.

IVA of Accommodation, cafes and restaurants increased by $1b, or 5%. Capital expenditure in this industry fell by 17% (or $0.5b), leading to a reduction in the investment rate (value added) to its lowest level (12%) in the four years of this series. Profit margin and interest coverage declined slightly.

Transport and storage

OPBT of this industry doubled between 2003-04 and 2004-05, to $7.6b, following two years of decline. Total income increased by $14b (16%) and total expenses by $10b (12%).

This industry was the second largest source (after Property and business services) of rent, leasing and hiring income, contributing 6% of the estimate for the Total selected industries in 2004-05. Its interest coverage and profit margin substantially improved during the year.

Funding from government for operational costs represented 4% of total income for Transport and storage, reflecting payments to passenger transport operators.

Communication services

Increases were recorded by this industry during 2004-05 in total income (12%, or $5.0b), total expenses (14%, or $4.9b), OPBT (4%, or $0.3b), and IVA (11%, or $2.3b). Both capital expenditure and GFCF rose by 45%, reflecting investment in new technologies. More than half (55%) of the value of capital expenditure in Communication services consisted of capital work done for own use, the highest proportion of any industry shown.

Communication services is the industry in which large (employing) businesses dominate most heavily, generating 79% of total income, 83% of IVA and 90% of OPBT in 2004-05 and providing 71% of employment.

Communication services is also the industry for which depreciation and amortisation represents the highest proportion of total expenses, at 15% in 2004-05 (compared to 4% for the Total selected industries).

Property and business services

The Property and business services industry had the largest number of operating businesses in 2004-05. Its estimated 674,700 businesses represented 29% of all businesses and was 6% more than the previous year.

IVA of this industry increased by 11% ($12b), greatly exceeding the rise in OPBT (1%, or $0.5b). Selected labour costs increased by $8b (13%).

In 2004-05, the Property and business services industry accounted for 14% of total income, 13% of total expenses, 22% of selected labour costs, 18% of employment and 20% of IVA of the Total selected industries.

Of total income for this industry in 2004-05, 14% is represented by rent, leasing and hiring income, the highest proportion of any industry shown. At the Total selected industries level, the corresponding proportion is 3%. The Property and business services industry generated 74% of all rent, leasing and hiring income earned by the Total selected industries.

Non-employing businesses accounted for 28% of the total income of the Property and business services industry, the highest proportion of any industry in 2004-05.

Education (private)

The number of operating businesses in the (private) Education industry increased by 7% between 2003-04 and 2004-05.

Selected labour costs represented 58% of total expenses for the (private) Education industry in 2004-05. As well, the $6.4b received in 2004-05 as funding from government for operational costs amounts to 38% of this industry's total income. Both proportions are the highest of any industry shown.

This industry exhibits the highest value for the ratio of wages and salaries to sales and service income of all industries presented. This is consistent with the labour intensive nature of the industry. At 0.83 in 2004-05, this value is more than 90% greater than that of the next-ranking industry by this measure (Health and community services (private)).

(Private) Education is the industry in which medium (employing) businesses are most dominant in terms of total income and IVA, contributing 51% and 52% respectively of the 2004-05 estimates for this industry.

Health and community services (private)

This industry recorded an increase of 5% in the number of operating businesses during 2004-05. Total income increased by 9%, total expenses by 7%, OPBT by 22%, and IVA by 8%.

The cost structure of the (private) Health and community services industry is distinctive in that selected labour costs and cost of sales are very similar, each constituting between 45% and 47% of total expenses for all four years presented.

Of the industries included in these statistics, (private) Health and community services is by far the largest recipient of funding from government for operational costs. In 2004-05 it received $10.1b, or 35% of all such funding paid to the Total selected industries. This represented 17% of the total income of the industry, compared to 18% in 2003-04.

Cultural and recreational services

The number of operating businesses in the Cultural and recreational services industry rose by 5% in 2004-05.

In 2004-05 OPBT increased by 5%, following a 43% increase in the previous year. IVA increased by 7% and capital expenditure by 18%.

In this industry, small employing and medium employing businesses generally make similar contributions to each major aggregate (apart from employment). At the Total selected industries level, however, small employing businesses tend to account for a larger share than medium ones.

Personal and other services

The number of operating businesses in the Personal and other services industry increased by 8% in 2004-05.

Between 2003-04 and 2004-05, this industry recorded increases in total income (11%), total expenses (10%), IVA (9%), and OPBT (15%).

Personal and other services is heavily dominated by small (employing) businesses, ranking third by this measure (after Agriculture, forestry and fishing and Construction) in terms of most variables presented. In 2004-05 such businesses contributed 29% of the OPBT in this industry, and between 37% and 42% to all other financial variables shown. Of this industry's OPBT in 2004-05, 49% was generated by non-employing businesses.

CHAPTER 3 EXPERIMENTAL ESTIMATES


INTRODUCTION

This Chapter presents experimental estimates of industry performance, in:

• table 3.1, which provides statistics to the ANZSIC class level for selected data items
• table 3.2, which provides a state and territory dissection of these data items at the industry division level.

Note that the estimates are also subject to non-sampling error, which is discussed in Technical Note 2. All industry codes shown are from the Australian and New Zealand Standard Industrial Classification (ANZSIC) (cat. no. 1292.0), 1993 edition. Definitions of terms used are shown in the Glossary.

INDUSTRY SUBDIVISIONS

The largest industry subdivision in terms of total income in 2004-05 was Business services (Subdivision 78), which earned $182b, or 9% of total income of the Total selected industries. All of the three next largest are in the Wholesale trade or Retail trade ANZSIC divisions:

• Personal and household good retailing (Subdivision 52) ($126b, or 6%)
• Machinery and motor vehicle wholesaling (Subdivision 46) ($122b, or 6%)
• Personal and household good wholesaling (Subdivision 47) ($118b, or 6%).

• Business services (Subdivision 78), with $25.4b, or 14% of total OPBT for the Total selected industries
• Property services (Subdivision 77) ($18.1b, or 10%)
• Construction trade services (Subdivision 42) ($10.9b, or 6%)
• Oil and gas extraction (Subdivision 12) ($9.2b, or 5%).

• Personal and household good retailing (Subdivision 52) ($14.9b)
• (Private) Health services (Subdivision 86) ($14.7b)
• Construction trade services (Subdivision 42) ($13.2b).

• Supermarket and grocery stores (Class 5110) ($57.5b, or 3% of total income for the Total selected industries)
• Car retailing (Class 5311) ($52.4b, or 3%)
• Commercial property operators and developers (Class 7712) ($42.6b, or 2%)
• Telecommunication services (Class 7120) ($37.6b, or 2%).

• Commercial property operators and developers (Class 7712) ($9.5b, or 5%)
• Oil and gas extraction (Subdivision 1200) ($9.2b, or 5%)
• Telecommunication services (Class 7120) ($6.2b, or 3%)
• Black coal mining (Class 1101) ($5.0b, or 3%).

• Computer consultancy services (Class 7834) ($7.0b or 3%)
• Business management services (Class 7855) ($6.1b or 2%)
• Contract staff services (Class 7862) ($6.1b or 2%)
• Road freight transport (Class 6110) ($5.3b or 2%).

Measured by share of total income, Manufacturing was the largest of the Total selected industries in 2004-05 in four of the states (Victoria, South Australia, Western Australia, and Tasmania). In Victoria, Manufacturing's total income barely exceeded that of Wholesale trade. In New South Wales Wholesale trade was the major source of total income, as was Retail trade in Queensland, the Australian Capital Territory and the Northern Territory.

The Property and business services industry was the major source of OPBT in five jurisdictions (New South Wales, Victoria, Queensland, South Australia and the Australian Capital Territory), and Manufacturing in one (Tasmania). Mining was the major source of OPBT in Western Australia and the Northern Territory.

Property and business services was even more dominant in its share of wages and salaries paid, being the major industry in all jurisdictions apart from South Australia and Tasmania. In both of these, the largest source of wages and salaries was Manufacturing.

Each state or territory was dominated by its major industry to a different degree, depending on the variable being analysed. Measured by wages and salaries paid, the predominance of a particular industry was greatest in the Australian Capital Territory, where Property and business services contributed 33%. This was followed by New South Wales, where it accounted for 24%. In comparison, the Northern Territory's major industry by this measure (also Property and business services) provided 15% of the territory's wages and salaries.

In 2004-05 Western Australia was the most industrially concentrated state or territory in terms of industries' shares of OPBT, its major industry (Mining) generating 39% of the state's OPBT. Similarly, Property and business services contributed 33% of OPBT in Victoria. By contrast, the main sources of OPBT in Queensland and South Australia each contributed 20% and 18% of OPBT for their respective states.

In terms of total income, the extent of dominance by particular industries varied over a much narrower range: from 22% for Retail trade in the Australian Capital Territory, to the 17% contributed by Manufacturing in WA and by Retail trade in the Northern Territory.