1. Enabling services in the wider economy Heather Cotching Manager, Economic and Business Conditions Section Industry Economics Branch Office of the Chief Economist 15 September 2015

2. Why look at enabling services? Services industries, gross value added (per cent of GDP), 1992–2014 Source: ABS 5206.0 (Mar 2015) Services sector has significant growth potential Services expanding post-mining boom Strong productivity growth Positive GDP growth Their ‘enabling’ function lies in the fact that without these services, firms would not be able to produce goods or services to sell to the market economy

3. Conceptual definition of enabling services Enabling services are those that primarily provide business-to-business services Focused not on WHAT they produce, but WHO they produce it for. Using ABS I-O Input-Output (IO) tables to identify Enabling Services at the ANZSIC class level. New ANZSIC grouping: Coverage — breadth of provision Focus — proportion of intermediate inputs ICT & the Digital Economy Professional & Support Services Trade, Transport & Logistics Utilities

4. Conceptual definition of Enabling Services

5. Enabling services are large, growing quickly, and productive Enabling Services are Source: Department of Industry and Science (2015) Enabling Services, GVA as a percentage of All Industries’ GVA, 2004–2014 Significant in size Output (GVA) 31 per cent of GDP Employed 27 per cent of workers Have grown faster than other industries in the economy 3.3 per cent annualised output growth vs 2.9 per cent for All Industries Output/hour was $83.3/hr vs $69.8/hr for All Industries

6. Performance of enabling services varies across groups Source: Department of Industry and Science (2015) Enabling Services: GVA, annualised output growth, output / hour 2014 Enabling Services Output (per cent of GDP), 2014 Annualised output growth (per cent), 2004–2014 Labour productivity (output / hour), 2014 ICT & the Digital Economy 2.23.772.2 Professional & Support Services 19.83.788.4 Trade, Transport & Logistics 5.22.763.7 Utilities1.71.3156.7 All Industries85.12.969.9 Professional services is the strongest performer, with significant variance between the four groups

7. Bolstering enabling services has wide-reaching growth implications Source: ACIL Allen Consulting (2015), Economic Modelling for Australian Industry Report 2015 Selected results: 1 per cent productivity shock to Enabling Services 1 per cent A 1 per cent increase in productivity produces significant increases in output ICT & the Digital Economy Trade, Transport & Logistics Professional & Support Services Utilities Growth sectors: 1 per cent productivity shock — enabling services Growth sectors Per cent increase output, labour productivity shock Advanced Manufacturing0.44 Medical Technologies & Pharmaceuticals0.36 Mining Equipment, Technology & Services0.22 Food & Agribusiness0.13 Oil, Gas & Energy Resources0.09

8. What next for services? Enabling Services are well placed for future growth Services are growing fast Better data analysis required Important to focus on WHO is demanding services Understand potential barriers Capitalise on enablers to maximise potential

9. Further information Contact Details Australian Industry Report 2015 Department of Industry and Science Heather Cotching Manager, Economic and Business Conditions Industry Economics Branch Office of the Chief Economist Phone:02 6213 7829 Email:heather.cotching@industry.gov.au