Global shifts: Economic Uncertainty

This information sheet offers some general information in relation to expected changes in the global economythat will influence how we live in the future.

Global economic changes in the longer term

Long-term economic projections are hard to find. The Economist Intelligence Unit has an established methodology for producing long-term economic forecasts for 82 national economies. In 2015 it published a report on key trends to 2050[1]predicting:

  • The top ten economies in 2050 will be (in order); China*, USA, India*, Indonesia*, Japan, Germany, Brazil, Mexico*, UK, and France[2].
  • Between 2014- 2050, Asia will grow from 32% to 53% of the global economy.
  • Between 2014- 2050, the spending power of an average Chinese consumer compared to a USA consumer will rise from 14% to 50% and the spending power of an Indian consumer compared to a USA consumer will rise from 3% to 24%
  • In line with population growth, the global economy will grow faster up till 2030 then decline back to average historical levels.
  • Countries with slowing or declining population growth will need to pursue policies that encourage greater workforce participation combined with greater take up of capital-intensive production. Advanced economies will need to pursue more efficient use of capital through research & development (R&D) and technological progress.

The current outlook for Australia

In June 2016,the Organisation for Economic Development (OECD)headline forecast for Australia[3]predicts:

  • Economic growth will gradually strengthen towards 3% per annum in 2017.
  • The economy is adjusting from the mining boom. Growth in the non-resource sectors will continue. Unemployment is expected to fall.
  • Risks from the housing boom are receding but vigilance is necessary.
  • Boosting productivity requires a focus on innovation. Research, university-business linkages, new internet-platform-based businesses and strong competition are important.
  • Inclusiveness should be boosted through education reform and better ICT infrastructure.

The current outlook for Victoria and Greater Geelong

In August 2016, St George Bank predicted that over the next three years:[4]

  • The Victorian economy will grow by 2.75% in 2016-17 (down from 3% in 2015-16) and by 3% in the next two years
  • Jobs grew in Victoria by 3.2% (93K) in the year to July 2016, the strongest growth of all States but growth over the next three years will be slower at around 2%. Unemployment will trend down from 5.9% to5.6%. The largest job gains in the year to May 2016 were in health care & social services, construction, agriculture, forestry & fishing and retail. The largest job losses were in manufacturing.
  • Overseas visitors to Victoria grew by 12.4% in the last year. The number of overseas visitors overtook QLD in 2015, second only to NSW.

In July 2016 the Victorian Government reported:[5]

  • Over two-thirds of job growth in Victoria over the last 15 years has come from five sectors: health care & social services[6] (also the largest employer in Greater Geelong), professional, scientific & technical services, education & training, construction and retail.
  • In 2015 Victoria exported $16.2billion in services and $26.7billion in goods. More than half went to China, India, South Korea, Japan and ASEAN countries.

The Victorian Government has nominated the following sectors as the ones to drive Victoria’s economic growth and jobs: Construction technologies, creative industries, defence technologies, digital technologies, food & fibre, international education, medical technologies & pharmaceuticals, new energy technologies, professional services, retail, transport distribution & logistics & postal, transport technologies and the visitor economy.

Regional Development Victoria notes that manufacturing has been and will continue to be a significant sector in Greater Geelong and that its economy is in a favourable transition stage because of the presence of higher education and research institutions and is increasing its capabilities in knowledge intensive industries such as biotechnology, information & communication technologies and carbon fibre[7]

CSIRO’s Australian Animal Health Laboratory at East Geelong is one of only six in the world and a vital part of Australian and world biosecurity. It is a great competitive advantage.

Greater Geelong could consider

  • Expanding and linking the airport, seaport and rail and road freight logistics capabilities
  • Making sure that existing big employers have the opportunity to grow
  • Encouraging new small businesses to start-up
  • Growing trade and tourism withexpanding international economies
  • Designing andmanufacturingnew technologies in line with Victoria’s priorities
  • Using water and energy technologies to increase export food production
  • Building on the new financial services coming to Geelong for TAC, WorkSafe and NDIS.
  • More health and social services to support a growing older population
  • Environmental, coastal and land management services
  • Hospitality services to support eco and cultural tourism and city workforces

We need to think about how we turn these challenges into opportunities in Greater Geelong.

[1] The Economist Intelligence Unit, Long-term macroeconomic forecasts – Key trends to 2050, 2015

[2]The ones marked with * are the economies that will move up the rankings from today.

[3] OECD, Economic Outlook, Volume 2016, Issue 1, June 2016

[4] St George Bank, State Economic Outlook – Victorian Economic Outlook, 24 August 2016.

[5] Dept of Economic Development, Jobs, Transport and Resources, Victoria’s economy, 21 July 2016

[6]Health care and social services are the largest employer in Greater Geelong (13.4%, 2011 ABS)

[7]Regional Development Victoria, Barwon South West’s Barwon Region, 26 July 2016