Does Australia have a 10 speed economy? We rate the best and worst sectors

“Two-speed economy” is so 2010. “Patchwork economy” is the descriptor of choice for Treasurer Wayne Swan. According to National Australia Bank chief Cameron Clyne, there might be 10 speeds in the economy.

Speaking after the bank reported a $5.5 billion full-year cash profit, Clyne noted that Australia was experiencing something closer to a 10 speed economy, with some industries soaring and others on the edge, and subtleties in between.

He said: “The simplistic view is to say mining good, retail bad. It’s much more granular than that. You’ve got obviously a whole range of companies there that actually are doing — they’re not at the boom end of the equation, but they’re actually quite solid. As the economic conditions improve or there’s more stability, it is reflected in the credit scores in those models.”

A NAB spokeswoman this morning said Clyne’s comments were an “exaggeration of the conditions that everyone is facing”.

But the bank did say yesterday that the “divergence in trading conditions between sectors has been particularly marked”, with activity and capacity growing strongly in mining and across large parts of the service sector, but much tougher business conditions for other important sectors.

“This reflects a process of structural adjustment in the economy as high commodity prices drive up the exchange rate and erode the competitiveness of sectors like manufacturing, tourism and export-oriented education,” the bank said in a report.

So the bank might not think there really are 10 speeds, but we think there’s something in the throwaway line. SmartCompany takes a look at who’s laughing, and who is not.

Resources and mining

Well, of course.

Tech

Boosted by deals like James Packer’s investments in Catch of the Day and Deals Direct, 99Designs picking up Accel Partners as investors, and the growth of group buying and expected consolidation before the National Broadband Network.

Construction

Construction firms leveraged to the mining industry, infrastructure – including the NBN – and the Queensland rebuild are going gangbusters.

Restaurants and cafes

Margins are notoriously thin in the food sector, but consumers remain of the view that they can justify spending on food while shirking goods. In the most recent ANZ small business survey, restaurants recorded 8.9% growth in the year to date, although some of that was attributed to strong price inflation.

Farming

There have been a few hiccups – the halt in live-cattle trade to Indonesia comes to mind – but on the whole the outlook looks strong, with the drought easing, commodity prices high and Australia well-positioned to deal with demand from Asia. Furthermore, ANZ’s small business surveys throughout the year have shown that  small businesses in rural and regional areas were continuing to “modestly outperform” their metropolitan counterparts – suggesting there is plenty of money floating outside Australia’s capital cities.

Banking

Yes, they’ve been job cuts and weak credit demand over the past few years, but they’re too big to fail, creeping into wealth management, takeover-proof via the four pillars policy, and dominate lending in Australia. Not a bad position to be in. Yes, there are serious questions about their ability to maintain record profits – but record profits are still a good result considering how most have suffered over the GFC and its aftermath.

The services industry, including insolvency

Insolvency practitioners have been buoyed by many monthly corporate collapse records throughout 2011, and are pointing to the Christmas period as a key one for their prospects in early 2012. On the other hand, KPMG confirmed it offered voluntary redundancies this week, and advisory firms are reporting a great deal of caution before signing off on deals. There’s also caution about the likely effect of the Future of Financial Advice reforms. Still, turnover in the services sector lifted by 6.8% year-on-year in the latest ANZ small business survey, with business service areas growing by 7.8% annually.

Housing

Australia talks of a housing shortage, but starts have been weak for some time, except in investment-friendly Victoria. The industry hopes recent changes in the NSW budget will stimulate demand. All eyes are on whether house price weakness will be sustained. 

Traditional retail

This year has seen the worst growth in retail sales in 50 years and plenty of high-profile collapses. There are mutterings about the threat of online stores, about high rents, about changing Australia’s penalty rates and industrial relations regime, about extending opening hours. Fingers are now crossed for a rate cut next month, to be followed by a change in consumer mindset from saving to spending.

Manufacturing

Manufacturing remains a large employer, but high labour costs combined with the strong Australian dollar are pressuring the traditional industry.