Organic farming set to fly in 2012-13 as manufacturing set to flounder: IBISWorld

The new financial year brings with it plenty of opportunities for Australian entrepreneurs, along with severe challenges for certain sectors.

So which industry will fly and which will fall in 2012-13?

Business information research firm IBISWorld has compiled a list of those set for growth and those set for hard times in the coming 12 months:

 Industries expected to fly:

1. Diamond and gemstone mining

The global financial crisis resulted in far lower demand for resources – including diamonds and gemstones.

Demand has started to recover globally and the rebound will be driven by higher production levels (up 39.5%), while prices are also expected to stabilise in 2012.

Significantly, 93% of Australian production is exported, and IBISWorld expects this to continue in the face of a very strong Australian dollar – resulting in forecast revenue growth of 35.6% over 2012-13 to reach $509.3 million.

IBISWorld identifies India as the key export market for Australia’s diamonds and gemstones. India uses the diamonds for industrial tools and jewellery.

2. Electricity generation

The electricity generation industry is forecast to grow strongly over the coming year, largely driven by the flow-on effects of the carbon tax – as the industry is the largest contributor of carbon dioxide in Australia at 32% of total emissions.

Victorian electricity generators that burn brown coal will be hardest hit by carbon pricing, followed by generators that burn black coal (mainly in New South Wales and Queensland).

Trends in electricity demand, production and prices are expected to be broadly reflected in industry performance. Low-cost producers will be able to take advantage of short-term increases in demand and are anticipated to perform well in the coming year.

Overall, IBISWorld expects industry profitability will be compressed by the introduction of carbon pricing, meaning profit will rise, but at a much slower rate than revenue. Electricity generation industry revenue is forecast to increase 28.7% over the coming year to reach $19.1 billion.

3. Preschool education

Over the coming financial year, IBISWorld expects the preschool education industry to grow by 26% and to be worth $1.1 billion.

Growth is expected to be driven primarily by additional funding, equating to $297 million over 2012-13, from the Australian Government to support reforms aimed at standardising preschool education.

The Australian government’s universal access policy is expected to increase demand for preschool services and increase total childcare hours.

All state governments have agreed that by the end of 2013, all four-year-old children will have access to 15 hours of preschool per week, 40 weeks of the year. These services are to be delivered by an early childhood teacher with four years of university training.

4. Superannuation funds

After four consecutive poor years, IBISWorld expects a return in confidence and favourable investment conditions in 2012-13. This is expected to result in growth of 21.2% for the superannuation funds industry to reach $232.8 billion.

This growth will be off a low base, following the revenue decimation experienced during the global financial crisis.

5. Organic farming

Over the past five years, Australia’s organic farming industry has grown at a robust pace of 11.6% per annum, and IBISWorld expects the industry will continue to soar, increasing its revenue by 14.9% over 2012-13 to be worth $578.9 million.

Demand for organic produce has been mainly driven by growing consumer interest in sustainable food production and rising disposable incomes.

Supermarkets have responded quickly to increasing demand for organic products by increasing organic product ranges to improve accessibility. This has resulted in supermarkets accounting for around 60% of all organic sales.

However, IBISWorld expects supply constraints – particularly in the meat segment due to the lack of an organised supply chain in regards to organic feed, abattoirs and processors – will continue to limit industry growth.