Health care, housing and retail the big winners in new population report
Sydney, Australia: Health and aged care, housing construction, personal financial services and certain areas of the retail sector stand to reap the benefits of a rapidly ageing population, while population growth from migration and increasing fertility rates are likely to continue to fuel Australia’s booming ‘sun belt’ states.

These key findings are contained in the inaugural Business & Population Monitor from chartered accounting and business advisory firm PKF, in conjunction with Access Economics. The report examines the impact of demographic changes on the Australian business landscape, detailing the anticipated winners and losers across industry types and geographical regions. The report highlights the prognosis that Australia’s working-age population is expected to nosedive in the next five to 10 years, while at the same time, the ratio of over 65s to the 15–64 age group will almost double over the next three decades.

“These will be the largest structural shifts in the Australian economy since World War II,” says Chris Allen, National Chairman of PKF Enterprise Advisers. “And they will present both considerable opportunities and challenges to the Australian business community.”

The beneficiaries of ‘grey gold’
PKF’s Business & Population Monitor identified a number of key areas of opportunity for Australian businesses. While annual spending fell once a worker retired, certain types of retailing benefited, such as health insurance, gambling, books, home improvement and electronics as well as communications and travel. However, spending on clothing and footwear, cars and entertainment would reduce. The report cited that investment in retirement villages and aged care accommodation, in particular, would continue to grow, with construction of aged care facilities topping $1.4 billion in 2007, up 38 per cent on the previous year, with the strongest activity in Tasmania and South Australia.

Businesses involved with health care are likely also to be winners from an ageing population, with older Australians expected to line the pockets of the health industry. “New technologies and medical procedures provide clear areas of opportunity for businesses operating in these sectors. Significant investments in health care technology are required to meet the demands of the aged, who wish to maintain quality of life into their senior years and are generally prepared to pay to get it,” says Mr Allen.

The report also argues there is value for businesses in retaining mature-age workers. Almost half of the increase in retail sales in the next decade will be to customers aged 60 and over.  “Having mature-aged staff sell to mature-aged customers may put your business at an advantage, particularly if you’re selling products such as health and travel services, book clubs, niche magazines and leisure,” says Mr Allen.

The impact of the mini ‘baby boom’ and growing migration
It’s not only the ageing population that will cause a seismic shift in Australia’s demographics. The large intake of skilled migrants from overseas and a mini ‘baby boom’ have helped drive population growth, which in turn has pushed the Australian economy along. This, of course, has already provided businesses with enormous opportunities. According to PKF’s Business & Population Monitor, population growth in the ‘sun belt’ states of the Northern Territory, Western Australia and Queensland is running ahead of the five-year average, as their economies ride the crest of a resources and investment boom, with no signs of the growth slowing.

The report found the Northern Territory was the standout with the highest birth rates in the country and most of the inbound migration from within Australia. Conversely, seven out of every eight workers arriving in WA were from overseas. “These demographics reaffirm the so-called ‘two-speed economy’ we’ve seen emerge in recent times,” says Mr Allen.

While WA, Queensland and the Northern Territory are powering along from strong population flows, the other states, notably Victoria and NSW, are struggling. In particular, the tide appears to be turning in Victoria, pointing to risks across a range of industry sectors that may not be fully evident until 2009. South Australia and Tasmania’s particularly low growth rates and rapidly ageing populations will create significant pressures to provide infrastructure, services, public health care and housing for the aged.

At the sectoral level nationally, the report highlighted that the overall growth in Australia’s population would be a boon for housing construction with higher demand for new homes. The data points to a spur in housing construction in the second half of 2009. That would then have flow-on benefits to local manufacturers of building products. Moreover, migrants – the dominant driver of the recent uptick in the population increase – come with a greater need to buy up than do existing residents. New migrants bring relatively few physical possessions with them, and need to build their environment anew. As a result, new migrants are also a particular benefit to the accommodation sector.

In turn, these sectoral-specific effects have implications for other sectors. For some – for example, some professional services – the opportunities presented are derived ones.

The call to action for businesses
“The first challenge for businesses is recognising that these opportunities exist. The second is to then do something positive about it,” says Mr Allen. “My advice to businesses is to be aware of the impact of the ageing workforce changing composition, particularly the mature aged skilled worker leaving the workforce and taking valuable skills and experience with them. Also, as governments struggle under the financial burden of spending on additional expenditure, be prepared for increases in tax rates to bolster government revenue. “Those firms that get ahead of coming trends are most likely to profit. The ones that fail to recognise and adapt to the impending demographic shifts will be left behind,” says Mr Allen.