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Industry Overview
The Financial Services industry covers building societies, banks, and credit
unions,
insurers,
superannuation
providers
and
other
fund
managers,
accountants and financial planners and advisers. Financial services is the largest
contributor to the Australian economy, eclipsing mining, manufacturing and
construction. The gross value added by the industry in 07/2012 was higher than
any other industry, at nearly $33b.
With growth rebounding across the industry, there are a number of trends that
will influence the size and shape of the labour market in the next couple of years.
Issues that have been evident for the past year or two and continue to have an
impact include:
The drive for productivity growth, in response to Australias declining
productivity in recent years, and
Improving oversight of the financial system as a result of the global
financial downturn including the ongoing implementation of International
Financial Reporting Standards and the global regulatory framework for
more resilient banks Beel III
There are also a number of major regulatory changes being rolled out which will
impact particular sectors, in particular:
The introduction of the carbon tax, which is expected to have a particular
impact on accountancy services
The introduction of Stronger Super reforms, which will have a particular
impact on superannuation funds
The introduction of the Future of Financial Advise reforms, including a
move y ASIC to introduce an examination for egulated financial advising
The Financial Service Industry covers banks, building societies and credit unions,
insurers, superannuation providers and other fund managers, accountants and
financial planners and advisers. Like other service industries, the Financial
Services industry involves a high degree of professional labour input. It is skill
and knowledge intensive in all areas of activity.
Insurance
The insurance sector includes general insurers who protect individuals and
businesses from losses associated with property, casualty, liability and other
risks, as well as health insurers, life insurers and insurance brokers. This is a
large sector of the economy with a combined revenue of over $100b. General
and life insurance are the largest parts of the industry.
Fund managers
. The primary threats to fund managers are the Governments focus on super
fund fees and the increasing popularity of self-managed funds. A large number of
funds use external administrators, advisers and managers. Management of
superannuation funds has become big business and will continue to benefit from
strong growth in super assets.
Other fund managers, outside the superannuation industry, will also increase
revenue in anticipation of improved market conditions. The ageing of the
population, growing wealth and new evolving investment products will underpin
continued demands for these services.
Regulatory Environment (Government Policy)
The Productivity Commission estimates significant increasing Australian
Government budgetary assistance to this sub-sector from $104.8 million in 200102 to $236.9 million in 200506. Net tariff "assistance" is estimated to have
increased industry cost from around $21.7 million in 2001-02 to around $28.3
million in 2005-06 in current prices. The major budgetary initiatives include the
Offshore Banking Unit Tax Concession ($75 million), the R&D Tax Concession
($75.5 million) and the Venture Capital Limited Partnerships Program ($30
million).
Current economic and political climate and their impact on the sector
Asian century Australias role in the Asian Century was a hot topic for politicians
and economists during 2012.17 There is general agreement that Australias
success in the future will depend on our ability to integrate more fully with Asian
markets. The increasing value of the Asian region to Financial services is
evidenced by the fact that the Asian region recently overtook North America for
the first time as being home to the worlds largest population of high net worth
individuals people with greater than US$1 million in investable assets.
Furthermore, investment from emerging Asian economies is increasing. Chinas
foreign investment in Australia has grown from $0.6 billion at the end of 2006, to
12.8 billion at the end of 2010.
Offshoring of jobs While both low and higher level ICT skills are in demand,
many companies are looking overseas to meet this need more economically.
According to recent research, occupations experiencing high rates of offshoring
are in ICT and administrative occupations such as data processing and software
and applications programmers. The rate of offshoring in service sector job has
increased from 9.7 percent in 2007 to 10.2 percent in 2012.
Stronger super reforms The latest raft of reforms to superannuation include the
creation of a new simple, low cost default superannuation product called
MySuper; reforms to make the processing of everyday transactions easier,
cheaper and faster, through the SuperStream package of measures and
strengthening of the governance, integrity and regulatory settings of the
superannuation system, including in relation to self-managed superannuation
funds.
Key issues facing the sector
The finance and insurance sector employs around 410,000 people and has seen
quite strong employment growth in the last five years. Household consumption of
financial services is that component of financial service charges imputed to
households. It depends on such things as bank interest margins on borrowing
and management fees on funds invested. Relative prices for financial services
have fallen by around 40% since 199394, flowing from increased productivity
growth in the financial services industry, and reduced margins due to increased
Global Context
The Asian Century will see an increasing need for cross cultural communication
and partnerships; and the drive for sustainable business practices is starting to
have a real impact on the industry. Businesses need strong leaders to guide
them through these changes and to ensure that staff have appropriate skills,
knowledge and professional judgment to work in the new environment.
The financial services industry is undergoing a period of significant change as it
emerges from the global financial downturn. New regulations affected a number
of sectors in the industry are being implemented concurrently. Technology
continues to advance ata rapid pace offering new opportunities for business that
can get on board.