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The NSW Economy: An Update

The NSW Economy: An Update

Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion.
Briefing Paper No. 2/2009 by J Wilkinson

New South Wales has been experiencing a massive re-organisation of production, from the period of Britain’s entry into the European Economic Community (1973) and throughout the subsequent global slumps of 1973-1974, 1980-1981 and 1990-1992. Agriculture (which contributed significantly to the state’s exports), and manufacturing (which produced relatively large quantities of goods for the local market), have both diminished. Services, by the 21st century, have become the dominant area of production: both in terms of activity on a domestic level and in the area of exports (pp.28,41-42)
Property and business services have expanded to the point where the majority of the nation’s leading property fund managers, and the majority of the nation’s listed property trusts, are located in Sydney. Property and business services is (equally) the largest area of full-time commercial employment in the state (pp.1-5)

Sydney now effectively occupies the position of financial capital of Australia. Not only are two out of the four major banks in Sydney, but the majority of the nation’s leading funds managers, and the majority of commercial providers of superannuation, are based in Sydney (pp.5-8)

Building remains relatively resilient, despite the slowdown following the 2000 Olympics and the rise and fall of the boom in residential housing (in the opening years of the twenty-first century). Not only are the headquarters of some of the nation’s major building firms based in Sydney, but the state is host to over 100,000 large and small house builders. Building is the third largest area of employment in NSW (pp.8-12)
Health is a sector which remains equally resilient, partly due to the expansion of the number of private health operations in the state, a development, in turn, stimulated by the Howard government’s changes to health insurance, introduced in the late 1990s. Health is the fifth largest area of employment in the state (pp.13-14)

Retailing has developed as the fourth largest employer in NSW. This has occurred partly through the massive expansion of the Woolworths and Coles chains. While Coles (the smaller of the two chains) is based in Melbourne, Woolworths (the larger) is based in Sydney. Retailing boosts the activity of the property sector, as supermarkets (owned by either Woolworths or Coles) are often anchor tenants in the many shopping malls built throughout the nation (pp.14-19)
    Transport and storage is another sector which continues to expand, if only slowly. A defining characteristic of the sector is the high number of light commercial vehicles. Around 80% of vehicles, in the transport and storage sector, are light commercial vehicles. LCVs, equally, are the fastest growing vehicle type in the sector. Sydney hosts the headquarters of the nation’s largest concern in the transport area: Qantas (pp.18-19)

    Wholesaling has expanded as the imbalance of the state’s imports, over exports, has increased to the point where NSW now imports almost twice as much as it exports (in dollar terms). This is partly due not only to a decline in Australia’s manufactured exports, but to a substantial increase in imports of passenger motor vehicles. A large amount of the sophisticated machinery, that the state needs to produce goods, is now imported from overseas. Understandably Sydney now hosts the headquarters of many of the nation’s major wholesaling concerns (pp.20-26)

    Education has expanded considerably as the sector has become a major exporter of services. Whereas, in 1989, international students were only 10% of all students at Australian universities, by the opening years of the 21st century the number of overseas students had reached a level of 25% of the student total. NSW, out of all the states and territories, earns the most from exports of education services (pp.26-28)
      Manufacturing, during the last decades of the twentieth century, has slumped sharply in terms of its contribution to the state’s gross state product (GSP). In 1981 it contributed 21% to GSP, whereas in 2006 its contribution had dropped to 11%. A substantial part of this decline has occurred through the decisions of multinational concerns to reduce their operations in NSW (these decisions, in turn, an outcome of the 1973-1974, 1980-1982 and 1990-1992 global recessions). Manufacturing, nevertheless, remains an important area of employment in the state (pp.28-32)
        Tourism, which many expected (along with education) would become a substantial export earning area of the services sector, has however declined in recent years. This is not only as a result of the reduced capacity of many Australians to holiday (domestically) as they used to, but also to a sudden recent drop in the number Japanese tourists visiting Australia (pp.32-35)
          Communications services forms a small component of gross state product. While the contribution of the sector has consistently been small, it has become even smaller in the last two or three years (pp.36-37)
            Mining, as a contributor to GSP, has declined since the 1920s (when, of all the coal produced in Australia, 80% was mined in NSW). Nonetheless mining still contributes significantly to the state’s export revenue (pp.38-42)

            Agriculture contributes even less to GSP than mining (although, in the 1950s, it contributed nearly 30% of Australia’s gross domestic product). Nevertheless agriculture, like mining, still makes a significant contribution to the state’s export revenue (pp.42-43)