Factors Driving Service Sector Growth & Impact on Australian Economy

This essay discusses the factors contributing to the growth of the service sector in developed nations like Australia, including the decline of the manufacturing industry, favorable government regulations, privatization, and technological advancements. It examines the potential impacts on this growth over the next five years, such as technological changes, government policies, and market forces of demand and supply. The essay highlights the importance of the service sector to world economies, particularly its contribution to GDP, employment opportunities, and overall economic well-being. It also notes that the success of the service sector may be influenced by the potential revival of other industries like agriculture and manufacturing. The essay concludes by emphasizing the instrumental role of the service industry in enabling economic growth and job creation in Australia and globally.

Marketing Services and Other Social Issues Macroeconomics
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Introduction
Notably, the Australian services sector has grown over recent years. Due to the less capital
intensive nature of the services, the sector has created more employment opportunities and
contributed massively to the country’s economic growth rate. More specifically, the growth has
been attributed to the decline of the manufacturing industry due to the high costs of
manufacturing, favorable government regulation and the growing affluence for privatization. In
the next five years, the service industry will be affected by technological advancement, forces of
demand and supply of the service sector and government regulation or deregulation. The survival
of the service sector is due to the importance of the service industry to the Australian and global
economy. Particularly, the service sector has created employment opportunities and contributed
to the growth of the Australian economy due to its substantive industry contribution to the gross
domestic product. Overall, the service sector is improving the economic wellbeing of individuals
and the country.
Factors Responsible for the Growth of the Service sector
Unfortunately, the decline of the manufacturing sector in Australia in the 2016-17 period
by 3.4 percent goes to show the industry is struggling(ABS,2018). For some economists, the
decline in the manufacturing industry is due to the high costs of production. Whereas the
manufacturing industry experienced a decline, the service industry grew by 9.1 percent in the
year 2012-16(ABS, 2018). Also, due to the high manufacturing costs, most economies are
shifting to the service sector since it is less capital intensive(Heath,2017). Currently, services are
making much more contribution to the gross domestic product than the manufacturing industry
in most countries. It is my assertion that the decline of other industries such as the mining and
manufacturing industry decline has led to the growth and demand in the service sector in

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Australia and other economies (Schutt, 2018). Due to privatization and favorable government
regulatory measures, the Australian service industry has blossomed. For the Indian economy, the
growth of the service sector has been attributed to the growing affluence and the growth of the
information and technology sector (Gupte, 2015).
Factors Likely to Impact the service sector in the next 5 years
. Undoubtedly, the technological revolution will affect the performance of the service sector
This is due to the fact that technology creates new opportunities. With the technological
development of the information, communication and technology sector, more employment
opportunities have been created across borders without the employees being at the same physical
location globally. Currently, technology has enabled persons to work online providing services
such as ticket booking, hotel, and accommodation services online among other services. With the
invention of newer technologies, newer employment opportunities for the service industry are
made possible. Due to the dynamic nature of technology and the service industry, major
technology-based changes will be effected in the service sector of the global economy (Kuznar,
N. d). Undoubtedly, regulation is an essential part of any economy. Currently, most governments
have put into place regulations that support service sector hence the fast-growing trend in which
the service sector is thriving and expanding globally(World Bank Group,2016).In addition,
privatization has contributed to the growth of the services due to the flexibility of regulatory
measures in the private corporate sector and the growing affluence for privatization.
Also, in the event that manufacturing costs go down in the Australian economy, the
demand for service sector might be affected. It is believed that part success of the service sector
is due to the fact that the manufacturing industry is in recession. Arguably, if the raw materials
for the manufacturing industry go down then the service industry performance will be affected.

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Also, the forces of demand and supply will affect the performance of the service sector in the
coming first years. In the event that the demand for services goes up and there is no supply of
human capital to match the demand then the service industry performance will be negatively
affected. Similar to other goods, services are subject to the market forces, of demand and supply
for their performance outcomes. In addition to market forces determining the future of the
service industry, the growth of other industries such as manufacturing, mining or agriculture
might displace the services sector in the event that their sector growth will be faster than the
service sector. The fact that both agriculture and the manufacturing sectors of the Australian
economy were once the largest gross domestic product contributors can still be restored if the
respective industry challenges are effectively addressed. Equally, the success of the sector might
be temporary.
Importance of the service economy
Noteworthy, revenue from services has been very instrumental in its contribution to most
countries gross domestic product (Rodrick, 2014). Specifically, the Australian service industry
contributed 21.6 percent as exports (Department of foreign affairs and Trade, N.d). For a long
period of time, manufacturing has been responsible for the expansion of globalization. However,
in recent times, its glory has faded and replaced by services as shown in the figure below. The
radical change is due to the fact that services are expanding more rapidly than commodities in
international trade platform. Arguably, the provision of services has misplaced the role of
manufacturing in the growth of the global economy. Undeniably, service has transformed the
global production and employment trends across the globe following the rise in manufacturing
costs. In a way, the prosperity of the service industry can be attributed to the fact that other
competitive sectors of the economy have been experiencing some challenges. More specifically,

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the manufacturing industry competitiveness and productivity levels have reduced due to the rise
in manufacturing costs. In a way, the service industry is not capital intensive like other sectors of
the Australian economy.
(Weforum, 2018).
Notably, services are a growth stimulator (Rodrick, 2014). In the Chinese economy, the
provision of services has boosted the country’s gross domestic product by 51 percent which is an
upgrade from the 44 % upgrade in the year 2011(Waldau, 2018). This goes to show that service
delivery is a major player in the economic welfare of country.it was noted that the construction
and manufacturing sectors of the Chinese economy have been on the decline. In a way, the
service industry has grown affluent, creating more employment opportunities hence better
revenue contribution to the economy. Noteworthy, in the year 2015, the service industry global
contribution in terms of exports was valued at four point eight trillion dollars. Particularly, this
value is considered a quarter of the world total export value (Department of Foreign affairs and
affairs, N.d). The growth of most developing countries has been attributed to the service sector

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thus the assertion that the service industry is influencing economic growth of respective
countries as illustrated (Buckley & Majumdar, 2018). Worth noting is the fact that services are
like a ‘glue’ holding the production process into place (Bohn, Brakman & Dietzenbacher, 2018).
Worth noting is the fact that the Service delivery is very key in unbundling tasks globally.
According to some economists hold the view that unrestricted service position is likely to
kick start productivity. Also, service delivery has been effective in the growing of various
economies such as the Rwandan economy (Owitone & Heshmeti, 2016). In addition, the fact that
the Indian, Chinese economies have grown fast due to the contribution of the service sector to
the gross domestic product continues to prove the viability of services expansion to economic
growth. In addition, the fact that services that are exported are not usually subject to costs
incurred in transport thus enabling fast growth of services in promoting international trade
(Bohn, brakeman & Dietzenbacher, 2018). Remarkably, the Australian service sector has
provided massive employment opportunities (ABS, 2019). It is believed that 4 out of 5
Australians are employed in the service sector (Department of foreign affairs and Trade, N.d).
These statistics go to show that the service industry is an employer of many according to the
Australian Bureau of Statistics database on industry labor participation. Due to the decline of the
agriculture and manufacturing industries in Australia, the service industry has taken the lead in
employment opportunities.
Conclusion
Worth noting is that the Australian service industry has shown massive growth in the recent
past. The rise of the service sector is attributed to the decline of the manufacturing industry,
favorable government regulatory measures, privatization affluence and market forces of demand
and supply. Also, the technological revolution has facilitated the growth of service services

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globally. Due to the importance of the sector which is evidenced by employment opportunities
and substantive revenue to the GDP, economic livelihoods of individuals and country have
significantly changed. However, in the near future, technology, government regulation, market
forces of demand and supply, will impact the performance of the service sector in the Australian
economy. In the event that the forces of demand and supply are not matched, the industry
performance might remain less competitive. Also, the possible revival of other key industries
such as agriculture and manufacturing might surpass the productivity and competitiveness of the
service sector. Undoubtedly, the service industry is very instrumental in enabling economic
growth and the creation of employment opportunities in Australia and the global economy.

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