NAB’s Chief Economist, Alan Oster provides his thoughts on the Australian and Global economy.
Alan Oster discusses the influence of the sharing economy and explores how fast it is growing and its impact on the business community.
While the sharing economy is not new, the internet provides an easier and cheaper way to aggregate demand and supply, process payments securely and assist in establishing trust through online review systems and networks. Consequently, some existing business models have been interrupted, but for others it has provided a cost-effective way to compete – often against much larger and better-resourced businesses.
We’ve been hearing a lot about the disruptive influence of the sharing economy, so we decided to explore just how fast it was growing and its impact on the business community. We examined the turnover of a large number of industry participants and included some relevant questions in our March quarterly business survey, which goes out to 1500 Australian businesses, and the result is the NAB Special Report How Australian business views the sharing economy.
The report shows that the sharing economy is growing at about 140 per cent per year. Admittedly this growth is from a low base but, as the sharing economy matures, it will most likely become a complement to existing business models rather than simply a competitive threat. This is already evidenced by, for example, the evolution of online retail, which has become an important additional platform for many bricks-and-mortar retailers.
Large firms in particular seem to be very aware of the influence of the sharing economy on their business, with 14 per cent telling us that the sharing economy had impacted their business over the past 12 months – 12 per cent positively and only 2 per cent negatively!
Among SMEs there were big differences between sectors. For example, 20 per cent of small businesses in the business services sector viewed the sharing economy as positive for business over the next 12 months. This was followed by finance and insurance, at 13 per cent.
Conversely, 12 per cent of SMEs in the accommodation and hospitality industry expected to be negatively disrupted over the next year, followed by those in property services, transport/storage and retail industries, with 10 per cent of businesses in each of these sectors anticipating a negative impact.
In the health services industry, one in four small firms remain unsure about what impact the sharing economy could have over the next year. Despite health services being a highly regulated industry, there is still scope for digital disruption to impact this sector, particularly with regard to lowering costs.
The Australian economy continues to do well despite the end of the mining boom, aided by the switch between the mining and non-mining sectors. One caveat is that mining and mining services are doing as badly as they were during the worst of the global financial crisis, which flows on to associated industries in Western Australia, South Australia and the Northern Territory.
In the services sector, however, which accounts for 70 per cent of the economy, we are seeing very strong growth. Taking out the mining industry, we think domestic demand is growing by at least around 4 per cent. That’s generating a lot of jobs and contributing to growth, along with low interest rates, reasonably high house prices (particularly in New South Wales, Victoria and south-east Queensland) and a slowdown in unemployment levels. Currently at 5.8 per cent, we think unemployment levels have peaked and will come down further.
One potential to consider is that the Australian dollar is going up. While that’s not causing problems in the short term, if it becomes even stronger and then stays high, that could reverse the sort of competitiveness that’s been helping the services sector.
In summary, while there are some sectors and some postcodes that are clearly struggling, on the whole the Australian economy is looking good. General business conditions – business outcomes, trading profits and employment levels – are all telling a positive story, and the Australian economy is generating a lot of jobs.
So, while we are mindful that some parts of the economy remain under stress, others like the sharing economy are growing solidly.
This article was first published in Business View magazine (Issue 21).
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