By John Burfitt

The chaos across the world unleashed by the COVID pandemic through 2020 included the evaporation of more than 250,000 jobs in Australia’s accommodation and food services sectors, according to the Australian Bureau of Statistics. And yet, some industries are predicted to not only recover faster in the post-COVID world, but to record sustained growth.

In the Snapshot in Time Report: The Australian labour market and COVID-19 from July, the National Skills Commission predicted health care, social assistance and construction would increase staffing levels into 2021. Renewable energy and medicinal cannabis production are also expected to experience significant growth.

It was a similar pattern after the global financial crisis (GFC) in 2007, when a range of revolutionary start-ups flourished during unsettled times. Such game-changing innovations as WhatsApp, Uber, Groupon, Instagram and Slack were all founded between 2008 and 2010. As people spent more time at home, DIY companies also boomed, as did many freight and logistic companies.

Australia and New Zealand largely escaped the worst of the GFC: at its height in 2009, Australia sustained 1.8% economic growth as the mining boom placed it in a strong economic and fiscal position. With a continued demand from China for iron ore and coal, the boom helped accelerate Australia’s post-crisis recovery. New Zealand sustained a growth rate close to 2% per annum, a reduction from the roughly 3% growth it had sustained in the 10 years before.

Speaking at a recent Australian Financial Review Revitalising the Economy event, Andrew Charlton, founder of strategic consultancy AlphaBeta, said post-crisis there’s an opportunity to “build back better” and unleash a wave of reform throughout the economy.

“A crisis does create a moment when people are open to change,” he said. “And I think with that moment, if we are ever going to seize it, it’s now.”

“A crisis does create a moment when people are open to change,” he said. “And I think with that moment, if we are ever going to seize it, it’s now.”

Disruption will boost key sectors

Nick Griffin, chief investment officer at global investment manager Munro Partners in Melbourne, is convinced a revolution will emerge in the post-COVID-19 era.

“Disruption accelerates,” says Griffin. “If disruption accelerates, then you get to embrace that opportunity, and try to identify where that disruption will occur next.”

“Disruption accelerates. If disruption accelerates, then you get to embrace that opportunity, and try to identify where that disruption will occur next.”

In the 2019-20 financial year, Munro Partners, which focuses on growth equities, posted a 24% annual return on its investments. As the COVID-19 pandemic spread across the globe, Griffin had to move quickly to safeguard them.

“We repositioned the portfolio towards companies we thought would be better off, so we put more money into places like Microsoft and Amazon and health care companies like Thermo Fisher Scientific that built the COVID-19 tests. Those companies are actually now up for the year.”

Paying close attention to where disruption would take place – due to factors such as social distancing and healthcare needs, for example – dictated where Munro Partners moved its investments.

By applying those same rules of logic to the upcoming years, with special consideration of life in the post-COVID-19 world and the industries expected to accommodate them, Griffin identifies health care, technological innovation and sustainability as the main sectors for growth.

Predictions about these sectors are shared by Kristian Kolding, partner at Deloitte Access Economics and a macroeconomics and forecasting expert, who also includes defence on the list of areas expected to encounter a future boom.

“COVID has shed further light on the geopolitical challenges we will continue to face over the next five to 10 years, and there’s a push from the government to start being more self-sufficient,” he says. “That’s going to be an exciting driver of growth and innovation.”

Healthcare skills will be in demand

Researchers at IBISWorld estimate the market size of New Zealand hospitals is NZ$21 billion while Australia’s health services sector is worth A$150 billion, including about 133,000 businesses and almost 800,000 workers.

“Health care is going to be right up in terms of growth as the in-demand skills of the future are going to be far more care-related,” says Kolding.

The combination of an ageing population, along with the continued rollout in Australia of the National Disability Insurance Scheme (NDIS) and recommendations from the Royal Commission into Aged Care Quality and Safety are expected to drive exponential growth in this sector.

“There will be particular focus on how we care for one another, particularly getting the right people with the right skills and qualifications into care jobs, and how do we complement those people and skills with the technology that’s required?”

Diagnostics is another aspect of health care that will undergo rapid change, says Griffin, who predicts major advances in many areas of technology.

“Computers are getting faster and, with that, more technology seeps into the disruption of different parts of the market. Technology’s share of GDP grows roughly to about US$2.1 trillion globally, but the disruption that causes does take a share from other areas. We think software is the most exciting area, and behind that are the semiconductors.”

Business to lead the way in clean energy

Investment in large-scale clean energy projects plunged 56% in Australia in 2019 to a level not seen since 2016. Australia’s Clean Energy Council blamed this plummet in investment on mounting regulatory risks, under-investment in power transmission and policy uncertainty. Meanwhile, Bloomberg New Energy Finance (BNEF) data reveals spending on new utility scale renewable energy assets was US$4.6 billion in 2019, confirming the Australian experience is out of step with global trends.

Griffin predicts renewable energy in various forms – from recycling through to solar and wind energy to development of turbines and electric cars – will attract dedicated new interest, but adds that “Australia is a long way behind in this discussion”.

In New Zealand, on the other hand, renewables make up more than 80% of the electricity capacity (in Australia it’s 21%) and last year the Interim Climate Change Commission concluded it could get to 93% renewable generation by 2035. The government has allocated a NZ$200 million “clean-powered public service fund” to create jobs and tackle climate change.

Picture: Te Apiti Wind Farm in the Tararua Ranges on New Zealand's North Island.

But Kolding believes it will be business, rather than government policy, that will lead the charge in this sector. “They already are,” he says.

“We are seeing so much momentum from all stakeholders behind the various initiatives surrounding renewable energy. There are big opportunities for commercial solar and commercial hydrogen that will become increasing prevalent across the next decade.”

Medicinal cannabis a major growth area

In 2018, Rua Bioscience became the first company in New Zealand to hold a cannabis cultivation licence for medicinal purposes and in 2019, it was the first to legally import seeds for planting. While a ‘no’ vote in the October referendum means recreational cannabis use in New Zealand remains illegal, the cannabis market is not about to burn out.

In Australia, the medicinal cannabis market was worth US$171.7 million in 2019 and, according to San Francisco-based business consultants Grand View Research, it will expand at a compound annual growth rate of 42.1% until 2026. Australia is poised to take a leading global position, with the world’s largest medicinal cannabis farm in Queensland expected to be operational within two years. The project has the potential to boost the regional economy by creating about 1000 jobs.

“This is going to be one of the major growth sectors in medical treatments and the flow through to the economy is strong,” says Dave Holland, director of communications and business development (Australia) for Asterion, the organisation behind the new facility. Australia is poised to play a major role in developing export markets for the plants, he adds.

Some sectors slow to bounce back

While hard-hit areas such as tourism, hospitality, retail and higher education are predicted to bounce back in the coming years, Griffin and Kolding have less confidence in real estate, motor vehicles and advertising sectors.

“As we have been forced to slow down migration, I am concerned about what impact that will have on the supply side of demand with property,” Kolding says. “There’s also the challenge of where we choose to live, as the shutdown has taught many people they don’t need to be close to a CBD to be gainfully employed. That gives me concern about some of the infrastructure investments we have in the pipeline.”

The new focus on technological and renewable innovations is also of concern for the auto industry. “The existing car companies haven’t invested enough in electric and so they’re getting hit by the electric competitors, but they’re also getting hit by carbon emissions,” says Griffin. “They have to spend money to save their company and have been reluctant to do that.”

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