economic significance of the Property industry to the ... · Economic Significance of the Property Industry to the Victorian ... hiring and real estate servcies* ... Economic Significance

The facTs are black & whiTe

Property Council of Australia – Victoria Division

economic significance of the Property industry to the Victorian economy

Economic Significance of the Property Industry to the Victorian EconomyThe facTs are black & whiTe

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Disclaimer

Whilst all care and diligence have been exercised in the preparation of this report, AEC Group Limited does not warrant the accuracy of the information contained within and accepts no liability for any loss or damage that may be suffered as a result of reliance on this information, whether or not there has been any error, omission or negligence on the part of AEC Group Limited or their employees. Any forecasts or projections used in the analysis can be affected by a number of unforeseen variables, and as such no warranty is given that a particular set of results will in fact be achieved.


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Table of conTenTs

Executive summary iv

1. Introduction 2

1.1 Background 2

1.2 Definition of the property industry 2

1.3 Geographic scope 3

1.4 Methodology 3

2. Operating characteristics 4

2.1 Value of property industry activity and employment 4

2.2 Property industry building activity 5

2.2.1 Commenced and completed developments 5

2.2.2 Building approvals 10

2.3 Rateable properties 12

3. Economic significance assessment 13

3.1 Contribution of the property industry to Victoria 13

3.2 Regional contribution of the property industry 15

3.3 Contribution of the property industry to Victoria by industry 20

3.4 Contribution of property sub-sectors to Victoria 22

4. Taxation contribution 23

4.1 Contribution to Victoria’s state taxes 23

4.2 Local government rates and charges 24

5. Comparisons with other industries 25

5.1 Economic contribution 25

5.1.1 Gross state product and gross value add 25

5.1.2 Incomes 28

5.1.3 Employment 29

5.2 State taxes 30

References 31

Appendix A - Definition of the property industry 32

Appendix B - Maps of geographic boundaries 40

Appendix C - Significance assessment methodology 42

Appendix D - Allocation of state taxes 46


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execuTiVe summary

The Victorian property industryVictoria’s property industry consists of organisations and individuals involved in developing, operating and facilitating the activities within the property industry to meet the dwelling and non-dwelling needs of Victoria. Typically this includes residential and non-residential construction along with finance, property and business services associated with property development and operation. While many of these industries are also involved in non-property related activities, this report examines the contribution of the property related components of these industries to the Victorian economy only.

The definition of the property industry used in this report does not include ownership of dwellings, which are rents paid by tenants to landlords and imputed rents to owner occupiers.

The property industry is the largest industry in VictoriaThe property industry is the largest industry in Victoria and is estimated to have contributed approximately $36.9 billion to total Victorian Gross State Product (GSP) in 2009-10. This represented 12.2% of GSP for the year of $301.4 billion.

figure es.1. Direct contribution to gross state product by industry, 2009-10

note: *Only non-property related activity is included for this industry classification. All property related activity is included in the property industry.

source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).

The contribution of the property industry to Victoria’s economy has increased in recent years. Between 2006-07 and 2009-10 property industry gross product increased by 18.1%, compared to a 16.0% increase in Victoria’s overall GSP. Property industry growth remained strong in the latter part of this period, with gross product growing by 6.5% between 2008-09 and 2009-10, compared to an overall Victorian GSP growth rate of 4.8%. This is likely to have been driven by significant growth in residential building activity since 2006-07.

$0 $5 $10 $15 $20 $25 $30 $35 $40

Gross product ($ Billion)

Property industry

Manufacturing

Financial and insurance services*

Proessional, scientific and technical services*

Health care and social assistance

Wholesale trade

Transport, postal and warehousing

Retail trade

Education and training

Public administration and safety

Information media and telecommunications

Ownership of dwellings

Mining

Accomodation and food services

Administrative and support services

Agriculture, forestry and fishing

Other services

Electricity, gas, water and waste services

Arts and recreation services

Construction*

Rental, hiring and real estate servcies*


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The property industry is the second largest employer in VictoriaThe property industry is estimated to have directly employed 312,165 full time equivalent (FTE) employees in Victoria during 2009-10. This is equivalent to 12.2% of the total FTE employees in Victoria for the year. Manufacturing employed a slightly greater number of Victorian workers in 2009-10, with 313,791 FTE employees (also 12.2% of total Victorian employment).

figure es.2. Direct contribution to employment by industry, 2009-10



The growth in property sector employment was slightly below the pace of employment growth in Victoria overall. Between 2006-07 and 2009-10 property industry employment increased by 11.4%, while overall Victorian employment increased by 11.7%. This could be partially attributable to the tightness of the Victorian labour market over this period.

The property industry is also a strong contributor to Victoria’s economy through flow-on activityIn addition to the direct contribution of the property industry to the Victorian economy, the property industry is estimated to have contributed a further $54.5 billion to Victorian GSP through flow-on demand for goods and services, including production induced1 and consumption induced2 effects. The property industry also indirectly contributes to employment in the Victoria through flow-on demand for goods and services. The property industry supported jobs for some 431,503 FTE employees in 2009-10 through flow-on activity.

0 50 100 150 200 250 300 350


Rental, hiring and real estate services*

Mining

Construction*







Other services

Wholesale trade



Accommodation and food services


Professional, scientific adn technical services*

Retail trade


Property industry

Manufacturing

Employment ('000 FTEs)


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Contribution Gross product ($M) Gross value add ($M) Incomes ($M) Employment (FTE)

Direct contribution $36,900.1 $33,828.7 $15,685.5 312,165

Flow-on contribution

Production induced (Type I) $22,217.9 $20,489.8 $13,160.6 157,419

Consumption induced (Type II) $32,323.4 $29,809.3 $16,371.0 274,084

Total flow-on contribution $54,541.4 $50,299.1 $29,531.6 431,503

Agriculture, forestry and fishing $1,045.0 $963.7 $280.2 11,970

Mining $606.7 $559.5 $103.9 1,026

Manufacturing $7,646.4 $7,051.7 $4,253.9 65,010


$1,862.8 $1,717.9 $676.4 8,046

Construction(a) $20.1 $18.5 $12.9 113

Wholesale trade $3,021.4 $2,786.4 $1,858.2 20,564

Retail trade $3,475.0 $3,204.7 $2,202.3 57,717

Accommodation and food services $2,001.8 $1,846.1 $1,198.6 35,416

Transport, postal and warehousing $3,287.3 $3,031.6 $1,465.0 26,698


$2,800.5 $2,582.7 $952.0 15,463

Financial and insurance services(a) $11,154.7 $10,287.1 $5,806.8 29,261

Rental, hiring and real estate services(a) $641.4 $591.5 $270.7 2,796

Professional, scientific and technical services(a) $4,379.6 $4,038.9 $3,104.9 44,931


$2,885.7 $2,661.3 $2,389.9 26,276

Public administration and safety $604.1 $557.1 $476.3 6,901

Education and training $1,771.7 $1,633.9 $1,469.7 20,634

Health care and social assistance $1,914.8 $1,765.9 $1,459.5 22,861

Arts and recreation services $670.6 $618.4 $393.7 8,838

Other services $1,776.6 $1,638.4 $1,156.8 26,982

Ownership of dwellings $2,975.2 $2,743.7 $0.0 0

Total contribution to Victoria $91,441.4 $84,127.8 $45,217.1 743,668

Flow-on demand for goods and services resulting from property industry activity primarily supports activity in the industries of:

• electricity, gas, water and waste services;

• administrative and support services;

• non-property related financial and insurance services;

• other services;

• accommodation and food services; and

• non-property related rental, hiring and real estate services.

Table es.1. estimated direct and flow-on contribution of the property industry to the Victorian economy, 2009-10

note: Totals may not sum due to rounding. (a) Only non-property related activity is included for this industry classification. All property related activity is included in the direct contribution.


1 Represents the combination of activity required from all industries that supply goods and services to the property sector, as well as the induced activity from all industries to support the production of industries supplying the property sector.

2 Represents the subsequent induced activity due to spending by the wage and salary earners across all industries arising from the compensation received for their labour as part of the direct and production induced effects.


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The property industry supports economic growth and employment throughout VictoriaIn line with its position as the principal population and business centre in Victoria, the Melbourne Statistical Division (SD) accounts for the majority (just over 80%) of total direct and flow-on property industry impacts in Victoria. However, the property industry’s contribution to regional Victoria should not be underestimated, as the industry accounts for over 12% of employment in the Barwon (13.3%), Gippsland (12.8%) and Loddon (12.6%) regions.

In terms of the property industry in the major sub-regions, Greater Geelong accounts for the greatest proportion, contributing $2.7 billion, or 3% of Victorian property industry gross product. Other major sub-regions contributing a high proportion of gross product include Latrobe (1.3%) and Ballarat (1.2%).

Table es.2. estimated regional economic contribution of the property industry in Victoria, 2009-10

Region Total contribution

Gross product ($M) Gross value add ($M) Incomes ($M) Employment (FTE)

Major sub-regions

Ballarat $1,129.6 $1,042.6 $544.6 9,735

Greater Bendigo $855.4 $785.4 $388.0 7,088

Greater Geelong $2,708.5 $2,498.2 $1,310.6 23,718

Greater Shepparton $700.8 $644.0 $337.1 6,362

Horsham $252.1 $231.8 $125.0 2,329

Latrobe $1,168.3 $1,074.5 $562.4 10,044

Mildura $255.3 $234.1 $108.4 2,345

Wangaratta $550.9 $506.6 $264.0 4,843

Warrnambool $425.0 $391.3 $199.6 3,631

Wodonga $961.9 $885.0 $462.5 7,921

Total major sub-regions $9,007.8 $8,293.5 $4,302.2 78,015

Statistical divisions

Barwon $3,761.5 $3,469.5 $1,803.4 33,527

Central Highlands $1,692.1 $1,561.8 $821.8 15,260

East Gippsland $949.2 $876.2 $452.6 8,851

Gippsland $2,590.2 $2,382.3 $1,235.3 23,192

Goulburn $2,156.3 $1,981.7 $1,022.5 19,637

Loddon $2,041.1 $1,876.2 $963.8 18,202

Mallee $975.1 $894.1 $405.5 4,111

Melbourne $74,513.5 $68,544.4 $37,182.5 595,423

Ovens-Murray $1,156.4 $1,063.6 $553.2 10,414

Western District $1,175.7 $1,082.4 $560.0 10,928

Wimmera $430.2 $395.6 $216.4 4,123

Victoria $91,441.4 $84,127.8 $45,217.1 743,668

note: Totals may not sum due to rounding.



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FACTThe property industry is the largest industry in Victoria

12.2% of GSP

Table es.3. estimated direct contribution of the property industry to the Victorian economy by property sub-sector/type, 2009-10

Property sub-sector/type Gross product ($M) Gross value add ($M) Incomes ($M) Employment (FTE)

Residential 61.2% 61.2% 60.4% 62.5%

Retail 6.8% 6.8% 6.9% 6.5%

Commercial 9.3% 9.3% 9.5% 9.0%

Industrial 6.3% 6.3% 6.5% 6.1%

Health 4.2% 4.2% 4.3% 4.0%

Education 6.4% 6.4% 6.6% 6.2%

Entertainment/recreation 2.6% 2.6% 2.7% 2.5%

Other 3.2% 3.2% 3.3% 3.1%

Total % of direct contribution 100.0% 100.0% 100.0% 100.0%


source: AECgroup, ABS (2011a), ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).

The residential property sub-sector provides the majority of property industry economic activityThe property industry consists of a range of property type sub-sectors. Residential property is estimated to have provided the largest contribution to the Victorian economy of all property industry sub-sectors, accounting for approximately 61.2% of gross product in 2009-10, followed by commercial property (9.3%) and retail property (6.8%).


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The property industry is the largest single contributor to Victorian taxesProperty related activities are estimated to have been the largest single industry contributing to Victoria’s state taxes and royalty revenues in 2009-10, contributing $5.4 billion or almost 40% of total state tax revenue for the year of $13.8 billion.

In terms of contribution to taxes per dollar of gross product, property related activities are the second most highly taxed in Victoria (behind only the arts and recreation services industry which primarily involves taxes on gambling and gaming) providing $0.15 per dollar of gross product.

Table es.4. contribution to state taxes, comparison of property related activities to other industries of the economy, 2009-10

note: (a) Taxes that have not been allocated to an industry include stamp duties on motor vehicle, motor vehicle registrations, levies on statutory corporations and franchise taxes. While a part of these taxes are payable by industry, the majority of these taxes are paid by households. Due to data limitations it is not possible to allocate the portion of these taxes that are paid by industry.

source: AECgroup, ABS (2011c), DTF (2010).

Industry Tax estimates ($M) Contribution to GSP ($M) Tax per $1 of GSP contributed ($)

Property related taxes $5,446.6 $36,900.1 $0.15

Agriculture, forestry and fishing $37.9 $6,240.2 $0.01

Mining $73.9 $7,981.8 $0.01

Manufacturing $482.4 $35,746.5 $0.01


$44.3 $5,426.1 $0.01

Construction $47.6 $2,959.0 $0.02

Wholesale trade $271.3 $17,577.6 $0.02

Retail trade $244.9 $15,395.4 $0.02


$106.5 $7,133.6 $0.01


$171.7 $15,815.9 $0.01


$102.7 $12,175.9 $0.01

Financial and insurance services $1,291.2 $35,718.1 $0.04

Rental, hiring and real estate services

$24.9 $2,353.0 $0.01

Professional, scientific and technical services

$373.2 $20,704.6 $0.02


$188.1 $9,051.4 $0.02

Public administration and safety $243.6 $12,827.8 $0.02

Education and training $320.3 $15,383.5 $0.02


$393.6 $20,505.1 $0.02

Arts and recreation services $1,679.9 $3,281.2 $0.51

Other services $99.8 $6,105.5 $0.02

Ownership of dwellings $0.0 $12,155.7 $0.00

Not allocated (a) $2,143.4 - -

Total Victoria $13,788.0 $301,438.0 $0.05


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1.1 background In 2011, the Property Council of Australia (Victoria Division) commissioned AEC Group Limited

(AECgroup) to prepare estimates of the economic significance associated with the property industry in Victoria. The industry consists of organisations and individuals involved in developing, operating and facilitating the activities within the property industry to meet the dwelling and non-dwelling needs of Victoria.

1.2 Definition of the property industry For the purposes of this assessment the industry classifications as defined by the Australian Bureau of Statistics (ABS) in the australian and new Zealand standard industrial classifications (ANZSIC), 2006 publication (ABS, 2008) were utilised.

The property industry has been defined as incorporating:

• Parts of the construction industry focussed on the development residential and non-residential building, as well as all construction services;

• Architectural, engineering and professional services involved in the development of property;

• Non-residential property operators and real estate services; and

• Parts of banking, non-bank finance and other financial and insurance services that facilitate the development of property.

While many of these industries are also involved in non-property related activities, this report examines the contribution of the property related components of these industries to the Victorian economy only.

The definition of the property industry used in this report does not include ownership of dwellings, which are rents paid by tenants to landlords and imputed rents to owner occupiers.

A full list of ANZSIC classes included in the definition of the property industry is provided in appendix a.

1. inTroDucTion


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1.3 Geographic scopeThe scope of this report is on the economic significance of the property industry in Victoria including the state of Victoria, its Statistical Divisions (SDs), and 10 identified major sub-regions.

These are:

Victoria

statistical Divisions

• Barwon

• Central Highlands

• East Gippsland

• Gippsland

• Goulburn

• Loddon

• Mallee

• Melbourne

• Ovens-Murray

• Western District

• Wimmera

major sub-regions (defined by local government area boundaries in Victoria)

• Ballarat

• Greater Bendigo

• Greater Geelong

• Greater Shepparton

• Horsham

• Latrobe

• Mildura

• Wangaratta

• Warrnambool

• Wodonga

Maps of the SDs and major sub-regions can be found in appendix b.

1.4 methodologyThe estimates in this report are produced using Input-Output transaction tables and models developed by AECgroup for the purposes of this assessment, combined with data from a range of sources, including State Accounts data and various industry specific data from the ABS. The Input-Output models were used to produce estimates of the direct and flow-on contributions of the property industry to the Victorian economy in terms of Gross State Product (GSP), gross value added (GVA) activity, employment and income (i.e. wages and salaries). A detailed description of the methodology employed in this report is provided in appendix c.

The information presented on the significance of the property industry in Victoria is for the 2009-10 financial year unless otherwise stated.

FACTProperty industry

contribution to state taxes 39.5%


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This chapter provides an overview of the Victorian property industry in terms of its overall value and contribution to employment and incomes, as well as historic performance. An overview of building activity, approvals and rateable properties is also presented.

2.1 Value of property industry activity and employment

In 2009-10 the Victorian property industry is estimated to have directly3 contributed approximately (refer to appendix c for a description of the economic measures used in this section):

• $36.9 billion towards Victoria’s GSP;

• $33.8 billion in GVA activity;

• $15.7 billion in income (wages and salaries); and

• 312,165 full time equivalent4 (FTE) jobs.

Table 2.1. estimated direct economic contribution of the property industry to the Victorian economy, 2009-2010

Note: Totals may not sum due to rounding. (a) It should be noted that many construction industry employees work more than the standard FTE of 40 hours per week, and as such the total number of construction employees may be less than that depicted in the table.

Source: AECgroup, ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d).

Between 2006-07 and 2009-10 the property industry’s contribution to GSP increased from $31.2 billion to $36.9 billion, representing total growth of 18.1% over this period. The property industry grew faster than the overall Victorian economy during this period, which grew by 16.0% in GSP terms between 2006-07 and 2009-10 (refer to Table 2.2). Strong property market performance over this period can be attributed to a number of factors, including strong population growth driven by net overseas migration (DTF, 2008).

However, in employment terms, employment growth in the property industry was slightly weaker than employment growth in Victoria overall between 2006-07 and 2009-10 (11.4% compared to 11.7%). Growth in wages and salaries was higher in the property industry than in Victoria overall between 2006-07 and 2009-10 (19.7% compared to 15.9%), perhaps due to the tight Victorian labour market. Between 2006-07 and 2009-10 Victoria’s labour market was strong with an unemployment rate between 4 and 6% (ABS, 2011e), suggesting that property industry may have increased wages and salaries offered to attract and retain employees.

2. oPeraTinG characTerisTics

Property industry component Gross product ($M) Gross value add ($M) Incomes ($M) Employment (FTE)

Residential building construction(a) $4,026.7 $3,691.5 $1,124.3 35,377

Non-residential building construction(a) $3,116.0 $2,856.7 $1,181.9 20,473

Construction services(a) $13,315.3 $12,207.0 $6,258.6 162,608

Finance $4,727.2 $4,333.7 $1,361.6 15,297

Insurance and superannuation funds

$649.3 $595.2 $272.9 1,619

Non-residential property operators and real estate services

$6,186.2 $5,671.3 $2,160.2 27,888


$4,879.5 $4,473.3 $3,326.0 48,904

Total property industry direct contribution

$36,900.1 $33,828.7 $15,685.5 312,165

3 The direct contribution of the property sector refers to the value of final products and services generated by the sector itself, as well as the jobs and incomes of employees directly employed in the sector. However, the economic contribution of the property sector extends beyond the sector itself through flow-on effects, which are discussed in Chapter 3.

4 Where one FTE is equivalent to one person working full time for one year.


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While both property industry growth and Victoria’s economic growth was weak between 2007-08 and 2008-09, the property industry grew relatively strongly between 2008-09 and 2009-10, at 6.5% in GSP terms. This was stronger than the growth of Victoria’s economy overall during this period, which was 4.8%. This is consistent with growth in GVA over the year, which was 5.7% in the property industry and 4.0% with Victoria’s overall economy.

Income growth between 2008-09 and 2009-10 was again higher in the property industry (6.9%) compared to Victoria overall (4.5%). In terms of employment, the property industry recorded much stronger growth between 2008-09 and 2009-10 than Victoria overall (6.0% compared to 2.4%). This could be due to a number of factors. High income growth could have attracted more workers to the property industry, particularly as job opportunities in other sectors are likely to have decreased during the global economic downturn. In addition, public investment programs such as the Australian Government’s Nation Building – Economic Stimulus Plan (Australian Government, 2009) assisted in maintaining demand for property industry workers.

Table 2.2. estimated property industry growth in Victoria compared to total Victorian economy growth



Economic measure 2006-07 2007-08 2008-09 2009-10 % Change 2006-07 to

2009-10

% Change 2008-09 to

2009-10

Victoria property industry

Gross product ($M) $31,245.7 $34,322.7 $34,639.6 $36,900.1 18.1% 6.5%

Gross value add ($M) $28,623.0 $31,389.3 $31,994.5 $33,828.7 18.2% 5.7%

Incomes ($M) $13,099.7 $14,304.4 $14,666.7 $15,685.5 19.7% 6.9%

Employment (FTEs) 280,112 292,394 294,419 312,165 11.4% 6.0%

Victoria total economy

Gross state product ($M) $259,789.0 $281,988.0 $287,619.0 $301,438.0 16.0% 4.8%

Gross value add ($M) $237,983.0 $257,888.0 $265,656.0 $276,348.0 16.1% 4.0%

Incomes ($M) $136,763.6 $147,108.8 $151,758.2 $158,558.6 15.9% 4.5%

Employment (FTEs) 2,298,642 2,469,891 2,507,527 2,567,165 11.7% 2.4%

2.2 Property industry building activity

2.2.1 commenced and completed developments

Victoria recorded the highest number of commenced (54,424, or 32.9% of the total) and completed (46,218, or 31.4% of the total) residential developments in Australia in 2009-10.

The value of commenced and completed residential developments in Victoria was $14.9 billion and $12.9 billion respectively, or 31.2% and 28.9% of the total value of residential developments in Australia for 2009-10.

Victoria recorded the second-highest value of non-residential commenced developments at $8.8 billion (22.8% of the total), behind New South Wales which recorded $10.4 billion (26.8%) of non-residential developments commenced in 2009-10. However, Victoria recorded the highest value of non-residential developments completed, at $9.2 billion, or 30.5% of the total.

312,165 full time Victorian jobs directly attributed to the property industry

FACT


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Table 2.3. building activity – commenced and completed development, 2009-10

Building activity commenced in Victoria grew strongly between 2006-07 and 2009-10, particularly for residential developments. Overall growth in the total value of buildings commenced for this period was 26.7%, which was stronger than the growth rate recorded for Australia overall during this period of 22.6%.

Victoria recorded the second-highest growth in the value of residential developments commenced between 2006-07 and 2009-10, at 43.0%, behind only the Australian Capital Territory (79.8%). This was consistent with strong population and employment growth in both Melbourne and regional Victoria (DTF, 2007a). In addition, the Victorian Government allocated an additional $510 million for social and public housing in the 2007-08 Budget, increasing the value of residential developments commenced over the period (DTF, 2007b).

However, the growth of non-residential building activity commenced over this period was the lowest of any state or territory, at 6.2%. This is despite a doubling of the annual expenditure on school construction and rebuilding between 2007 and 2011 (VAGO, 2008). However, in absolute terms, the value of non-residential building approvals commenced was relatively strong in 2009-10 (see Table 2.5).

Figure 2.1 shows the value of different types of building work commenced in Victoria between 2001-02 and 2009-10. Residential buildings comprise the majority with almost two thirds (62.4%) of total value of works commenced.

Of the non-residential buildings commenced, commercial buildings accounted for the largest value of total works commenced in Victoria between 2001-02 and 2009-10 (9.1%), followed by retail (6.6%), education (6.2%) and industrial (6.1%) buildings.

Region Residential Non-residential

Commenced Completed Commenced Completed

Number Value ($M) Number Value ($M) Value ($M) Value ($M)

New South Wales 31,897 $10,683 25,663 $9,243 $10,365 $7,272

Victoria 54,424 $14,858 46,218 $12,932 $8,818 $9,217

Queensland 33,178 $9,539 33,628 $10,302 $7,975 $6,080

South Australia 11,989 $2,790 12,061 $2,866 $2,768 $1,814

Western Australia 25,118 $7,290 22,293 $7,292 $6,363 $3,846

Tasmania 3,120 $803 2,767 $725 $777 $547

Northern Territory 1,244 $464 1,304 $483 $473 $409

Australian Capital Territory

4,433 $1,235 3,334 $936 $1,117 $1,044

Australia 165,403 $47,662 147,268 $44,779 $38,656 $30,229

source: ABS (2011a).


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Table 2.4. comparison of building activity commenced, 2006-07 and 2009-10

figure 2.1. Proportion of total value of works commenced by property industry type in Victoria, 2001-02 to 2009-10

Region 2006-07 ($M) 2009-10 ($M) % Change, 2006-07 to 2009-10

New South Wales

Residential $9,266 $10,683 15.3%

Non-residential $8,067 $10,365 28.5%

Total $17,333 $21,048 21.4%

Victoria

Residential $10,393 $14,858 43.0%

Non-residential $8,301 $8,818 6.2%

Total $18,694 $23,676 26.7%

Queensland

Residential $11,022 $9,539 -13.5%

Non-residential $6,965 $7,975 14.5%

Total $17,987 $17,514 -2.6%

Australia

Residential $41,269 $47,662 15.5%

Non-residential $29,128 $38,656 32.7%

Total $70,397 $86,318 22.6%

Residential 62.4%

source: ABS (2011a)

source: ABS (2011a).

Victorian wages and salaries generated by the property industry

$15.7 billion

FACT


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2.2.2 building approvals

Consistent with the number of commencements and completions across Australia, building approvals data shows that in 2009-10 Victoria had the highest number (113,884) of residential building approvals across all states and territories. This represented 33.2% of the total, and was roughly 1.7 times higher than the number of residential building approvals in Queensland, which recorded the second highest number. The total value of residential approvals in Victoria was $30.2 billion, or 32.2% of the total across all states and territories for the year. The value per residential approval, at $264,911, was slightly below the Australian average of $274,025.

The value of non-residential approvals in Victoria in 2009-10 was the second highest of all states and territories, at $17.8 billion (or 22.3% of the total). New South Wales recorded the highest value of non-residential approvals for the year, at $21.5 billion (27.0% of the total).

Table 2.5. building approvals by state, 2009-10

As may be expected, the Melbourne SD, containing the capital city and primary population and service centre of Victoria, accounted for the majority of the total number of Victorian residential building approvals (74.4% of the total) and value (76.4% of the total) in 2009-10. The Melbourne SD also accounted for the majority of the total value of non-residential building approvals for the year (74.6%).

Of the major sub-regions, Greater Geelong recorded the highest number and value of residential building approvals (4,298 approvals valued at $1,055 million), and also the highest value of non-residential approvals ($693.1 million). Ballarat accounted for the second highest number of residential building approvals in 2009-10, with 2,338, or 16.1% of the total, while Greater Bendigo accounted for 2,200 (15.1%). In value terms, Greater Bendigo recorded $483.3 million, while Ballarat recorded $481.6 million. Greater Bendigo had the second-highest value of non-residential building approvals after Greater Geelong, with $315.9 million, or 13.9% of the total for the non-Melbourne major sub-regions.


Number Value ($M) Value per approval ($) Value ($M)

New South Wales 66,622 $20,345.0 $305,379 $21,525.0

Victoria 113,884 $30,169.1 $264,911 $17,793.0

Queensland 67,444 $18,965.8 $281,208 $17,263.5

South Australia 25,208 $5,386.4 $213,679 $5,354.8

Western Australia 50,660 $14,060.2 $277,540 $12,562.0

Tasmania 6,464 $1,602.8 $247,956 $1,506.2

Northern Territory 2,642 $925.7 $350,379 $1,246.1

Australian Capital Territory 9,074 $2,261.0 $249,174 $2,520.7

Australia 341,998 $93,716.0 $274,025 $79,771.4

note: Totals may not sum due to rounding

source: ABS (2011b).


1111


Number Value ($M) Value ($M)

Major sub-regions (a)

Ballarat 2,338 $481.6 $312.2

Greater Bendigo 2,200 $483.3 $315.9

Greater Geelong 4,298 $1,054.9 $693.1

Greater Shepparton 1,140 $265.4 $155.7

Horsham 272 $68.4 $42.1

Latrobe 1,288 $322.3 $176.0

Mildura 992 $225.0 $133.2

Wangaratta 376 $93.0 $76.5

Warrnambool 568 $152.8 $257.3

Wodonga 1,066 $236.5 $107.9

Total major sub-regions 14,538 $3,383.2 $2,269.9


Barwon 6,014 $1,626.7 $902.9

Central Highlands 3,786 $806.6 $455.4

East Gippsland 1,604 $371.4 $219.7

Gippsland 4,624 $1,092.9 $482.0

Goulburn 4,604 $1,126.0 $685.9

Loddon 3,600 $847.8 $692.4

Mallee 1,354 $319.0 $225.0

Melbourne 84,728 $23,054.1 $13,280.5

Ovens-Murray 1,876 $452.2 $271.8

Western District 1,270 $364.6 $471.7

Wimmera 424 $107.9 $105.8

Victoria 113,884 $30,169.1 $17,793.0

Table 2.6. building approvals in Victoria and major sub-regions, 2009-10

note: Totals may not sum due to rounding. (a) Boundary definitions for the major sub-regions are outlined in section 1.3.

source: ABS (2011b).

FACT33.2% of

Australia’s total building approvals in 2009-10

were in Victoria


12

2.3 rateable propertiesTable 2.7 shows estimated unimproved capital values (UCVs) for residential, commercial, industrial and rural land in Victoria in 2009-10. In line with Melbourne’s position as Victoria’s capital, land values are highest in the Melbourne SD. Melbourne accounted for $633.4 billion, or 81.7% of the total UCV of land for Victoria, mainly due to the UCV of residential land. The Melbourne SD had the highest total land values across all land types. Of the other SDs, Barwon had the highest total land value, followed by Gippsland.

Of the major sub-regions, Greater Geelong had the highest total UCV of land of $22.3 billion, mainly accounted for by the value of residential land. Greater Geelong recorded the highest land values across all land types compared to the other major sub-regions.

Table 2.7. unimproved capital value of land, 2009-10 ($m)

Region Residential Commercial Industrial Rural Total

Major sub-regions

Ballarat $4,783.0 $643.9 $274.1 $442.0 $6,143.1

Greater Bendigo $4,875.0 $628.5 $280.3 $550.9 $6,334.8

Greater Geelong $17,637.8 $1,320.5 $1,036.5 $2,354.2 $22,349.0

Greater Shepparton $2,000.2 $497.4 $179.0 $981.4 $3,658.0

Horsham $508.3 $4.0 $158.6 $779.9 $1,450.7

Latrobe $2,795.0 $360.0 $219.9 $613.5 $3,988.4

Mildura $1,598.7 $391.1 $125.7 $830.8 $2,946.3

Wangaratta $979.2 $198.5 $67.8 $1,026.9 $2,272.5

Warrnambool $1,920.3 $439.2 $140.7 $261.5 $2,761.7

Wodonga $1,380.4 $658.2 $0.0 $235.4 $2,274.0

Total major sub-regions $38,477.9 $5,141.4 $2,482.5 $8,076.6 $54,178.5


Barwon $27,384.0 $1,822.0 $1,150.7 $6,694.1 $37,050.9

Central Highlands $7,954.6 $827.5 $352.3 $3,639.7 $12,774.0

East Gippsland $5,119.7 $544.3 $143.4 $2,707.6 $8,515.0

Gippsland $11,324.2 $1,100.3 $430.9 $5,975.7 $18,831.1

Goulburn $7,310.7 $1,136.6 $423.4 $8,303.8 $17,174.5

Loddon $9,733.0 $813.8 $331.4 $3,203.1 $14,081.4

Mallee $2,282.9 $527.2 $168.3 $2,656.8 $5,635.2

Melbourne $537,244.9 $49,527.7 $28,393.0 $18,215.4 $633,381.1

Ovens-Murray $3,535.2 $1,002.6 $87.4 $3,350.0 $7,975.2

Western District $4,703.2 $682.0 $249.5 $8,976.9 $14,611.6

Wimmera $852.1 $48.3 $178.6 $4,192.0 $5,271.0

Victoria $617,44.6 $58,032.2 $31,908.9 $67,915.2 $775,301.0

source: DSE (unpublished).

FACT$36.9 billion

contributed to Victoria’s gross

product in 2009-10


13

Property industry component Gross product ($M) Gross value add ($M) Incomes ($M) Employment (FTE)

Direct contribution

Residential building construction $4,026.7 $3,691.5 $1,124.3 35,377

Non-residential building construction

$3,116.0 $2,856.7 $1,181.9 20,473

Construction services $13,315.3 $12,207.0 $6,258.6 162,608

Finance $4,727.2 $4,333.7 $1,361.6 15,297


$649.3 $595.2 $272.9 1,619


$6,186.2 $5,671.3 $2,160.2 27,888


$4,879.5 $4,473.3 $3,326.0 48,904

Total direct contribution $36,900.1 $33,828.7 $15,685.5 312,165


Production induced (type I) $22,217.9 $20,489.8 $13,160.6 157,419

Consumption induced (type II) $32,323.4 $29,809.3 $16,371.0 274,084

Total flow-on contribution $54,541.4 $50,299.1 $29,531.6 431,503

Total contribution to Victoria $91,441.4 $84,127.8 $45,217.1 743,668

3. economic siGnificance assessmenT

This chapter describes the economic contribution (or significance) of the property industry to the Victorian economy, including estimates of the industry’s contribution to major sub-regions and SDs of Victoria. The flow-on contribution of property industry activity to other industries is also provided.

3.1 contribution of the property industry to VictoriaThe economic contribution of the property industry to the Victorian economy has been estimated across four key measures:

• Gross product: Refers to the value of all outputs of an industry including taxes/subsidies on its final products after deducting the cost of goods and services inputs in the production process. Gross State Product (GSP) is the measure of a state’s total gross production;

• Gross value add (GVa): Refers to the value of all outputs of an industry excluding taxes/subsidies on its final products after deducting the cost of goods and services inputs in the production process;

• incomes: Measures the level of wages and salaries paid to employees of each industry; and

• employment: Refers to the part-time and full-time employment positions supported by an industry, both directly and indirectly through flow-on activity, and is expressed in terms of full time equivalent (FTE) positions.

In 2009-10 the property industry is estimated to have directly contributed $36.9 billion to gross product of Victoria, or 12.2% of the total GSP of $301.4 billion (refer to Table 3.1 and Table 3.2). Including flow-on activity, the total contribution of the property industry to Victoria’s economy is estimated to have been $91.4 billion in 2009-10, or 30.3% of total GSP. The property industry contributed $84.1 billion to Victoria’s GVA of $276.3 billion, or 30.4%.

The property industry generated a total of 743,668 FTE employment positions in 2009-10; 312,165 directly and a further 431,503 through flow-on activity. This represented 29.0% of total employment in Victoria. These jobs generated approximately $45.2 billion in incomes (wages and salaries) for Victorian residents, representing 28.5% of total incomes in Victoria in 2009-10.

Table 3.1. estimated direct and flow-on contribution of the property industry to the Victorian economy, 2009-10




14

Within the property industry, the largest direct contributors to the Victorian economy (in terms of GSP) for 2009-10 were:

• construction services: $13.3 billion in gross product (4.4% of GSP).

• non-residential property operators and real estate services: $6.2 billion in gross product (2.1% of GSP).

• Professional, scientific and technical services: $4.9 billion in gross product (1.6% of GSP).

• finance: $4.7 billion in gross product (1.6% of GSP).

Considering property industry employment, the largest contributors to the Victorian economy in 2009-10 were:

• construction services: 162,608 FTE jobs (6.3% of total Victorian FTE jobs).

• Professional, scientific and technical services: 48,904 FTE jobs (1.9% of total Victorian FTE jobs).

• residential building construction: 35,377 FTE jobs (1.4% of total Victorian FTE jobs).

• non-residential property operators and real estate services: 27,888 FTE jobs (1.1% of total Victorian FTE jobs).

Table 3.2. estimated % contribution of the property industry to the Victorian economy, 2009-10

As outlined in Section 2.1, the property industry grew at a stronger rate than the Victorian economy overall between 2006-07 and 2009-10, representing an increase in the contribution of the property industry to the Victorian economy. Overall, the contribution of the property industry to the Victorian economy increased by around 0.4 percentage points (in GSP terms) between 2006-07 and 2009-10. The increase in GVA was similar, at 0.5 percentage points.

The property industry’s contribution to Victorian incomes between 2006-07 and 2009-10 increased by 0.9 percentage points, while the property industry’s contribution to Victorian employment declined slightly by 0.1 percentage points. This could be due to tight labour market conditions disproportionately impacting the property industry, as outlined above.

Property industry component Gross product (%) Gross value add (%) Incomes (%) Employment (%)

Direct contribution

Residential building construction 1.3% 1.3% 0.7% 1.4%

Non-residential building construction

1.0% 1.0% 0.7% 0.8%

Construction services 4.4% 4.4% 3.9% 6.3%

Finance 1.6% 1.6% 0.9% 0.6%


0.2% 0.2% 0.2% 0.1%


2.1% 2.1% 1.4% 1.1%


1.6% 1.6% 2.1% 1.9%

Total direct contribution 12.2% 12.2% 9.9% 12.2%


Production induced (type I) 7.4% 7.4% 8.3% 6.1%

Consumption induced (type II) 10.7% 10.8% 10.3% 10.7%

Total flow-on contribution 18.1% 18.2% 18.6% 16.8%

Total contribution to Victoria 30.3% 30.4% 28.5% 29.0%




15

3.2 regional contribution of the property industryThe economic contribution of the property industry to each of the SDs and major sub-regions in Victoria (as defined in Section 1.3) is outlined in Table 3.4, Table 3.5 and Table 3.6 below. The information described in each table is as follows:

• Table 3.4 outlines the economic contribution of the property industry to major sub-regions and SDs in Victoria in value terms;

• Table 3.5 outlines the economic contribution of the property industry in major sub-regions and SDs in Victoria as a percent of total Victorian economic activity; and

• Table 3.6 outlines the per cent contribution of each major sub-region and SD to total direct and flow-on contributions of the property industry to the Victorian economy.

The tables highlight that:

• The Melbourne SD accounts for more than three quarters of total direct and flow-on property industry impacts in Victoria, contributing $74.5 billion to GSP (81.5% of total property industry contribution to the state), $68.5 billion to gross value add (81.5%), $37.2 billion in incomes (82.2%) and 595,423 FTE jobs (80.1%); and

• Of the non-Melbourne major sub-regions, Greater Geelong, Latrobe and Ballarat are the largest contributors to total property industry impacts in Victoria, accounting for 3.0%, 1.3% and 1.2% respectively of total property industry contributions to Victorian GSP.

Year/effect Gross product (%) Gross value add (%) Incomes (%) Employment (%)

2006-07

Direct contribution 12.0% 12.0% 9.6% 12.2%

Production induced (type I) contribution

7.3% 7.3% 8.0% 6.1%

Consumption induced (type II) contribution

10.6% 10.6% 10.0% 10.7%

Total 2006-07 contribution 29.9% 29.9% 27.6% 29.0%

2009-10



7.4% 7.4% 8.3% 6.1%


10.7% 10.8% 10.3% 10.7%

Total 2009-10 contribution 30.3% 30.4% 28.5% 29.0%

Change, 2006-07 to 2009-10(a)



0.1% 0.1% 0.3% 0.0%


0.1% 0.2% 0.3% 0.0%

Total change in contribution 0.4% 0.5% 0.9% -0.1%

Table 3.3. estimated change in property industry contribution to the Victorian economy, 2006 07 to 2009-10

note: Totals may not sum due to rounding. (a) The percentage change estimates represent percentage point differences between 2006-07 & 2009-10.



16

Reg

ion

Dir

ect c

ontr

ibut

ion

Flow

-on

(typ

e I +

type

II) c

ontr

ibut

ion

Tota

l con

trib

utio

n

Gro

ss

prod

uct (

$M

)G

ross

val

ue

add

($M

)In

com

es

($M

)Em

ploy

men

t (F

TE)

Gro

ss

prod

uct (

$M

)G

ross

val

ue

add

($M

)In

com

es

($M

)Em

ploy

men

t (F

TE)

Gro

ss

prod

uct (

$M

)G

ross

val

ue

add

($M

)In

com

es

($M

)Em

ploy

men

t (F

TE)

Maj

or s

ub-r

egio

ns

Bal

lara

t$5

09.2

$468

.9$2

14.2

4,61

0$6

20.5

$573

.7$3

30.4

5,12

5$1

,129

.6$1

,042

.6$5

44.6

9,73

5

Gre

ater

Ben

digo

$598

.0$5

48.2

$243

.85,

234

$257

.4$2

37.2

$144

.11,

854

$855

.4$7

85.4

$388

.07,

088

Gre

ater

Gee

long

$1,2

04.7

$1,1

08.5

$515

.411

,203

$1,5

03.8

$1,3

89.6

$795

.212

,515

$2,7

08.5

$2,4

98.2

$1,3

10.6

23,7

18

Gre

ater

She

ppar

ton

$329

.8$3

02.5

$141

.43,

117

$370

.9$3

41.5

$195

.73,

245

$700

.8$6

44.0

$337

.16,

362

Hor

sham

$118

.6$1

08.8

$49.

21,

058

$133

.5$1

23.0

$75.

71,

270

$252

.1$2

31.8

$125

.02,

329

Latr

obe

$540

.9$4

96.2

$226

.14,

790

$627

.4$5

78.3

$336

.35,

255

$1,1

68.3

$1,0

74.5

$562

.410

,044

Mild

ura

$255

.3$2

34.1

$108

.42,

345

$0.0

$0.0

$0.0

0$2

55.3

$234

.1$1

08.4

2,34

5

Wan

gara

tta

$251

.0$2

30.3

$107

.02,

287

$299

.9$2

76.3

$157

.02,

556

$550

.9$5

06.6

$264

.04,

843

War

rnam

bool

$207

.1$1

90.3

$86.

31,

860

$217

.9$2

01.0

$113

.31,

771

$425

.0$3

91.3

$199

.63,

631

Wod

onga

$435

.5$3

99.5

$186

.33,

835

$526

.4$4

85.5

$276

.24,

086

$961

.9$8

85.0

$462

.57,

921

Tota

l maj

or s

ub-r

egio

ns$

4,45

0.1

$4,

087.

4$

1,87

8.2

40,3

38$

4,55

7.8

$4,

206.

1$

2,42

4.0

37,6

77$

9,00

7.8

$8,

293.

5$

4,30

2.2

78,0

15

Stat

isti

cal d

ivis

ions

Bar

won

$1,6

63.1

$1,5

30.3

$707

.115

,745

$2,0

98.4

$1,9

39.2

$1,0

96.3

17,7

82$3

,761

.5$3

,469

.5$1

,803

.433

,527

Cen

tral

Hig

hlan

ds$7

54.8

$695

.1$3

21.3

7,13

6$9

37.3

$866

.7$5

00.5

8,12

4$1

,692

.1$1

,561

.8$8

21.8

15,2

60

East

Gip

psla

nd$4

63.3

$426

.8$1

97.2

4,50

7$4

86.0

$449

.4$2

55.4

4,34

4$9

49.2

$876

.2$4

52.6

8,85

1

Gip

psla

nd$1

,178

.2$1

,081

.0$4

91.8

10,8

86$1

,411

.9$1

,301

.4$7

43.5

12,3

06$2

,590

.2$2

,382

.3$1

,235

.323

,192

Gou

lbur

n$1

,000

.5$9

17.6

$425

.09,

549

$1,1

55.8

$1,0

64.1

$597

.510

,089

$2,1

56.3

$1,9

81.7

$1,0

22.5

19,6

37

Lodd

on$9

53.7

$874

.2$3

96.5

8,74

2$1

,087

.4$1

,002

.0$5

67.3

9,46

1$2

,041

.1$1

,876

.2$9

63.8

18,2

02

Mal

lee

$975

.1$8

94.1

$405

.54,

111

$0.0

$0.0

$0.0

0$9

75.1

$894

.1$4

05.5

4,11

1

Mel

bour

ne$2

8,65

2.1

$26,

253.

6$1

2,20

3.0

239,

341

$45,

861.

4$4

2,29

0.8

$24,

979.

535

6,08

2$7

4,51

3.5

$68,

544.

4$3

7,18

2.5

595,

423

Ove

ns-M

urra

y$5

00.5

$459

.2$2

15.0

4,79

8$6

55.9

$604

.4$3

38.2

5,61

6$1

,156

.4$1

,063

.6$5

53.2

10,4

14

Wes

tern

Dis

tric

t$5

57.9

$512

.6$2

38.4

5,48

6$6

17.8

$569

.7$3

21.6

5,44

2$1

,175

.7$1

,082

.4$5

60.0

10,9

28

Wim

mer

a$2

00.8

$184

.2$8

4.7

1,86

4$2

29.4

$211

.4$1

31.7

2,25

8$4

30.2

$395

.6$2

16.4

4,12

3

Vict

oria

$36

,900

.1$

33,8

28.7

$15

,685

.531

2,16

5$

54,5

41.4

$50

,299

.1$

29,5

31.6

431,

503

$91

,441

.4$

84,1

27.8

$45

,217

.174

3,66

8

Tabl

e 3.

4.

esti

mat

ed r

egio

nal e

cono

mic

con

trib

utio

n of

the

prop

erty

indu

stry

in V

icto

ria,

200

9-10

not

e: T

otal

s m

ay n

ot s

um d

ue to

rou

ndin

g.

sour

ce: A

ECgr

oup,

AB

S (2

010a

, b, c

, d a

nd e

), AP

RA

(200

8), R

BA

(201

1a, b

, c a

nd d

).

17

Economic Significance of the Property Industry to the Victorian EconomyeffecTiVe Play - The facTs are black & whiTe

Tabl

e 3.

5.

esti

mat

ed %

reg

iona

l eco

nom

ic c

ontr

ibut

ion

of th

e pr

oper

ty in

dust

ry to

the

Vict

oria

n ec

onom

y, 2

009-

10

not

e: T

otal

s m

ay n

ot s

um d

ue to

rou

ndin

g.

sour

ce: A

ECgr

oup,

AB

S (2

010a

, b, c

, d a

nd e

), AP

RA

(200

8), R

BA

(201

1a, b

, c a

nd d

).

Reg

ion

Dir

ect c

ontr

ibut

ion

Flow

-on

(typ

e I +

type

II) c

ontr

ibut

ion

Tota

l con

trib

utio

n

Gro

ss

prod

uct (

%)

Gro

ss v

alue

ad

d (%

)In

com

es (%

)Em

ploy

men

t (%

)G

ross

pr

oduc

t (%

)G

ross

val

ue

add

(%)

Inco

mes

(%

)Em

ploy

men

t (%

)G

ross

pr

oduc

t (%

)G

ross

val

ue

add

(%)

Inco

mes

(%

)Em

ploy

men

t (%

)

Maj

or s

ub-r

egio

ns

Bal

lara

t0.

2%0.

2%0.

1%0.

2%0.

2%0.

2%0.

2%0.

2%0.

4%0.

4%0.

3%0.

4%

Gre

ater

Ben

digo

0.2%

0.2%

0.2%

0.2%

0.1%

0.1%

0.1%

0.1%

0.3%

0.3%

0.2%

0.3%

Gre

ater

Gee

long

0.4%

0.4%

0.3%

0.4%

0.5%

0.5%

0.5%

0.5%

0.9%

0.9%

0.8%

0.9%

Gre

ater

She

ppar

ton

0.1%

0.1%

0.1%

0.1%

0.1%

0.1%

0.1%

0.1%

0.2%

0.2%

0.2%

0.2%

Hor

sham

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.0%

0.1%

0.1%

0.1%

0.1%

Latr

obe

0.2%

0.2%

0.1%

0.2%

0.2%

0.2%

0.2%

0.2%

0.4%

0.4%

0.4%

0.4%

Mild

ura

0.1%

0.1%

0.1%

0.1%

0.0%

0.0%

0.0%

0.0%

0.1%

0.1%

0.1%

0.1%

Wan

gara

tta

0.1%

0.1%

0.1%

0.1%

0.1%

0.1%

0.1%

0.1%

0.2%

0.2%

0.2%

0.2%

War

rnam

bool

0.1%

0.1%

0.1%

0.1%

0.1%

0.1%

0.1%

0.1%

0.1%

0.1%

0.1%

0.1%

Wod

onga

0.1%

0.1%

0.1%

0.1%

0.2%

0.2%

0.2%

0.2%

0.3%

0.3%

0.3%

0.3%

Tota

l maj

or s

ub-r

egio

ns1.

5%1.

5%1.

2%1.

6%1.

5%1.

5%1.

5%1.

5%3.

0%3.

0%2.

7%3.

0%

Stat

isti

cal d

ivis

ions

Bar

won

0.6%

0.6%

0.4%

0.6%

0.7%

0.7%

0.7%

0.7%

1.2%

1.3%

1.1%

1.3%

Cen

tral

Hig

hlan

ds0.

3%0.

3%0.

2%0.

3%0.

3%0.

3%0.

3%0.

3%0.

6%0.

6%0.

5%0.

6%

East

Gip

psla

nd0.

2%0.

2%0.

1%0.

2%0.

2%0.

2%0.

2%0.

2%0.

3%0.

3%0.

3%0.

3%

Gip

psla

nd0.

4%0.

4%0.

3%0.

4%0.

5%0.

5%0.

5%0.

5%0.

9%0.

9%0.

8%0.

9%

Gou

lbur

n0.

3%0.

3%0.

3%0.

4%0.

4%0.

4%0.

4%0.

4%0.

7%0.

7%0.

6%0.

8%

Lodd

on0.

3%0.

3%0.

3%0.

3%0.

4%0.

4%0.

4%0.

4%0.

7%0.

7%0.

6%0.

7%

Mal

lee

0.3%

0.3%

0.3%

0.2%

0.0%

0.0%

0.0%

0.0%

0.3%

0.3%

0.3%

0.2%

Mel

bour

ne9.

5%9.

5%7.

7%9.

3%15

.2%

15.3

%15

.8%

13.9

%24

.7%

24.8

%23

.5%

23.2

%

Ove

ns-M

urra

y0.

2%0.

2%0.

1%0.

2%0.

2%0.

2%0.

2%0.

2%0.

4%0.

4%0.

3%0.

4%

Wes

tern

Dis

tric

t0.

2%0.

2%0.

2%0.

2%0.

2%0.

2%0.

2%0.

2%0.

4%0.

4%0.

4%0.

4%

Wim

mer

a0.

1%0.

1%0.

1%0.

1%0.

1%0.

1%0.

1%0.

1%0.

1%0.

1%0.

1%0.

2%

Vict

oria

12.2

%12

.2%

9.9%

12.2

%18

.1%

18.2

%18

.6%

16.8

%30

.3%

30.4

%28

.5%

29.0

%


18

Reg

ion

Dir

ect c

ontr

ibut

ion

Flow

-on

(typ

e I +

type

II) c

ontr

ibut

ion

Tota

l con

trib

utio

n

Gro

ss

prod

uct (

%)

Gro

ss v

alue

ad

d (%

)In

com

es

(%)

Empl

oym

ent

(%)

Gro

ss

prod

uct (

%)

Gro

ss v

alue

ad

d (%

)In

com

es

(%)

Empl

oym

ent

(%)

Gro

ss

prod

uct (

%)

Gro

ss v

alue

ad

d (%

)In

com

es

(%)

Empl

oym

ent

(%)

Maj

or s

ub-r

egio

ns

Bal

lara

t0.

6%0.

6%0.

5%0.

6%0.

7%0.

7%0.

7%0.

7%1.

2%1.

2%1.

2%1.

3%

Gre

ater

Ben

digo

0.7%

0.7%

0.5%

0.7%

0.3%

0.3%

0.3%

0.2%

0.9%

0.9%

0.9%

1.0%

Gre

ater

Gee

long

1.3%

1.3%

1.1%

1.5%

1.6%

1.7%

1.8%

1.7%

3.0%

3.0%

2.9%

3.2%

Gre

ater

She

ppar

ton

0.4%

0.4%

0.3%

0.4%

0.4%

0.4%

0.4%

0.4%

0.8%

0.8%

0.7%

0.9%

Hor

sham

0.1%

0.1%

0.1%

0.1%

0.1%

0.1%

0.2%

0.2%

0.3%

0.3%

0.3%

0.3%

Latr

obe

0.6%

0.6%

0.5%

0.6%

0.7%

0.7%

0.7%

0.7%

1.3%

1.3%

1.2%

1.4%

Mild

ura

0.3%

0.3%

0.2%

0.3%

0.0%

0.0%

0.0%

0.0%

0.3%

0.3%

0.2%

0.3%

Wan

gara

tta

0.3%

0.3%

0.2%

0.3%

0.3%

0.3%

0.3%

0.3%

0.6%

0.6%

0.6%

0.7%

War

rnam

bool

0.2%

0.2%

0.2%

0.3%

0.2%

0.2%

0.3%

0.2%

0.5%

0.5%

0.4%

0.5%

Wod

onga

0.5%

0.5%

0.4%

0.5%

0.6%

0.6%

0.6%

0.5%

1.1%

1.1%

1.0%

1.1%

Tota

l maj

or s

ub-r

egio

ns4.

9%4.

9%4.

2%5.

4%5.

0%5.

0%5.

4%5.

1%9.

9%9.

9%9.

5%10

.5%

Stat

isti

cal d

ivis

ions

Bar

won

1.8%

1.8%

1.6%

2.1%

2.3%

2.3%

2.4%

2.4%

4.1%

4.1%

4.0%

4.5%

Cen

tral

Hig

hlan

ds0.

8%0.

8%0.

7%1.

0%1.

0%1.

0%1.

1%1.

1%1.

9%1.

9%1.

8%2.

1%

East

Gip

psla

nd0.

5%0.

5%0.

4%0.

6%0.

5%0.

5%0.

6%0.

6%1.

0%1.

0%1.

0%1.

2%

Gip

psla

nd1.

3%1.

3%1.

1%1.

5%1.

5%1.

5%1.

6%1.

7%2.

8%2.

8%2.

7%3.

1%

Gou

lbur

n1.

1%1.

1%0.

9%1.

3%1.

3%1.

3%1.

3%1.

4%2.

4%2.

4%2.

3%2.

6%

Lodd

on1.

0%1.

0%0.

9%1.

2%1.

2%1.

2%1.

3%1.

3%2.

2%2.

2%2.

1%2.

4%

Mal

lee

1.1%

1.1%

0.9%

0.6%

0.0%

0.0%

0.0%

0.0%

1.1%

1.1%

0.9%

0.6%

Mel

bour

ne31

.3%

31.2

%27

.0%

32.2

%50

.2%

50.3

%55

.2%

47.9

%81

.5%

81.5

%82

.2%

80.1

%

Ove

ns-M

urra

y0.

5%0.

5%0.

5%0.

6%0.

7%0.

7%0.

7%0.

8%1.

3%1.

3%1.

2%1.

4%

Wes

tern

Dis

tric

t0.

6%0.

6%0.

5%0.

7%0.

7%0.

7%0.

7%0.

7%1.

3%1.

3%1.

2%1.

5%

Wim

mer

a0.

2%0.

2%0.

2%0.

3%0.

3%0.

3%0.

3%0.

3%0.

5%0.

5%0.

5%0.

6%

Vict

oria

40.4

%40

.2%

34.7

%42

.0%

59.6

%59

.8%

65.3

%58

.0%

100.

0%10

0.0%

100.

0%10

0.0%

Tabl

e 3.

6.

esti

mat

ed %

reg

iona

l con

trib

utio

n to

tota

l dir

ect a

nd fl

ow-o

n Vi

ctor

ian

prop

erty

indu

stry

impa

cts,

200

9-10

not

e: T

otal

s m

ay n

ot s

um d

ue to

rou

ndin

g.

sour

ce: A

ECgr

oup,

AB

S (2

010a

, b, c

, d a

nd e

), AP

RA

(200

8), R

BA

(201

1a, b

, c a

nd d

).


19

The property industry is estimated to have directly employed 312,165 FTE employees in Victoria in 2009-10, representing 12.2% of total employment in the state. The Barwon SD is estimated to directly employ 13.3% of its workforce (or 118,671 workers) in the property industry – representing the largest proportional contribution to total employment by the property industry of any SD in Victoria. The Gippsland and Loddon SDs had the next highest shares of total employment in the property industry at 12.8% and 12.6% respectively, followed by the Melbourne SD with 12.2%. The Melbourne SDs share of employment in the property industry was equal to the state’s average (12.2%).

The majority of the major sub-regions had a lower property industry employment share than the Victorian average. Exceptions to this included Warrnambool, which had the highest share of property industry employment of the major sub-regions with 1,860 FTE employees in the property industry, or 12.6% of the total workforce. Wodonga and Greater Bendigo also had a relatively high share of property industry employment, with 12.4% and 12.2% of the total workforce employed by the property industry respectively.

Table 3.7. estimated % direct contribution of the property industry to regional employment, 2009-10

Region Direct employment in property industry

Total employed % Share of property industry

Major sub-regions

Ballarat 4,610 44,251 10.4%

Greater Bendigo 5,234 42,757 12.2%

Greater Geelong 11,203 94,643 11.8%

Greater Shepparton 3,117 28,314 11.0%

Horsham 1,058 9,239 11.5%

Latrobe 4,790 42,325 11.3%

Mildura 2,345 23,445 10.0%

Wangaratta 2,287 21,053 10.9%

Warrnambool 1,860 14,778 12.6%

Wodonga 3,835 30,873 12.4%

Total major sub-regions 40,338 351,677 11.5%


Barwon 15,745 118,671 13.3%

Central Highlands 7,136 62,609 11.4%

East Gippsland 4,507 38,933 11.6%

Gippsland 10,886 85,248 12.8%

Goulburn 9,549 82,079 11.6%

Loddon 8,742 69,425 12.6%

Mallee 4,111 41,567 9.9%

Melbourne 239,341 1,957,650 12.2%

Ovens-Murray 4,798 43,239 11.1%

Western District 5,486 46,044 11.9%

Wimmera 1,864 21,700 8.6%

Victoria 312,165 2,567,165 12.2%




20

3.3 contribution of the property industry to Victoria by industryTable 3.8 identifies the direct and flow-on contribution of the property industry to the Victorian economy by industry. In terms of flow-on contribution to gross product, the following is noted:

• Non-property related financial activity and insurance services is the primary beneficiary of property industry activity, with property industry activity contributing to flow-on effects for financial and insurance services of approximately $11.2 billion in gross product, equating to 20.5% of total flow-on gross product effects of $54.5 billion in Victoria (or 31.2% of total Victorian financial and insurance services gross product).

• Manufacturing and non-property related professional, scientific and technical services are the next largest beneficiaries of property industry activity, contributing $7.6 billion (14.0%) and $4.4 billion (8.0%) of total flow-on gross product effects respectively.

• Other key beneficiaries of property industry flow-on activity include:

− retail trade (6.4%);

− transport, postal and warehousing (6.0%);

− wholesale trade (5.5%); and

− ownership of dwellings (5.5%).

In terms of employment, the property industry primarily supports flow-on employment in the following industries:

• manufacturing (65,010 FTE jobs, or 15.1% of total flow-on employment);

• retail trade (57,717 FTE jobs, or 13.4% of total flow-on employment);

• non-property related professional, scientific or technical services (44,931 FTE jobs, or 10.4% of total flow-on employment);

• accommodation and food services (35,416 FTE jobs, or 8.2% of total flow-on employment; and

• non-property related financial and insurance services (29,261 FTE jobs, or 6.8% of total flow-on employment).

Table 3.8 highlights that the property industry is a key contributor of total demand for goods and services provided by industries of:

• electricity, gas, water and waste services;

• administrative and support services;

• non-property related financial and insurance services;

• other services;

• accommodation and food services; and

• non-property related rental, hiring and real estate services.

Flow-on activity generated by the property industry accounts for a quarter or more of total economic activity in each of these industries.

FACT12.2% of total state employment in Victoria is represented by the

property industry


21

Indu

stry

Valu

e of

con

trib

utio

n%

of T

otal

indu

stry

in V

icto

ria

Gro

ss p

rodu

ct ($

M)

Gro

ss v

alue

add

($

M)

Inco

mes

($M

)Em

ploy

men

t (F

TE)

Gro

ss p

rodu

ct

(%)

Gro

ss v

alue

ad

d (%

)In

com

es (%

)Em

ploy

men

t (%

)

Dir

ect p

rope

rty

indu

stry

con

trib

utio

n

Res

iden

tial b

uild

ing

cons

truc

tion

$4,0

26.7

$3,6

91.5

$1,1

24.3

35,3

7710

0.0%

100.

0%10

0.0%

100.

0%

Non

-res

iden

tial b

uild

ing

cons

truc

tion

$3,1

16.0

$2,8

56.7

$1,1

81.9

20,4

7310

0.0%

100.

0%10

0.0%

100.

0%

Con

stru

ctio

n se

rvic

es$1

3,31

5.3

$12,

207.

0$6

,258

.616

2,60

810

0.0%

100.

0%10

0.0%

100.

0%

Fina

nce

$4,7

27.2

$4,3

33.7

$1,3

61.6

15,2

9710

0.0%

100.

0%10

0.0%

100.

0%

Insu

ranc

e an

d su

pera

nnua

tion

fund

s$6

49.3

$595

.2$2

72.9

1,61

910

0.0%

100.

0%10

0.0%

100.

0%

Non

-res

iden

tial p

rope

rty

oper

ator

s

and

real

est

ate

serv

ices

$6,1

86.2

$5,6

71.3

$2,1

60.2

27,8

8810

0.0%

100.

0%10

0.0%

100.

0%

Pro

fess

iona

l, sc

ient

ific

and

tech

nica

l ser

vice

s$4

,879

.5$4

,473

.3$3

,326

.048

,904

100.

0%10

0.0%

100.

0%10

0.0%

Tota

l dir

ect c

ontr

ibut

ion

$36

,900

.1$

33,8

28.7

$15

,685

.531

2,16

510

0.0%

100.

0%10

0.0%

100.

0%

Flow

-on

(typ

e I +

II) n

on-p

rope

rty

rela

ted

indu

stry

con

trib

utio

n

Agri

cult

ure,

fore

stry

and

fish

ing

$1,0

45.0

$963

.7$2

80.2

11,9

7016

.7%

16.8

%18

.9%

18.7

%

Min

ing

$606

.7$5

59.5

$103

.91,

026

7.6%

7.6%

9.6%

8.5%

Man

ufac

turi

ng$7

,646

.4$7

,051

.7$4

,253

.965

,010

21.4

%21

.5%

22.6

%20

.7%

Elec

tric

ity, g

as, w

ater

and

was

te s

ervi

ces

$1,8

62.8

$1,7

17.9

$676

.48,

046

34.3

%34

.5%

39.1

%31

.0%

Con

stru

ctio

n (A

)$2

0.1

$18.

5$1

2.9

113

0.7%

0.7%

0.7%

0.7%

Who

lesa

le tr

ade

$3,0

21.4

$2,7

86.4

$1,8

58.2

20,5

6417

.2%

17.3

%17

.5%

17.1

%

Ret

ail t

rade

$3,4

75.0

$3,2

04.7

$2,2

02.3

57,7

1722

.6%

22.7

%23

.0%

23.8

%

Acco

mm

odat

ion

and

food

ser

vice

s$2

,001

.8$1

,846

.1$1

,198

.635

,416

28.1

%28

.2%

28.8

%24

.3%

Tran

spor

t, po

stal

and

war

ehou

sing

$3,2

87.3

$3,0

31.6

$1,4

65.0

26,6

9820

.8%

20.9

%21

.8%

20.7

%

Info

rmat

ion

med

ia a

nd te

leco

mm

unic

atio

ns$2

,800

.5$2

,582

.7$9

52.0

15,4

6323

.0%

23.1

%23

.7%

27.0

%

Fina

ncia

l and

insu

ranc

e se

rvic

es (A

)$1

1,15

4.7

$10,

287.

1$5

,806

.829

,261

31.2

%31

.4%

34.9

%32

.0%

Ren

tal,

hiri

ng a

nd r

eal e

stat

e se

rvic

es (A

)$6

41.4

$591

.5$2

70.7

2,79

627

.3%

27.4

%27

.8%

29.7

%

Pro

fess

iona

l, sc

ient

ific

and

tech

nica

l ser

vice

s (A

)$4

,379

.6$4

,038

.9$3

,104

.944

,931

21.2

%21

.3%

21.3

%21

.3%

Adm

inis

trat

ive

and

supp

ort s

ervi

ces

$2,8

85.7

$2,6

61.3

$2,3

89.9

26,2

7631

.9%

32.1

%32

.5%

29.5

%

Pub

lic a

dmin

istr

atio

n an

d sa

fety

$604

.1$5

57.1

$476

.36,

901

4.7%

4.7%

5.0%

5.3%

Educ

atio

n an

d tr

aini

ng$1

,771

.7$1

,633

.9$1

,469

.720

,634

11.5

%11

.6%

11.7

%10

.9%

Hea

lth

care

and

soc

ial a

ssis

tanc

e$1

,914

.8$1

,765

.9$1

,459

.522

,861

9.3%

9.4%

9.5%

8.8%

Arts

and

rec

reat

ion

serv

ices

$670

.6$6

18.4

$393

.78,

838

20.4

%20

.6%

21.0

%20

.0%

Oth

er s

ervi

ces

$1,7

76.6

$1,6

38.4

$1,1

56.8

26,9

8229

.1%

29.3

%29

.6%

26.7

%

Ow

ners

hip

of d

wel

lings

$2,9

75.2

$2,7

43.7

$0.0

024

.5%

24.6

%n.

a.n.

a.

Tota

l flow

-on

cont

ribu

tion

$54

,541

.4$

50,2

99.1

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22

3.4 contribution of property sub-sectors to VictoriaThe property industry can be classified into sub-sectors by the range of property types that are developed and managed. In this section the property industry has been disaggregated into the following sub-sectors to examine the direct5 contribution of individual property sub-sectors to the Victorian economy:

The direct contribution of the property industry to the Victorian economy is disaggregated across each of its sub-sectors (or property type) in Table 3.9. The methodology applied in disaggregating the direct contribution of the property industry to its constituent sub-sectors is described in appendix c.

Table 3.9 shows that the residential subsector of the property industry directly contributed $22.6 billion (or 61.2%) of the total property industry gross product in 2009-10. The second highest contributor was the commercial sub-sector, which contributed $3.4 billion, or 9.3% of the total. Retail buildings accounted for a further $2.5 billion, or 6.8% of property industry gross product.

Table 3.9. estimated direct contribution of the property industry to the Victorian economy by property sub-sector/type, 2009-10

Property sub-sector/type Gross product ($M) Gross value add ($M) Incomes ($M) Employment (FTE)

Direct contribution

Residential $22,587.2 $20,707.2 $9,469.3 195,247

Retail $2,492.2 $2,284.7 $1,082.4 20,358

Commercial $3,446.3 $3,159.5 $1,496.8 28,152

Industrial $2,334.6 $2,140.3 $1,013.9 19,071

Health $1,537.7 $1,409.8 $667.9 12,561

Education $2,365.9 $2,168.9 $1,027.5 19,326

Entertainment/recreation $957.8 $878.1 $416.0 7,824

Other $1,178.4 $1,080.3 $511.8 9,626

Total direct contribution $36,900.1 $33,828.7 $15,685.5 312,165

Percent of total direct contribution

Residential 61.2% 61.2% 60.4% 62.5%

Retail 6.8% 6.8% 6.9% 6.5%

Commercial 9.3% 9.3% 9.5% 9.0%

Industrial 6.3% 6.3% 6.5% 6.1%

Health 4.2% 4.2% 4.3% 4.0%

Education 6.4% 6.4% 6.6% 6.2%

Entertainment/recreation 2.6% 2.6% 2.7% 2.5%

Other 3.2% 3.2% 3.3% 3.1%

Total % of direct contribution 100.0% 100.0% 100.0% 100.0%


source: AECgroup, ABS (2011a), ABS (2010a, b, c, d and e), APRA (2008), RBA (2011a, b, c and d)

5 Only direct contributions have been examined as insufficient data is available to appropriately identify any variances between sub-sectors contribution to flow-on effects.

• Residential

• Retail

• Commercial

• Industrial

• Health

• Education

• Entertainment/recreation

• Other


23

This chapter outlines the direct contribution of property related activities to state and local government taxes, including estimates of the contribution to taxes from property related activities in major sub-regions and SDs of Victoria.

4.1 contribution to Victoria’s state taxesProperty related activities are estimated to have directly contributed approximately $5.4 billion to state taxes in 2009-10, or 39.5% of total Victorian state tax revenue for the year of $13.8 billion. The contribution of property related activity to state taxes was generated through a combination of $401.2 million in payroll tax (for business directly employed by the property industry), $3.6 billion in transfer duties (for property purchased), $1.2 billion in land tax and $263.4 million in other property related taxes.

The Melbourne SD contributed 85.2% of total property related taxes, with the Barwon SD contributing the next highest share (4.5%). Of the major sub-regions, Greater Geelong contributed the most to state tax revenue, followed by Ballarat and Greater Bendigo.

The approach utilised in allocating state taxes to property related activities is provided in appendix D.

Table 4.1. estimated regional contribution of property related activity to state taxes, 2009-10

4. TaxaTion conTribuTion

Region Payroll tax ($M) Transfer duty ($M) Land tax ($M) Other property related taxes ($M)

Total ($M)

Major sub-regions

Ballarat $5.5 $35.4 $9.3 $4.6 $54.8

Greater Bendigo $6.2 $28.2 $9.6 $4.9 $49.0

Greater Geelong $13.2 $113.8 $34.0 $10.5 $171.4

Greater Shepparton $3.6 $10.8 $5.6 $3.0 $23.0

Horsham $1.3 $3.5 $2.2 $1.0 $7.9

Latrobe $5.8 $14.7 $6.1 $3.6 $30.1

Mildura $2.8 $8.8 $4.5 $2.6 $18.6

Wangaratta $2.7 $5.2 $3.5 $1.4 $12.7

Warrnambool $2.2 $11.2 $4.2 $1.6 $19.3

Wodonga $4.8 $8.6 $3.5 $1.7 $18.6

Total major sub-regions $48.0 $240.2 $82.3 $34.8 $405.4


Barwon $18.1 $157.8 $56.3 $13.8 $245.9

Central Highlands $8.2 $50.1 $19.4 $7.5 $85.3

East Gippsland $5.0 $18.6 $12.9 $4.2 $40.7

Gippsland $12.6 $63.6 $28.6 $8.5 $113.3

Goulburn $10.9 $37.1 $26.1 $10.1 $84.1

Loddon $10.1 $51.4 $21.4 $8.8 $91.8

Mallee $10.4 $11.9 $8.6 $4.5 $35.4

Melbourne $312.2 $3,171.8 $962.4 $193.6 $4,640.0

Ovens-Murray $5.5 $17.1 $12.1 $4.8 $39.5

Western District $6.1 $19.8 $22.2 $5.1 $53.2

Wimmera $2.2 $4.7 $8.0 $2.4 $17.3

Victoria $401.2 $3,604.0 $1,178.0 $263.4 $5,446.6

note: Other property related taxes includes duties on property (not including transfer duties), financial accommodation levies, congestion levies, metropolitan improvement levies and property owner contributions to fire brigades.

source: AECgroup, ABS (2011c), ABS (2011d), DTF (2010), DSE (2010a and 2010b), DSE (unpublished).


2424

4.2 local government rates and chargesIn addition to taxes collected by the Victorian Government, local governments in Victoria also charge various rates for the provision of services related to property. In 2009-10, $3.2 billion in total rates and charges revenue was estimated to have been collected by local governments across Victoria. As with state taxes, the majority (69.4%) of rates revenue was generated within the Melbourne SD.

Table 4.2. local government rates and charges, 2009-10

Region Rates revenue, municipal charges and waste management charges

$M %

Major sub-regions

Ballarat $60.2 1.9%

Greater Bendigo $63.0 1.9%

Greater Geelong $130.5 4.0%

Greater Shepparton $45.1 1.4%

Horsham $14.8 0.5%

Latrobe $42.8 1.3%

Mildura $42.6 1.3%

Wangaratta $18.8 0.6%

Warrnambool $22.0 0.7%

Wodonga $26.3 0.8%

Total major sub-regions $466.2 14.4%


Barwon $194.6 6.0%

Central Highlands $107.8 3.3%

East Gippsland $67.9 2.1%

Gippsland $128.9 4.0%

Goulburn $130.7 4.0%

Loddon $118.6 3.7%

Mallee $50.6 1.6%

Melbourne $2,253.4 69.4%

Ovens-Murray $70.1 2.2%

Western District $80.3 2.5%

Wimmera $42.4 1.3%

Victoria $3,245.4 100.0%

source: AECgroup, MAV (2010).

FACTDirect annual contribution by the property sector to Victorian state taxation

$5.4 billion


25

This chapter examines the direct contribution of the property industry to the Victorian economy and state taxes compared to the contributions of other industries within the economy.

5.1 economic contribution

5.1.1 Gross state product and gross value add

The property industry was the largest direct contributor to Victorian GSP in 2009-10, contributing $36.9 billion in gross product, or 12.2% of Victorian GSP for the year (which totalled $301.4 billion). Manufacturing was the second highest contributor, accounting for $35.7 billion in gross product, or 11.9% of Victorian GSP in 2009-10. Financial and insurance services closely followed manufacturing in terms of gross product contributions, also accounting for $35.7 billion in gross product for 2009-10, or 11.8% of total GSP for Victoria.

figure 5.1. Direct contribution to Gross state Product by industry, 2009-10

note: *Only non-property related activity is included for this industry classification. All property related activity is included in the property industry


5. comParisons wiTh oTher inDusTries

$0 $5 $10 $15 $20 $25 $30 $35 $40


Construction*



Other services



Mining






Retail trade


Wholesale trade


Professional, scientific and technical services*


Manufacturing

Property industry

Gross product ($ Billion)

FACTThe property industry

is the largest contributor to Victorian gross

state product


28

figure 5.2. Direct contribution to incomes by industry, 2009-10



$0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20



Mining



Construction*


Other services






Retail trade

Wholesale trade




Property industry


Manufacturing

Incomes ($ Billion)

5.1.2 incomesThe property industry was the third highest contributing sector to incomes (wages and salaries) in Victoria in 2009-10, despite being the highest contributing sector to GSP for the year. Incomes of approximately $15.7 billion were paid by the property industry in 2009-10, or 9.9% of the total for Victoria. The sectors which paid higher incomes during 2009-10 were manufacturing, paying $18.9 billion (11.9% of the total) and financial and insurance services, paying $16.7 billion (10.5% of the total).

FACTThe property industry is

the second most highly taxed industry in Victoria, $0.15 for

every dollar generated


29

5.1.3 employment

The property industry directly employed 312,165 FTE employees in 2009-10, accounting for 12.2% of the total FTE employees in Victoria for the year. This is significantly higher than the property industry’s contribution to incomes (9.9%) for the year, but in line with the property industry’s contribution to GSP (also 12.2%). The property industry was the second largest employer, just behind manufacturing, which employed 313,791 FTE employees in 2009-10 (12.2% of total Victorian employment).

figure 5.3. Direct contribution to employment by industry, 2009-10



0 50 100 150 200 250 300 350



Mining

Construction*







Other services

Wholesale trade






Retail trade


Property industry

Manufacturing

Employment ('000 FTEs)


30

Industry Tax estimates ($M) Contribution to GSP ($M) Tax per $1 of GSP contributed ($)

Property related taxes $5,446.6 $36,900.1 $0.15

Agriculture, forestry and fishing $37.9 $6,240.2 $0.01

Mining $73.9 $7,981.8 $0.01

Manufacturing $482.4 $35,746.5 $0.01

Electricity, gas, water and waste services $44.3 $5,426.1 $0.01

Construction $47.6 $2,959.0 $0.02

Wholesale trade $271.3 $17,577.6 $0.02

Retail trade $244.9 $15,395.4 $0.02

Accommodation and food services $106.5 $7,133.6 $0.01

Transport, postal and warehousing $171.7 $15,815.9 $0.01


$102.7 $12,175.9 $0.01

Financial and insurance services $1,291.2 $35,718.1 $0.04

Rental, hiring and real estate services $24.9 $2,353.0 $0.01


$373.2 $20,704.6 $0.02

Administrative and support services $188.1 $9,051.4 $0.02

Public administration and safety $243.6 $12,827.8 $0.02

Education and training $320.3 $15,383.5 $0.02

Health care and social assistance $393.6 $20,505.1 $0.02

Arts and recreation services $1,679.9 $3,281.2 $0.51

Other services $99.8 $6,105.5 $0.02

Ownership of dwellings $0.0 $12,155.7 $0.00

Not allocated (a) $2,143.4 - -

Total Victoria $13,788.0 $301,438.0 $0.05

5.2 state taxesProperty related taxes are estimated to be the highest contributing sector to Victorian tax revenue in 2009-10, contributing $5.4 billion of a total of $13.8 billion (39.5%). The next highest contributor was arts and recreation services, contributing $1.7 billion (12.2%) to state taxes for the year (primarily through taxes on gambling), followed by financial and insurance services with $1.3 billion (9.4%).

In terms of contribution to tax revenue per dollar of gross product, the property industry is the second most highly taxed in the state, contributing $0.15 in tax revenue for every dollar of gross product generated. Arts and recreation services, which primarily involve taxes on gambling and gaming, are the most heavily taxed sector in the state, contributing $0.51 in revenue for every dollar of gross product generated (although this sector provides less than a third of the total tax revenue of the property industry in total). All other sectors contribute much less tax revenue per dollar of GSP, at $0.04 per dollar of gross product or less.

The contribution to state taxes by property related activities and other industries of the economy has been estimated utilising the approach outlined in appendix D.

Table 5.1. Contribution to state taxes, comparison of property related activities to other industries of the economy, 2009-10

note: (a) Taxes that have not been allocated to an industry include stamp duties on motor vehicle, motor vehicle registrations, levies on statutory corporations and franchise taxes. While a part of these taxes are payable by industry, the majority of these taxes are paid by households. Due to data limitations it is not possible to allocate the portion of these taxes that are paid by industry.



31

ABS (2011a). Building Activity, Australia, Sep 2010. Cat. No. 8752.0, Australian Bureau of Statistics, Canberra.

ABS (2011b). Building Approvals, Australia. Cat. No. 8731.0, Australian Bureau of Statistics, Canberra.

ABS (2011c). Taxation Revenue, Australia, 2009-10. Cat. No. 5506.0, Australian Bureau of Statistics, Canberra.

ABS (2011d). Regional Population Growth, Australia, 2009-10. Cat. No. 3218.0, Australian Bureau of Statistics, Canberra.

ABS (2011e). Labour Force, Australia, May 2011. Cat. No. 6202.0, Australian Bureau of Statistics, Canberra.

ABS (2010a). Australian National Accounts: Input-Output Tables – Electronic Publication, Final release 2006-07 tables. Cat. No. 5209.0.55.001, Australian Bureau of Statistics, Canberra.

ABS (2010b). Number of Employed Persons by Industry of Employment (ANZSIC 93 all 4 digit classification levels) by all Place of Work LGAs in Australia. Data provided by Information Consultancy Services, Australian Bureau of Statistics, GPO Box 9817, Brisbane, QLD, 4001.

ABS (2010c). Australian National Accounts: State Accounts, 2009-10. Cat. No. 5220.0, Australian Bureau of Statistics, Canberra.

ABS (2010d). Experimental Estimates of Industry Multifactor Productivity, 2009-10. Cat. No. 5260.0.55.002, Australian Bureau of Statistics, Canberra.

ABS (2010e). Counts of Australian Businesses, including Entries and Exits, Jun 2007 to Jun 2009, Business by Industry Class by Main State by Annual Turnover Size Ranges. Cat. No. 8165.0, Australian Bureau of Statistics, Canberra.

ABS (2010f). Australian Standard Geographical Classification (ASGC) Digital Boundaries (Intercensal), Australia, July 2010. Cat. No. 1259.0.30.001, Australian Bureau of Statistics, Canberra.

ABS (2008). Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 (Revision 1.0). Cat. No. 1292.0, Australian Bureau of Statistics, Canberra.

ABS (2007). 2006 Census of Population and Housing. Cat. No. 2068.0, Australian Bureau of Statistics, Canberra.

APRA (2008). Statistics, Annual Superannuation Bulletin, June 2007. Australian Prudential Regulation Authority. available from: http://www.apra.gov.au/statistics/annual-superannuation-publication.cfm. last accessed: 4th March 2011.

Australian Government (2009). Nation Building - Economic Stimulus Plan. Australian Government, Canberra. available from: http://www.economicstimulusplan.gov.au/pages/theplan.aspx. last accessed: 15th June 2011.

DSE (unpublished). Unimproved Capital Values by Local Government Area, 2010. Unpublished data provided via email by the Office of the Valuer-General, Victorian Government Department of Sustainability and Environment, Melbourne.

DSE (2010a). Victorian Property Sales Report – Median House Prices. Victorian Government Department of Sustainability and Environment, Melbourne.

DSE (2010b). Victorian Property Sales Report – Median Apartment/Unit Prices. Victorian Government Department of Sustainability and Environment, Melbourne.

DTF (2010). Financial Report of the State of Victoria, 2009-10. Victorian Government Department of Treasury and Finance, Melbourne.

DTF (2008). Budget Paper No. 2 – Chapter 2: Economic Conditions and Outlook. Victorian Government Department of Treasury and Finance, Melbourne.

DTF (2007a). Budget Paper No. 2 – Chapter 2: Economic Conditions and Outlook. Victorian Government Department of Treasury and Finance, Melbourne.

DTF (2007b). Budget Paper No. 1 – Treasurer’s Speech. Victorian Government Department of Treasury and Finance, Melbourne.

MAV (2010). 2009-10 Victorian Local Government Rates Survey. Municipal Association of Victoria, Melbourne.

RBA (2011a). Assets of Financial Institutions – B01. Bulletin Statistical Tables, Reserve Bank of Australia. available from: http://www.rba.gov.au/statistics/tables/index.html#assets_liabilities. last accessed: 4th March 2011.

RBA (2011b). Banks – Assets – B02. Bulletin Statistical Tables, Reserve Bank of Australia. available from: http://www.rba.gov.au/statistics/tables/index.html#assets_liabilities. last accessed: 4th March 2011.

RBA (2011c). Credit Unions – Selected Assets and Liabilities – B08. Bulletin Statistical Tables, Reserve Bank of Australia. available from: http://www.rba.gov.au/statistics/tables/index.html#assets_liabilities. last accessed: 4th March 2011.

RBA (2011d). Superannuation Funds – Outside Life Offices Table – B15. Bulletin Statistical Tables, Reserve Bank of Australia. available from: http://www.rba.gov.au/statistics/tables/index.html#assets_liabilities. last accessed: 4th March 2011.

VAGO (2008). School Buildings: Planning, Maintenance and Renewal. Victorian Auditor-General’s Office, Melbourne.

West, G. R. (1993). User’s Guide, Input-Output Analysis for Practitioners An Interactive Input-Output Software Package Version 7.1. Department of Economics. University of Queensland, 1993.

references


32

aPPenDix a DefiniTion of The ProPerTy inDusTry

The information contained in this report is obtained from published data produced by the Australian Bureau of Statistics (ABS) as well as other data sources as relevant. The ABS uses the Australian and New Zealand Standard Industrial Classification (ANZSIC) in the collection and publication of statistics. In 2006 the ABS began transitioning to a new ANZSIC system (2006 ANZSIC) from the previous classification system developed in 1993 (1993 ANSZIC). The 2006 ANZSIC (ABS, 2008) has therefore been used in this report in order to be consistent with most data sets recently produced by the ABS, including the Input-Output Transaction Tables used in this assessment (ABS, 2010a).

The property industry as defined in this report consists of the following industries.

construction

class 3011 – house construction

This class consists of units mainly engaged in the construction of houses (except semi-detached houses) or in carrying out alterations, additions or renovations to houses, or in organising or managing these activities.

Not included are units mainly engaging in:

• Off-site production of prefabricated buildings or building components are included in the appropriate classes of Group 222 Structural Metal Product Manufacturing;

• Providing special trade repair services such as electrical or plumbing repairs are included in the appropriate classes of Group 323 Building Installation Services; and

• Providing architectural or building consultancy services are included in the appropriate classes of Group 692 Architectural, Engineering and Technical Services.

class 3019 – other residential building construction

This class consists of units mainly engaged in the construction of residential buildings (except freestanding houses) or in carrying out alterations, additions or renovations to such buildings or in organising or managing these activities.


• Off-site production of prefabricated buildings or building components are included in the appropriate classes of Group 222 Structural Metal Product Manufacturing;

• The construction of hotels, hostels, hospitals and other public buildings are included in Class 3020 non-residential Building Construction;



class 3020 – non-residential building construction

This class consists of units mainly engaged in the construction of non-residential buildings such as hotels, motels, hostels, hospitals, prisons or other buildings, in carrying out alterations, additions or renovation to such buildings, or in organising or managing these activities.


• Off-site production of prefabricated metal buildings or metal building components are included in the appropriate classes of Group 222 Structural Metal Product Manufacturing;


33



class 3211 – land development and subdivision

This class consists of units primarily engaged in subdividing land into lots and servicing land (such as excavation work for the installation of roads and utility lines), for subsequent sale.


• Constructing buildings on lots they subdivide or develop are included in the appropriate classes of Subdivision 30 Building Construction;

• Construction of roads on a subcontract basis for land subdividers are included in Class 3101 Road and Bridge Construction; and

• Legal subdivision of land without land preparation are included elsewhere in the classification system based on the primary activity of the unit.

class 3212 – site preparation services

This class consists of units mainly engaged in earthmoving work such as levelling of construction sites, excavation of foundations, trench digging or removal of overburden.


• Quarrying sand or gravel are included in Class 0911 Gravel and Sand Quarrying;

• Quarrying earth soil or filling are included in Class 0919 Other Construction Material Mining; and

• Selling sand, gravel or other quarried construction materials are included in Class 3339 Other Hardware Goods Wholesaling.

class 3221 – concreting services

This class consists of units mainly engaged in concreting work, concrete pouring or other concrete work on construction projects.


• Terrazzo laying are included in Class 3243 Tiling and Carpeting Services;

• Brick paving are included in Class 3291 Landscape Construction Services.

class 3222 – bricklaying services

This class consists of units mainly engaged in bricklaying or concrete block laying.


• Units mainly engaged in brick paving are included in Class 3291 Landscape Construction Services;


34

class 3223 – roofing services

This class consists of units mainly engaged in roof tiling, metal roof fixing and the application of roof coatings.


• The installation of insulation materials are included in Class 3239 Other Building Installation Services;

• The installation of roof guttering are included in Class 3231 Plumbing Services; and

• The installation of wooden roof trusses are included in Class 3242 Carpentry Services.

class 3224 – structural steel erection services

This class consists of units mainly engaged in the erection (including on-site fabrication) of metal silos, storage tanks or structural steel components for buildings or other structures such as bridges, overhead cranes or electricity transmission towers.


• The construction of buildings (which incorporate structural steel components) are included in the appropriate classes of Subdivision 30 Building Construction; and

• The construction of complete structures such as bridges, towers or oil refinery plants (which incorporate structural steel components) are included in the appropriate classes of Subdivision 31 Heavy and Civil Engineering Construction.

class 3231 – Plumbing services

This class consists of units mainly engaged in plumbing or drainage (except sewerage or stormwater drainage systems construction). Also included are units mainly engaged in septic tank and other plumbing installation and repair.


• The construction of sewerage or stormwater drainage systems are included in Class 3109 Other Heavy and Civil Engineering Construction;

• Installation of fire sprinkler systems are included in Class 3234 Fire and Security Alarm Installation Services; and

• Repairing gas appliances are included in Class 9421 Domestic Appliance Repair and Maintenance

• Pumping or cleaning septic tanks are included in Class 2921 Waste Treatment and Disposal Services.

class 3232 – electrical services

This class consists of units mainly engaged in the installation of electrical wiring or fittings in buildings or other construction projects. Electrical work arising from the installation of appliances is included in this class.


• Repairing electricity transmission or distribution lines are included in Class 3109 Other Heavy and Civil Engineering Construction;

• Installing fire and/or security systems are included in Class 3234 Fire and Security Alarm Installation Services; and

• Repairing electrical appliances are included in Class 9421 Domestic Appliance Repair and Maintenance.


35

class 3233 – air conditioning and heating services

This class consists of units mainly engaged in the installation of heating equipment, refrigeration equipment, air conditioning equipment, or in the installation of air conditioning duct work.


• Manufacturing air conditioning duct work are included in Class 2240 Sheet Metal Product Manufacturing (except Metal Structural and Container Products);

• The on-site assembly of industrial furnaces from prefabricated components are included in Class 3109 Other Heavy and Civil Engineering Construction; and

• Installing motor vehicle air conditioning equipment are included in Class 9411 Automotive Electrical Services.

class 3234 – fire and security alarm installation services

This class consists of units mainly engaged in the installation of fire protection, detection and control systems, and in installing security systems.


• Units mainly engaged in the installation and monitoring of security systems are included in Class 7712 Investigation and Security Services.

class 3239 – other building installation services

This class consists of units mainly engaged in building installation services not elsewhere classified.

class 3241 – Plastering and ceiling services

This class consists of units mainly engaged in plastering, plaster fixing or finishing.

class 3242 – carpentry services

This class consists of units mainly engaged in carpentry work or the fixing of wooden formwork on construction projects.


• Units mainly engaged in manufacturing prefabricated, wooden built-in cabinets, cupboards or shop fronts and their installation (except on-site fabrication) are included in Class 1492 Wooden Structural Fitting and Component Manufacturing.

class 3243 – Tiling and carpeting services

This class consists of units mainly engaged in laying carpet, or setting wall or floor tiles


• Installing roofing tiles are included in Class 3223 Roofing Services; and

• Installing wooden flooring are included in Class 3242 Carpentry Services.

class 3244 – Painting and decorating services

This class consists of units mainly engaged in painting, decorating or wallpapering houses or other structures.


36


• Units mainly engaged in roof painting, spraying or coating are included in Class 3223 Roofing Services.

class 3245 – Glazing services

This class consists of units mainly engaged in glazing, including glass installation and repair work.


• Units mainly engaged in the fabrication of aluminium and timber framed glass products are included in the appropriate classes of Division C Manufacturing.

class 3291 – landscape construction services

This class consists of units mainly engaged in constructing landscapes, including landforming and the provision of retaining walls and paths, decks, fences, ponds and similar structures. Units also engaged in garden planting or installation of sprinkler/drainage systems in conjunction with constructing landscapes are included.


• Landscape consultancy and design services are included in Class 6921 Architectural Services; and

• Garden maintenance activities and maintenance of lawns are included in Class 7313 Gardening Services.

class 3292 – hire of construction machinery with operator

This class consists of units mainly engaged in hiring construction machinery, plant or equipment with operator(s).


• Units mainly engaged in hiring earthmoving plant and equipment with operator are included in Class 3212 Site Preparation Services.

class 3299 – other construction services (not elsewhere classified)

This class consists of units mainly engaged in construction services not elsewhere classified.

rental, hiring and real estate services

class 6712 – non-residential property operators

This class consists of units mainly engaged in renting or leasing non-residential properties.


• Units mainly engaged in land development and subdivision are included in Class 3211 Land Development and Subdivision.

class 6720 – real estate services

This class consists of units mainly engaged in valuing, purchasing, selling (by auction or private treaty), managing or renting real estate for others.


37


• Providing title transfer or conveyancing service are included in Class 6931 Legal Services; and

• Providing engineering or structural property and house inspections are included in Class 6923 Engineering Design and Engineering Consulting Services.

financial and insurance services

class 6221 – banking (partial only)

This class consists of units mainly engaged in operating banks (except merchant banks). Banks incur liabilities by accepting demand and other deposits and make commercial, industrial and consumer loans.


• Performing central banking functions are included in Class 6210 Central Banking;

• Operating building societies are included in Class 6222 Building Society Operation;

• Operating credit unions are included in Class 6223 Credit Union Operation; and

• Operating merchant banks are included in Class 6229 Other Depository Financial Intermediation.

Not all of this class has been allocated to the property industry. The allocation of this class to the property industry is based on the share of loans and advances to the residential sector in the banks’ total assets. Although part of loans to the commercial sector is property-related, data limitations regarding loans to the commercial sector precluded its inclusion.

class 6222 – building society operation

This class consists of units mainly engaged in operating building societies which accept deposits and provide specialised financing for home building or purchasing purposes.


• Operating development, savings and trading banks are included in Class 6221 Banking; and

• Operating credit unions are included in Class 6223 Credit Union Operation.

class 6223 – credit union operation (partial only)

This class consists of units mainly engaged in operating credit unions which accept members’ share deposits and provide loans to their members for various purposes.


• Operating development, savings and trading banks are included in Class 6221 Banking; and

• Operating building societies are included in Class 6222 Building Society Operation.

Not all of this class has been allocated to the property industry. The allocation of this class to the property industry is based on the share of loans and advances to the residential sector in credit union’s total assets. Although part of loans to the commercial sector is property-related, data limitations regarding loans to the commercial sector precluded its inclusion.

class 6322 – General insurance (partial only)

This class consists of units mainly engaged in providing general insurance cover (except life and health insurance).


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• Providing insurance broking services are included in Class 6420 Auxiliary Insurance Services;

• Providing insurance cover for hospital, medical, dental, pharmaceutical or funeral expenses or costs are included in Class 6321 Health Insurance; and

• Providing life insurance and life reinsurance cover are included in Class 6310 Life Insurance.

Not all of this class has been allocated to the property industry. The allocation of this class to the property industry is based on the share of property industry assets in the total assets of general insurance.

class 6330 – superannuation funds (partial only)

This class consists of units of separately constituted funds mainly engaged in providing retirement benefits.


• Investing money on their own account in predominantly financial assets (e.g. shares, bonds, bills etc, including mortgages) are included in Class 6240 Financial Asset Investing; and

• Managing or in carrying out the operations of separately constituted superannuation funds on a commission or fee basis are included in Class 6419 Other Auxiliary Finance and Investment Services.

Not all of this class has been allocated to the property industry. The allocation of this class to the property industry is based on the share of land and buildings in superannuation total investment. Although part of equities and units in trusts is property-related, data limitations regarding loans to the commercial sector precluded its inclusion.


class 6921 – architectural services

This class consists of units mainly engaged in providing architectural services such as planning and designing buildings and structures; or planning and designing the development of land. Units apply knowledge of design, construction procedures, zoning regulations, location and land use, building codes and building materials.


• Units mainly engaged in managing or organising construction projects as the prime contractor are included in the appropriate classes of Division E Construction.

class 6922 – surveying and mapping services

This class consists of units mainly engaged in providing surveying and mapping services (including exploration surveying services on contract). Units in this class use a variety of surveying techniques depending on the purpose of the survey, including magnetic surveys, gravity surveys, seismic surveys or electrical and electromagnetic surveys. These services may also include surveying and mapping of areas above or below the surface of the earth.


• Units mainly engaged in exploring for petroleum or minerals are included in the appropriate classes of Group 101 Exploration.


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class 6923 – engineering design and engineering consulting services

This class consists of units mainly engaged in providing engineering consulting services. These units are primarily involved in applying physical laws and principles of engineering in the design, development and utilisation of machines, materials, instruments, structures, processes and systems. Units provide advice, prepare feasibility studies, prepare preliminary and final plans and designs, provide technical services during the construction or installation phase, inspect and evaluate engineering projects, and related services.


• The physical or chemical transformation of materials into new products are included in the appropriate classes of Division C Manufacturing;

• Managing or organising construction projects as the prime contractor are included in the appropriate classes of Division E Construction;

• Undertaking scientific research are included in Class 6910 Scientific Research Services; and

• Providing scientific or technical laboratory or testing services are included in Class 6925 Scientific Testing and Analysis Services.

FACTThe property industry is the largest industry

in Victoria


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aPPenDix csiGnificance assessmenT meThoDoloGy

The economic significance estimates in this report are produced using Input-Output transaction tables and models developed by AECgroup for the purposes of this assessment, combined with data from a range of sources, including State Accounts data and various industry specific data from the ABS. The Input-Output models were used to produce estimates of the direct and flow-on contribution of the property industry to the Victorian economy in terms of output, gross value added activity, employment and income (i.e. wages and salaries).

overview of i-o modellingInput-Output (I-O) analysis demonstrates inter-industry relationships within an economy, depicting how the output of one industry is purchased by other industries, households, the government and external parties (i.e. exports), as well as expenditure on other factors of production such as labour, capital and imports. I-O analysis shows the direct and indirect (flow-on) effects of one industry on other industries and the general economy. As such, I-O modelling can be used to demonstrate the economic contribution of an industry on the overall economy and how much the economy relies on this industry or to examine a change in final demand of any one industry and the resultant change in activity of its supporting industries.

The economic contribution can be traced through the economic system via:

• Direct impacts, which are the first round of effects from direct operational expenditure on goods and services; and

• flow-on impacts, which comprise the second and subsequent round effects of increased purchases by suppliers in response to increased sales.

These effects can be identified through the examination of five types of impacts:

• output: Refers to the gross value of goods and services transacted, including the costs of goods and services used in the development and provision of the final product. Output typically overstates the economic impacts as it counts all goods and services used in one stage of production as an input to later stages of production, hence counting their contribution more than once;

• Value added: Refers to the value of output after deducting the cost of goods and services inputs in the production process. Value added defines the true net contribution and is subsequently the preferred measure for assessing economic impacts;

• Gross product: Gross product (or more commonly known as Gross Domestic/State/Regional Product) is a similar measure to value added, but also includes taxes less subsidies on the final goods and services produced. Gross product is the most commonly used headline measure of economic activity;

• income: Measures the level of wages and salaries paid to employees of the industry under consideration and to other industries through flow-on activity.

• employment: Refers to the part-time and full-time employment positions generated by the economic shock, both directly and indirectly through flow-on activity, and is expressed in terms of full time equivalent (FTE) positions.

i-o assumptions

The key assumptions and limitations of I-O analysis include:

• The inputs purchased by each industry are a function only of the level of output of that industry. The input function is generally assumed linear and homogenous of degree one (which implies constant returns to scale and no substitution between inputs);

• Each commodity (or group of commodities) is supplied by a single industry or sector of production. This implies that there is only one method used to produce each commodity and that each industry or sector has only one primary output;


43

• The total effect of carrying on several types of production is the sum of the separate effects. This rules out external economies and diseconomies and is known simply as the additivity assumption. This generally does not reflect real world operations;

• The system is in equilibrium at given prices. This is not the case in an economic system subject to external influences; and

• In the static I-O model, there are no capacity constraints so that the supply of each good is perfectly elastic. Each industry can supply whatever quantity is demanded of it and there are no capital restrictions. This assumption would come into play depending upon the magnitude of the changes in quantities demanded.

Despite these limitations, I-O techniques provide a solid approach for taking account of the inter-relationships between the various sectors of the economy in the short-term and provide useful insight into the quantum of final demand for goods and services, both directly and indirectly, generated by the property industry in Victoria.

significance assessment versus impact assessmentThe framework employed in significance assessment differs from that employed in economic impact analysis in that economic significance assessment primarily seeks the contribution of an existing industry as opposed to the impact of a “stimulus” in a particular industry or in several industries (West, 1993). The usual approach of comparing what the economy would be with and without the industries whose contributions are to be assessed does not work because the inter-relationship between industries means whether or not the industries to be assessed exist, there will still be demand for their outputs (e.g., a complete vehicle needs tyres so that whether or not the entire tyre manufacturer is closed down, the car manufacturer’s demand for tyres still exists). From a modelling stance, this problem is solved by assuming that demand for outputs of the industries to be assessed will instead be met by imports.

model developmentThe models used in this assessment are derived from sub-regional transaction tables developed specifically for this project. The process of developing a sub-regional transaction table involves developing regional estimates of gross production and purchasing patterns based on a parent table, in this case the 2006-07 Australian transaction table (ABS, 2010a).

Estimates of gross production (by industry) in the study areas (SDs and major sub-regions) and Victoria were developed based on the percent contribution to employment (by place of work) of the study areas and Victoria to the Australian economy (ABS, 2010b), and applied to Australian gross output identified in the 2006-07 Australian table.

Industry purchasing patterns within study areas and Victoria were estimated using a process of cross industry location quotients and demand-supply pool production functions as described in West (1993).

In addition to the general limitations of I-O analysis, there are two other factors that need to be considered when assessing the outputs of sub-regional transaction table developed using this approach, namely:

• It is assumed the sub-region has similar technology and demand/consumption patterns as the parent (Australia) table (e.g. the ratio of employee compensation to employees for each industry is held constant); and

• Intra-regional cross-industry purchasing patterns for a given industry vary from the national tables depending on the prominence of the industry in the regional economy compared to its input industries. Typically, industries that are more prominent in the region (compared to the national economy) will be assessed as purchasing a higher proportion of imports from input industries than at the national level, and vice versa.


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I-O tables utilise an aggregated system of industry classifications based on the ANZSIC system. In total, the 2006-07 I-O tables produced by the ABS (2010a) define 111 distinct industries, some of which are aggregates of the industry classes outlined in appendix a. Some of the property related industries in the I-O tables consist of both property and non-property related sub-sectors, and it is necessary to separate the property component from the non-property component in the related I-O industry.

The industries defined in the I-O tables that are included in the property industry are as follows:

• Residential building construction (all);

• Non-residential building construction (all);

• Construction services (all);

• Finance (partially);

• Insurance and superannuation funds (partially);

• Non-residential property operators and real estate services (all); and

• Professional, scientific and technical services (partially).

The separation of property from non-property related operation for those I-O industries listed as “partially” included in the property industry is based on either:

1. The share of total income (revenue) of the sub-sectors listed in appendix a in the total income (revenue) of all sub-sectors grouped under the same I-O industry classification code;

2. The share of asset (loans and advances to as well as investment in) in the property industry in the total assets of all sub-sectors grouped under the same I-O industry classification code .

These shares are then utilised to expand the original I-O table to separate these industries into their property related and non-property related components to facilitate the economic significance assessment of the property industry in isolation. Once the transaction table is complete, the significance model is developed through the development of coefficients as per West (1993).

significance assessment approach

contribution to Victoria and its regions

The significance assessment is initially undertaken for the 2006-07 financial year to be consistent with the I-O transaction tables utilised. These estimates are then “rebased” to 2009-10 values using:

• Data from the Victorian State Accounts (ABS, 2010c) to identify growth between 2006-07 and 2009-10 in gross product and gross value add for each industry of the economy;

• Data on labour productivity increases (ABS, 2010d) to identify changes in productivity per employee for each industry between 2006-07 and 2009-10. These estimates were then applied to 2009-10 production (estimated above) to identify 2009-10 employment for each industry; and

• Estimates of incomes in 2009-10 were obtained assuming that the relationship between income and output in 2006-07 remains constant, which is consistent with the stylised fact of cost shares of output being close to constant over the long-term.

Estimates of the flow-on effects of the property industry in 2009-10 are obtained assuming constant proportion between individual industries’ flow-on effects and the direct (total) effects (output, GVA, income and employment) in 2006-07. Since the relationship between industries is likely to have changed over this period, the estimates produced are indicative only. In the absence of a more recent I-O transaction table, which forms the basis to quantify


45

the inter-relationships between industries, the estimates produced represent the flow-on effects of the property industry assuming no significant structural changes in the relationship between industries.

Regional allocation of the direct and flow-on effects is performed in three steps:

1. Individual I-O transaction tables and significance assessment models were developed for each Statistical Division in Victoria as well as each major sub-region examined (as described in the “Model Development” section of this Appendix). This approach produces regional estimates of direct and flow-on property industry contributions assuming each region operates in isolation, and therefore does not account for any inter-regional flow-on relationships (i.e., flow-on demand by the property industry in, for example, the Barwon SD for goods and services produced in the Melbourne SD are not captured in the regional models as this is considered an “import” to the Barwon SD economy).

2. To account for inter-regional flows of demand for goods and services between SDs, the difference between the total Victorian flow-on effects and the sum of flow-on effects for each SD by industry (the “inter-regional” flow-on effects) has been redistributed to each SD based on the proportion that each SD contributes to total Victorian activity in each industry (i.e., if Melbourne SD accounts for 50% of total Victorian output in retail trade, then 50% of the inter-regional retail trade flow-on effects have been allocated to Melbourne SD).

3. To allocate to each major sub-region the same approach is used as for SDs in redistributing inter-regional flows, but uses the proportional contribution of each major sub-region to the SD in which it is located to allocate inter-regional flows within the SD rather than the state (i.e., if Geelong accounts for 50% of total Barwon SD output in retail trade, then 50% of the inter-regional retail trade flow-on effects within Barwon SD have been allocated to Geelong).

contribution to Victoria by property sub-sector

The direct contribution of the property industry to the Victorian economy has also been disaggregated across the following property sub-sectors:

• Residential

• Retail

• Commercial

• Industrial

• Health

• Education

• Entertainment/recreation

• Other

The direct contribution of each property sub-sector has been estimated based on allocation of each of the I-O industry contributions to the sub-sectors. Allocations have been based on:

• Direct “Residential building construction” effects is entirely allocated to the Residential property sub-sector;

• Direct “Non-residential building construction” effects is allocated across all non-residential property sub-sectors based on long term (2001-02 to 2009-10) proportional splits of value of non-residential building works commenced for each non-residential property sub-sector (ABS, 2011a); and

• All other property related I-O industry effects are allocated based on long term (2001-02 to 2009-10) proportional splits of value of total building works commenced for each sub-sector (ABS, 2011a).


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Victorian Government taxation and royalty revenues have been allocated to property related activities and other industries based on the following allocation approach.

Table D.1. allocation of 2009-10 state taxes to property related activities and other industries

Taxes attributable to property related activities were allocated across major sub-regions and SDs as follows:

• Payroll tax: Payroll tax of property related activities (estimated using the approach outlined in Table D.1) was allocated to each major sub-region/SD based on the share of each major sub-region/SD to total property industry incomes.

• Transfer duty: Indicative estimates of transfer duties were calculated based on the average value of property (house and unit/townhouse) sales in each major sub-region/SD during 2009-10 and the total number of sales in each major sub-region/SD during the year (DSE, 2010a and 2010b). The proportion each region provided to the indicative estimate of transfer duties was then applied to the actual transfer duty revenues outlined in Table D.1.

• land tax: Land tax was allocated to each major sub-region/SD based on the share of each major sub-region/SD to total Unimproved Capital Value of land (DSE, unpublished).

• other property related taxes: Other property related taxes primarily relate to emergency service levies and have been allocated to each major sub-region/SD based on their share of total Victorian population in 2010 as estimated by the ABS (2011d).

aPPenDix DallocaTion of sTaTe Taxes

Tax item Tax ($M) How allocated

Payroll tax $4,056Allocated across each industry

based on contribution to incomes

Duties

Transfer $3,604 Property related activity

Other property duties $7 Property related activity

Vehicle registration $573 Not allocated

Insurance $1,403 Financial and insurance services

Total duties $5,587

Gambling taxes and levies $1,632 Arts and recreation services

Other taxes

Land tax $1,178 Property related activity

Financial accommodation levy $52 Property related activity

Congestion levy $47 Property related activity

Metropolitan improvement levy $123 Property related activity

Property owner contributions to fire brigades

$34 Property related activity

Motor vehicle registration $864 Not allocated

Levies on statutory corporations $69 Not allocated

Franchise taxes $23 Not allocated

Other taxes $76 Not allocated

Total other taxes $2,467

Royalties from mining $46 Mining

Total taxation and royalty revenue $13,788



47

Property council of australia

Level 7, 136 Exhibition Street Melbourne, Victoria 3000T: 03 9650 8300F: 03 9650 [email protected]

www.propertyoz.com.au/vic©Copyright 2012

Property council of australia

Level 7, 136 Exhibition Street Melbourne, Victoria 3000

T: 03 9650 8300

F: 03 9650 8693

[email protected]

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