Victoria votes: where will the growth and jobs of the future be?

Despite the loss of car manufacturing in Geelong, manufacturing is expected to grow in the broader Barwon region. David Crosling/AAP

Victorians will soon go to the polls to decide who will be responsible for the management of the state for the next four years. Voters are confronted with many issues on which they must pass judgement, with roads, railways and ports all prominent in the debate. But what are the key characteristics of the Victorian economy?

Economic modelling at Victoria University’s Centre of Policy Studies tells us about the types of jobs Victorians can expect to be doing over the next few years. The Victorian economy employs around 2.9 million people. In line with growth in both the population and the economy, this is set to increase by around 300,000 people by 2020.

Which industries are winning

In Victoria, as in Australia as a whole, the vast majority of jobs are in the service industries. This is a diverse group of industries including (but not limited to) retail trade, health and social assistance, professional and technical services, transport and warehousing and public administration and safety. The non-service industries – agriculture, mining, manufacturing, utilities and construction – comprise just below 23% of jobs in Victoria. For the remainder of this decade, the proportion of jobs in service industries will increase only slightly, to almost 78% of jobs by 2020.

At a more detailed level, greater change is revealed. As the construction phase of the mining boom draws to an end, employment in the construction industry will fall from its present level of 8.5% of jobs to just 7% of jobs in 2020. This partly reflects the transitory impact the mining boom has had on the construction sector. The “release” of many construction workers into the economy over the next couple of years could be a boon to major government-backed infrastructure projects.

Construction is the only sector in which employment is forecast to fall. Manufacturing, agriculture and transport and warehousing are forecast to expand, more than compensating for the fall in construction activity. These sectors have a similar skills profile to construction, employing relatively large proportions of workers with no post-school qualifications or Certificate I-IV level qualifications.

Manufacturing surprise

The positive forecast for manufacturing may seem surprising, given the high-profile announcements of closures of the last motor vehicle manufacturing plants in Victoria. Manufacturing in Victoria employs around 270,000 people, of which 10% work in the motor vehicle and parts sector.

On the whole, manufacturing is a very trade-exposed activity. Products are either exported (for example, processed food products, wine and pharmaceuticals) or they compete against imports in the domestic market (for example, textiles, pharmaceuticals, motor vehicles and various types of appliances). Because of this, movements in the exchange rate have a very significant impact on manufacturing. Throughout the “boom” years, with the exchange rate very high, manufacturing has been uncompetitive, a phenomenon known as “Dutch Disease”. Motor vehicle manufacturing has been a conspicuous casualty.

As the boom unwinds, the effects of Dutch Disease will also unwind. A large fall in the Australian dollar will revive the competitiveness of manufacturing, more than compensating for the loss of the motor vehicle plants. Export-oriented sectors like agriculture and education will also benefit from a fall in the Australian dollar.

The professional and technical services sector is forecast to expand the most, gaining 44,000 jobs by 2020. This sector includes activities such as legal and accounting services, architectural, engineering and technical services, and computer services.

Almost half of all people working in professional and technical services hold a bachelor degree or higher qualification. By 2020, this is estimated to have grown to 53% of people working in the sector. In Victoria as a whole, 28% of people employed hold at least a bachelor degree.

Another significant source of employment growth is the health and social assistance sector. Although only weak growth is forecast for domestic incomes, leading to weak growth in domestic demand, health and social assistance is a significant expenditure item for older Australians. While the average household spends just over 5% of their budget on medical care and health expenses, households where the reference person is aged over 65 spend almost 10%. Government spending on health care will also increase as the population ages.

State of the regions

Melbourne accounts for 75% of employment in Victoria. Two-thirds of growth in Melbourne will be concentrated in five sectors: professional and technical services, manufacturing, health and social assistance, transport and warehousing, and education and training.


Click on the map above to view the growth forecasts for each region.


Differences in the underlying structures of regional economies mean that overall performance is varied.

For example, in Barwon, an area including the regional city of Geelong, the manufacturing sector has a relatively large representation of motor vehicle manufacturing. As a result, Barwon’s manufacturing sector is forecast to grow more slowly than the state average, and Barwon is forecast to be the slowest-growing regional economy. However, for the reasons given above, growth is still positive in Barwon manufacturing.

Strong forecast growth in the agriculture sector is the main contributor to growth in several regional economies. In the Wimmera, Western Districts, the Mallee, Goulbourn, East Gippsland, Gippsland and Ovens-Murray, growth in agriculture will contribute between 20% and 50% of regional employment growth.

In the Wimmera, the Mallee and the Western Districts, the agriculture sector currently accounts for a fifth of jobs. However, the Wimmera and the Western Districts are the regions with the highest forecast growth rates, while the Mallee is one of the slowest. Although all agricultural economies, the nature of agriculture in these regions is quite different. The strongly growing agricultural activities sheep, beef, grains and dairy are well represented in the Wimmera and Western Districts. However, Mallee agriculture includes a sizable portion of fruit growing, an activity with a relatively low growth forecast.

Agriculture is relatively less important in the economies of the Central Highlands (including Ballarat) and Loddon (including Bendigo). While agriculture will account for around 10% of employment growth in these regions, health, education and manufacturing are forecast to be of greater significance, accounting for around 40% of growth in employment.