Looking to start a business in 2017? Stay away from apartment development and milk powder manufacturing.
According to research from IBISWorld, these industries, as well as mineral exploration, heavy industry and other non-building construction and grain growing, will suffer a decline in earnings this year.
Apartment development, heavy industry construction will have the biggest losses, suffering a 26 and 38 per cent decline in income respectively.
"Many of the industries likely to disappoint this year have performed strongly in recent years, but research suggests boom times for these industries are over, at least for the next 12 months," IBISWorld senior industry analyst Nathan Cloutman said.
Concerns of declines in these "risk" industries are not new.
Sharp deterioration
Fears of an apartment glut in Melbourne, Brisbane and pockets of Sydney have been brewing over the past year.
IBISWorld said apartment building revenue would contract to $19.3 billion in 2016-17.
Economists and analysts predict a large supply of off-the-plan apartments will hit the markets following concern that foreign buyers who bought apartments during the recent boom may not be able to settle after banks shut down foreign lending.
"Demand conditions are projected to deteriorate sharply during the current year on the completion of major developments and as oversupply conditions emerge in several key markets," Mr Cloutman said.
Producers of milk powder are also likely to have a 12 per cent fall in revenue.
Revenue is forecast to fall to $757 million in 2016-17. This follows declines of 35.8 per cent and 22.2 per cent in 2014-15 and 2015-16, respectively, according to IBISWorld.
"The milk powder manufacturing industry heavily relies on export markets, which account for approximately 90 per cent of industry revenue," Mr Cloutman said. "Consequently, fluctuations in global milk powder prices play a major role in the industry's performance. Global milk powder prices collapsed during 2014-15 amid concerns about excessive increases in milk powder supplies."
Changed regulations
The industry recently suffered a heavy battering after Bellamy's drop in profit forecasts and its share price fall in late December, after Chinese authorities changed import regulations. All foreign companies in China must now apply for fresh product registration to continue to sell in China's ecommerce channels.
Until recently, milk powder manufacturers, which mainly relied on sales into China where demand is strong and used "grey" suitcase seller channels, or "daigous", to get their product into the country, have enjoyed bountiful returns.
Road and bridge construction would have a 27 per cent lift in revenue, while data storage will pick up 14 per cent more revenue and childcare services will be up 12 per cent.
The large infrastructure spend in NSW is the biggest contributor to road and bridge construction revenue growth, particularly the M1 to M2 link and WestConnex projects in Sydney. These private-public funded projects will dominate the road construction landscape for several years, IBISWorld said.
Sugar price boost
The rise in internet traffic and corresponding increases in demand for cloud storage will give data storage services sales a boost, while the growing number of mothers returning to work and the increase in government-provided subsidies will support growth in childcare services earnings.
Interestingly, sales in sugar is about to hit the roof, and is expected to rise 19.9 per cent, IBISWorld said.
"The world sugar price indicator is projected to increase 20.1 per cent during 2016-17," Mr Cloutman said. "This is because global sugar consumption is expected to exceed global sugar production for the second year in a row, reducing world sugar stocks for the second year running.
"As the world sugar price indicator is expressed in US dollar terms, the projected depreciation of the Australian dollar during 2016/17 is expected to increase the world price of sugar in Australian dollar terms even further during the year, boosting returns for local sugar manufacturers."
