The Australian Accounting Industry

What is the Australian Accounting Industry?

The Australian Accounting industry comprises firms engaged in the provision of accounting, auditing and bookkeeping services. The services provided by these firms cover all areas of taxation, financial reporting and auditing. A large number of these firms offer business advice and assistance in addition to the aforementioned services.


The Australian Accounting industry is one of the handful few industries that narrowly escaped the brunt of the global financial crisis with only marginal falls in revenue. In fact, the global financial crisis itself served as its antidote in the case of the Accounting industry as the crisis caused more and more people to seek the help of accountants in order to identify and implement cost-cutting measures. The industry’s revenue is expected to grow 6.1% in the current accounting year to reach close to A$16.8 billion. 9,968 firms are currently engaged in the industry, employing 108,177 individuals.


Current Composition and State of the Industry

The dominant majority of firms in the Australian Accounting industry are small in size. In fact, non-employing establishments currently account for around 50% of industry enterprises. Like any other industry, the Australian Accounting industry has its big four, but these accounting firms account for only around 30% of available market share. These accounting firms also don’t pose any threat to the small and medium-size accounting firms as they cater to different markets than their small and medium-size counterparts.


Employment and Wages in the Industry

The industry currently employs around 108,177 individuals. As accounting firms are broadening the range of their service far beyond traditional offerings and as businesses are becoming more and more data-oriented and analytical, engineers and economists are entering the industry along with the traditional business graduates. It’s a positive thing that accounting firms are offering services outside the traditional accounting services, but many such firms are currently finding it a little difficult to find candidates with both specialist knowledge and the right experience.


As there is no shortage of accountants in the country, wage pressure is low and is expected to remain so. Hiring in the Australian Accounting industry is expected to grow 3.8% and overall industry wages are expected to grow at a relatively lower rate of 3.4%.


Growth in the Industry During the Past Five Years

The industry’s revenue grew at an average rate of 2.74% over the five years through 2011-2012. It was however marginally affected by the global financial crisis and the industry experienced decline in revenue in the accounting years 2008-2009 and 2009-2010. In the accounting year 2011-2012, the industry’s revenue rose by 5.6% to reach A$15.8 billion.


Expected Growth in the Industry

In spite of the expected slight decline in revenue for small non-employing accounting enterprises due to the proliferation of e-tax and simplification of personal tax, it is expected that the Australian Accounting industry’s revenue will grow at an average rate of 5.5% over the five years through 2016-17 to reach A$20.7 billion. Auditing and other traditional streams of revenue will play a major role in this growth as it is expected that price competition will intensify and the number of business enterprises requiring auditing will increase significantly in coming years.


The implementation of carbon tax in July this year will also have a very positive effect on the industry’s overall revenue. That’s because the affected companies will have to incur larger compliance costs in coming years and the accounting firms capitalising on emission auditing, assurance, tax and strategy work will experience growth in revenue.


As the largest portion of revenue in the industry comes from wage costs, and as it is expected that revenue growth will easily surpass wage growth, profit margins are expected to increase substantially in the near future. Another factor contributing to improvement in profit margins, especially over the next couple of years or so, is the expansion of both large and medium-size firms into the premium advisory services market. 


Areas with Greatest Growth Potentials

The area with the most potential for growth is tax consultancy. It is expected to fuel the growth of the industry for the next several years, especially after the implementation of the carbon tax. Business enterprises that have been directly affected are aiming at restructuring tax reporting in a much more aggressive manner with a view to protecting profits and revenue. If accounting firms continue to deliver value, they will benefit from areas such as process improvement, risk management and margin improvement in addition to compliance.


With Chinese interest in the country’s resources sector on the rise, the Chinese government and Chinese companies are becoming an important source of revenue for the Australian Accounting industry, especially the larger accounting firms. As a result, more and more accounting firms are concentrating on building and strengthening their networks and reputation in China in order to capitalize on them in the near future.


Opportunities for New Entrants

The industry offers great opportunities for new entrants. Not only doesn’t the Australian Accounting industry present any significant barriers to entry, but overall concentration in the industry is also low. These conditions coupled with the fact that the accounting firms that dominate the industry cater to entirely different markets make the industry ideal for new entrants. New accounting practices don’t have to bear high start-up costs as the industry is labour intensive rather than capital intensive. Furthermore, neither licensing is needed for operating in the industry, nor any formal training is required for basic bookkeeping.