Australia is banking on its tourism and education services industry to make up for the economic losses chalked up in the commodities crash, but that story may be overstretched, Goldman Sachs cautioned a report.
Net tourism and education exports have offset only about one-sixth of the decline in bulk commodity export earnings since the first quarter of 2014, the bank's analysts wrote in the report published on Wednesday.
Australia is a major exporter of iron ore, coal and wheat, prices for which have come off significantly alongside an oil price slump that has sent prices down as much as 70 percent since the summer of 2014.
As major trade partner China changes its focus from manufacturing to services, cutting its appetite for commodities, the Australian government has touted its own transition to a services-led economy, with some success.
Since the first quarter of 2014, net exports of tourism and education services have risen by 5.4 billion Australian dollars ($4.1 billion), but that was against a net A$32.5 billion decline in annual export earnings from bulk commodity exports, Goldman said.
The rise in tourism and education services exports, however, rode on the back of a 35 percent decline in the value of the Australian dollar over the last two-and-a-half years. With the AUD gaining some ground recently, growth momentum from this source will fade into the next year, the house added.
Like its commodities exports, Australia's tourism and education exports are also increasingly skewed toward China. This means that the sectors are acutely vulnerable to events in China and the trend comes with "its own risks," Goldman's analysts said.
"Over recent years, it is also interesting to note that the surge in Chinese tourists to Australia has coincided with both trips of shorter duration and far greater Chinese participation in Australia's residential property markets," they wrote. "In turn, it is quite likely that a portion of the rise in Chinese 'tourist arrivals' is little more than a brief trip to attend a few house auctions in either Sydney or Melbourne."
Such trips likely entailed less spending than is typically done by tourists, as well as running the risk of slowing as Australia moved to limit foreign property ownership, the analysts added.
Growth in export earnings from Chinese tourists slowed to just 2.6 percent in June, against 31 percent average over 12 months to January 2016.
Australian education exports have also become increasingly concentrated toward China, but overall student visa grant rates across countries more generally have been steadily falling since the end of 2014, the analysts said.
"While long-run prospects remain bright, we caution against the hyperbole often used to describe recent trends and offer some perspective on the net contribution of these sectors to the broader economy," Goldman cautioned.