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Veterinary Services Informer February 2017

PREPARED FOR MEMBERS • Current Performance • Employment • Outlook


Australia’s love of animals has driven solid demand for Veterinary Services over the past five years, with the industry growing steadily. Advancing technology and the availability of more expensive treatments has buoyed spending in the industry, promoting growth. Rising real household disposable income has improved the capacity for families to pay more expensive vet bills, while pet insurance has also made advanced treatments more palatable. This has encouraged pet owners to engage veterinarians for more costly treatments in an effort to extend the life of their pets. The range of services provided by veterinarians will likely continue to grow in line with advances in treatment options and advancing corporatisation of the industry. This will provide further opportunities for the industry as animal health becomes an increasingly high priority for animal owners. Veterinarians will be forced to negotiate a competitive job market over the coming years, with the number of vets in the profession rising rapidly. Graduate numbers and skilled migration have encouraged the profession to expand significantly, outpacing increases in job vacancies. Remuneration across the industry remains low relative to similarly qualified professions, and full-time positions are becoming harder to obtain in some areas. However, overall, veterinarians enjoy strong job prospects relative to other professions, and Australia’s love of animals will ensure that opportunities remain strong over the next five years.

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Current performance Demand for veterinary services across Australia is rising, despite relatively stable pet numbers. As a result, the industry’s revenue base is also growing, albeit at a modest rate. According to industry analysis firm IBISWorld, revenue in the Veterinary Services industry will rise by an annualised 3.1% over the five years through 2016-17. Industry value added, which measures the industry’s contribution to the economy, is expected to grow at a similar rate, increasing by an annualised 3.0% over the same period, outpacing the wider economy.

Veterinary Services1 2011 - 2012

2015 - 2016

2016 - 2017

1 Year Growth

5 Year Annualied Growth

Revenue (‘000s)

$2,409.1

$2,717.8

$2,799.8

3.0%

3.1%

Value Added (‘000s)

$1,515.3

$1,672.0

$1,711.8

2.4%

2.5%

17,990

19,360

19,720

1.9%

1.9%

Employment

Pet numbers According to the RSPCA, Australians have among the highest rates of pet ownership in the world, with some 25 million pets across Australia². This number has remained relatively steady over the past five years, providing a strong base of demand for veterinary services across the nations. While companion animals are common, many of new animals replace existing pets as they pass, limiting growth in the overall rate of pet ownership. The rising popularity of urban apartment living has placed some downward pressure on pet numbers, as many of these locations prohibit or limit pets. Concerns with housing affordability can also affect pet ownership, driving more households towards renting, where pet ownership is not widely permitted. As a result, growth in the number of animals requiring veterinary services has been somewhat restrained. However population growth across Australia and rising disposable income are expected to lead to renewed growth over the decade to come.

New treatments Rising demand for more advanced, technical procedures has provided a boost for the industry, pushing spend per animal upwards and encouraging growth. As a result, the overall volume of treatments – particularly more advanced and costly procedures – is rising, despite steady pet numbers. The rising life expectancy of pets is also aiding the industry. Veterinarians routinely provide treatment for broken bones, and serious illnesses, where once animal euthanasia may have been more common. As a result, the industry now encompasses a number of veterinarians that specialise in advanced treatments, such as animal oncology and cardiology, in addition to many specialist animal surgeons. The increasing demand for these treatments has also given rise to a range of complementary services, such as physiotherapy and rehabilitation for animals, particularly after surgery. These services collectively are contributing to an increase in the life expectancy of animals3. In a similar manner to humans, older pets typically require more health care, and often more costly treatment for serious or chronic illnesses, causing demand for veterinary services to rise further.

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1 IBISWorld Industry Report M6970, Veterinary Services in Australia, September 2016 2 http://kb.rspca.org.au/How-many-pets-are-there-in-Australia_58.html, last accessed 7 February 2017 3 https://www.banfield.com/state-of-pet-health, last accessed 7 February 2017


Employment The job market for vets has strengthened over the past five years, with the number of advertised positions rising quite strongly. In 2016, The Department of Employment’s Internet Job Vacancies Index recorded 303 advertised positions for veterinarians, representing a 37.7% increase on the previous years, and more than double the number recorded in 2010. There are a number of factors driving growth in vet positions, including greater uptake of services and pet insurance, which has enabled additional care. However, while job creation in the profession is strengthening, the rapidly rising number of graduates suggests that there are improvements to be made. The number of completions from veterinary science courses outpaces job advertisements by approximately two to one. As a result, despite more job vacancies, in practice it may actually be becoming more difficult for qualified vets to find suitable employment.

Figure 1: Internet Job Vacancies - veterinarians⁴

Source: Department of Employment

⁴Department of Employment, Internet Job Vacancies Index – Vacancy Report, December 2016

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Figure 2: Job vacancies, business locations and employment by state

Source: ABS & Department of Employment

The number of veterinarians is expected to grow further over the next five years, aided by university completions. Commencements provide a key leading indicator of new graduate numbers, and significantly, commencements have increased by 62.5% over the past five years of available data to 2014. As a result, the market will likely become even more competitive for new graduates and experienced vets alike, and full-time employment may become harder to obtain. With demand for veterinary services continuing to rise, the industry is in a good position to absorb some new entrants, however universities and governments will need to monitor the market. Interestingly, veterinarians remain on the Skilled Occupations List (SOL), essentially boosting supply in the profession. However, the Department of Employment has identified no shortages across the profession. The Australian Veterinary Association has argued for veterinarians to be removed from the SOL for several years, however at present they remain on the list, lifting supply in an already crowded market.

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Graduates The job market for veterinarians is competitive, with the number of qualified practitioners entering the market rising strongly. High pet numbers and rising spend have stimulated interest in the industry, with the number of graduate veterinarians growing rapidly over the past decade. Supply has been supported by the establishment of several new veterinary science programs in Australian universities. In 1999, there were four university programs around Australia, producing some 230 graduate veterinarians per year. This has expanded to seven programs in 2017, with the number of graduates approaching 600-700. The larger pool of new veterinarians will place major pressure on the industry as it seeks to balance supply against demand. Figure 3: Veterinary science commencements and completions, domestic studentsâ ľ

Source: Department of Employment

According to the Australian Graduate Survey conducted annually by Graduate Careers Australia, the rising number of qualified veterinarians has made the industry increasingly competitive, particularly for graduates. Overall, the industry still offers very strong prospects for graduates, with the overall percentage of graduates still seeking work four months after graduating sitting at 15.1% in 2015, much lower than the average across all professions of 31.2%. These findings demonstrate the industry is continuing to provide opportunities for new entrants and existing veterinarians alike, as demand for veterinary services grows. However, graduate prospects compare relatively poorly to similarly qualified professions such as pharmacists and doctors, where the proportion of students still seeking full-time work are 4.4% and 3.7% respectively. Additionally, while employment outcomes have improved over the past year, the number of veterinary science graduates unable to find full-time work has increased strongly over the longer term, doubling since 2009.

⠾Department of Employment, Occupational skill shortages information – Veterinarians, February 2016

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Figure 4: Percentage of veterinary science graduates still looking for full-time work after 4 months ⁶

Source: Graduate Careers Australia

According to Graduate Careers Australia⁷, the average wage for veterinary science graduates across Australia rose by an annualised 2.1% over the past five years, from $45,000 in 2010 to $50,000 in 2015. While this increase remains relatively in line with growth across all disciplines, average wages remain well below the average for all professions. These findings are relatively surprising given high academic requirements and high fees required to become a veterinarian. Veterinary science courses across Australia require domestic students to pay around $10,000 per year, seeing debt rise to over $50,000 by graduation. By comparison, an engineering student would expect to pay around $36,000 for a four year course, after which they receive an average of $60,000 as a graduate. As a result, graduate veterinarians receive among the lowest returns on their university fees of all professions, significantly increasing both the interest accrued and the period required to eventually pay off student debt. Figure 5: Veterinarian graduate salaries vs all professions

Source: Graduate Careers Australia

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⁶ Graduate Careers Australia, GradStats, 2009-2015 ⁷ http://www.graduatecareers.com.au/research/researchreports/gradstats/


Outlook The outlook for veterinarians remains quite positive, with demand expected to rise further over the coming years. The industry will benefit from a rising capacity and willingness to pay among consumers. This is likely to drive continued revenue growth in the industry, with IBISWorld forecasting an annualised increase of 2.1% over the next five years. Population growth, high pet ownership rates, and the rising uptake of pet insurance will support revenue growth over the next five years. Rising prices at vets will also see theindustry grow in the years ahead, with the cost of veterinary services rising at a much faster rate than CPI.

Corporatisation The veterinary services industry is undergoing its first real phase of commercialisation, with a number of major players emerging in recent years. Greencross Limited is the largest of the majors accounting for 7.8%â ¸ of industry revenue from their network of 155 clinics. The company also has plans to expand their network further over the coming years, with market share likely to grow well in excess of 10%.

While the shift to a corporate structure may support revenue, it does raise some concerns for vets. Greencross is actively pursuing an integrated pet care model, with vet clinics marketing other pet care services, while its network of Petbarn stores are rapidly introducing instore clinics. Integration risks blurring the line between the professional role of vets, and the retail function also provided in store. Additionally, the public structure and the overall emphasis on profitability places additional burdens on veterinary staff, encouraging up-selling and potentially requiring veterinarians to recommend additional, costly, or otherwise unnecessary procedures such as blood tests, scans or x-rays. Veterinary networks under a single banner are becoming more prevalent across the nation, with concentration rising significantly over the past five years as independent vets sell their practices to the major players. National Veterinary Care has expanded its network to 40 clinics over the past five years, with plans to expand further. The company appears to be following the model of Greencross, becoming publicly listed in 2015.

â ¸ IBISWorld Industry Report M6970, Veterinary Services in Australia, September 2016

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Pet insurance Pet insurance may well provide the single largest opportunity for growth in the industry over the coming years. The rise of pet insurance – almost unheard of a decade ago – is providing a means for families to readily meet higher vet bills, often extending the life of their pets. A 2013 report by the Animal Health Alliance (AHA)⁹ notes that 12% of cat owners and 18% of dog owners in Australia have purchased pet insurance to cover vet bills. The same report released in 2016¹⁰ found these figures had risen to 18% of cat owners and 26% of dog owners in the space of three years. While these figures are already remarkable considering the product was born only in the past decade, future growth is likely to be even more significant. The 2013 report indicates that Gen Y pet owners have a much higher rate of pet insurance. These findings suggest that younger pet owners see greater value in pet insurance, and are largely unwilling to put down sick pets, preferring insurance to ensure that vet bills are payable. As a result, the percentage of animals euthanized due to medical reasons has fallen significantly over the past 5 years according to RSPCA data¹¹ . This trend is expected to continue as more owners take up pet insurance and as treatment technology advances. The rising popularity of pure breed animals is also expected to drive the uptake of pet insurance, as these animals are often more costly to purchase, and also more prone to breed specific illnesses. The AHA figures for pet insurance claim that 23% of pure breed pets are insured, compared with only 9% of mixed breed pets. The rising popularity of pet insurance has encouraged insurance companies to expand their offering, increasing competition for customers and pushing prices lower. The consumer advocacy group CHOICE¹², currently assesses 113 different policies available for those seeking pet insurance, up from 57 two years ago. Consumers can also often gain access to discounts for holding multiple policies with the same insurer, making pet insurance even more affordable. Figure 6: RSPCA euthanasia on medical grounds

Source: RSPCA

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⁹ http://animalmedicinesaustralia.org.au/wp-content/uploads/2015/06/AMA-Pet-Ownership-in-Australia-5-AUGUST-2013.pdf , last accessed 10 Feb 2017 ¹⁰ http://animalmedicinesaustralia.org.au/wp-content/uploads/2016/11/AMA_Pet-Ownership-in-Australia-2016-Report_sml.pdf , last accessed 10 Feb 2017 ¹¹ http://www.rspca.org.au/facts/annual-statistics/published-statistics ¹² https://www.choice.com.au/money/insurance/pet/reviews-and-comparisons/pet-insurance


Professionals Australia

Rural vs urban Over the past few years there has been ongoing discussion regarding the availability of skilled veterinarians in rural areas. Veterinarians in rural areas provide services that are integral to the success, productivity and profitability of Australia’s agricultural sector. Growth in international trade, driven by rising demand for Australian animal products abroad, is fuelling the need for veterinary services in these areas. According to the Australian Veterinary Association (AVA), scarcity of vets in rural areas is due in some part to difficulty in retaining skilled veterinarians in rural areas. While there is some imbalance between vet numbers in rural and urban locations, the issue presents an excellent opportunity for new graduates to break into the market by taking up important veterinarian roles in rural areas. The AVA, in their 2013 Workforce Review¹³ points to several issues in retaining skilled vets in rural areas, such as long working hours, living away from family, and a lack local amenities in some rural locations. The major universities providing veterinary science courses are also located in major capitals, discouraging uptake from rural students. However, these issues are not unique to veterinary services, and are unlikely to discourage new veterinarians from seeking employment in rural locations as a first step into the industry. Ultimately, many of these vets aspire to eventually return to urban practice. A report commissioned by the Department of Education, Science and Training and the Department of Agriculture, Fisheries and Forestry found that while almost two thirds of graduates find their first employment in rural areas, the a large portion move back within ten years¹⁴. At this point, many of these veterinarians have gained excellent skills in dealing with a diverse range of animals, and are well positioned to gain employment in the more competitive urban market. Another major issue affecting veterinarians in rural areas is the attitudes of farmers towards veterinary services. The AVA’s Australian Veterinary Workforce Review Report 2013 notes that “there was some reluctance among farmers to use vets and a lack of awareness among farmers of the potential contribution vets could make to herd health and productivity”. While this issue is also difficult to resolve, it appears to be improving. The report suggests that intensive farming industries such as dairy farming have increased their employment of veterinarians in an effort to boost productivity. Further education of farmers as to the benefits of preventative services may aid the problem, making rural veterinary services more lucrative and therefore more attractive to veterinarians. As a result, veterinarians in rural areas need to actively sell their services, educating farmers in efficient herd management, which has the potential to improve the health and productivity of production animals, limiting devastating diseases and potentially improving the profitability of farms.

¹³https://www.ava.com.au/sites/default/files/AVA_website/pdfs/AVA%20workforce%20review%20report%202013.pdf ¹⁴https://www.ava.com.au/sites/default/files/documents/Other/Frawley%20report.pdf

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Professionals Australia

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