This paper explores past, current and future trends in the veterinary sector. Much of the data in this report was drawn from a research paper prepared by Access Economics, The value and business of Australian health care, prepared for NAB Health and published in December 2008.

There are fundamental shifts occurring in the structure and composition of the veterinary sector. Similar to a number of other medical fields, the veterinary sector is experiencing a feminisation effect, with the number of women practising in the field rising sharply since the 1970s.

At the same time, practices within the field are increasingly mirroring practices in other medical sectors. Specialist vet practitioners such as cardiologists are starting to provide consulting services to pet owners, who increasingly want their pets to have access to the same level of medical care humans receive.

In addition, the following trends are re-shaping the veterinary sector:

1. The total number of vets has increased over the last couple of decades but is expected to decrease in future years to reflect an expected reduction in demand for vet services.
2. The relative number of female vets to male vets is increasing, with the total number of female vets expected to overtake the total number of male vets by 2010.
3. Dogs and cats are the focus of the sector, which means most vets enter private practice when they leave vet school. This is a trend in direct contrast to 50 years ago, when most vets worked for the government and treated farm animals.

This paper explores these trends, drawing on data from Access Economics' research (sections 1 - 3).

The total number of vets is predicted to fall in future decades.

The total number of full time equivalent veterinarians working in Australia in 2008 is 7,849. In 2038 this figure is expected to be 7,601, a reduction of seven percent. Nevertheless, the number of veterinarians working in Australia doubled between 1981 and 2001 from 3,177 to 7,601 (the latter figure representing full time equivalent vets in practice).

Female vets are expected to considerably out-number male vets by 2038, rising from just 477 female vets in 1981 to 3,629 full time equivalent female vets in 2008, to 4,778 female vets (full time equivalent figures) by 2038. This represents a rise of 32 percent between 2008 and 2038.

Females made up 83 percent of the increase in the total number of vets between 2001 and 2006. Access Economics assumes that the trend over the last 25 years of a 1.2 percent annual increase in the proportion of female veterinarians will continue.

In contrast, the number of male vets is expected to drop by 37 percent between 2008 and 2039. There were 2,700 male vets in 1981, 4,501 full time equivalent male vets in 2008 and there is expected to be 2,823 full time equivalent male vets by 2038.

The total number of female vets is expected to overtake the total number of male vets by 2010, with the number of female full time equivalent vets expected to exceed the number of male full time equivalent vets by 2013.

The number of vets settling in Australia from overseas, while small, has more than doubled since 2002/2003, when only 50 migrant vets started practising in Australia. This number has risen year on year since that time, with the number of migrant vets coming to Australia in 2006/2007 reaching 107.

In 2001 the Australian Bureau of Statistics reported the veterinary industry contributed $549 million to gross domestic product.

Although the ABS has not continued this research, it is likely the value of the veterinary industry has retained around the same share of GDP between 2001 and 2007, and is estimated to have contributed $681 million to GDP in 2007.

industry trends

Below is a discussion of the major industry trends in the vet sector.

graduate numbers

There were 210 veterinarians per million people in Australia in 1981. This number had increased to 360 veterinarians per million people by 2006, representing an increase of 73 percent over the previous 25 years. The main contributor to the change in this figure was an increase in the number of graduates from veterinary schools, which turned out an average of 256 vets each year during the 1990s, increasing to 350 vet graduates in 2005.

The increase in the number of vet graduates is in part due to the opening of three new veterinary schools at Charles Sturt University, James Cook University and The University of Adelaide. The number of graduates is likely to continue increasing, with Access Economics estimating that the number of graduates finishing vet school each year is likely to exceed 500 within the next four to five years and approach 600 graduates annually over the subsequent five years as graduates from these universities begin practising. By 2011 the number of veterinarians per million people is likely to be twofold greater than in 1981.

pet numbers

Despite the increase in the number of graduates, the number of people that own pets is falling, but only slightly. According to the Australian Veterinary Association, in 1994, 59 percent of households owned a cat or a dog but by 2007 that figure had fallen to 53 percent.

There were approximately 700 veterinarians per million dogs and cats in 1991 and more than 1200 veterinarians per million dogs and cats in 2006, with this figure expected to reach 1500 vets per million dogs and cats by 2011. More than 75 percent of all vet work involves dogs and cats and this figure is tipped to grow, despite the drop in the number of people owning dogs and cats. The number of veterinarians per million dogs and cats will increase at a greater rate if dog and cat numbers continue to fall, but the number of vets graduating from medical school increases.

The number of cats and dogs declined from 6.8 million in 1999 to 6.6 million in 20001. The drop in the number of people owning pets is due to the fact that the number of single people, professionals and retirees is growing and these groups want to live in units and townhouses, where pets are less likely to be found.

The decrease in the number of people that own dogs and cats could reverse an employment trend in the vet sector that has been gaining momentum for more than half a century.

Fifty years ago approximately half of all vet graduates started out as government employees, as opposed to only around 10 percent now. This is because fifty years ago around half the work of all graduates was with cattle, with dogs and cats only 20 percent of the workload compared to more than 75 percent now.

Future income is already a source of concern among veterinarians, especially employees. Veterinary graduates receive lower incomes than graduates from at least 12 other professional courses, most of which are shorter and have lower entry levels than veterinary science. The Department of Education, Sports and Territories reports that in 2006, while the average income of graduates across all disciplines was 80 percent of average earnings of all workers, for veterinary graduates it was 74 percent of average earnings.

If the current oversupply unwinds, given most of the surplus new entrants are women, they may also constitute the majority of those who exit the industry over time. An alternate scenario would be for supply to continue to increase in the short term, then wind back to sustainable levels over the medium term, before finally rising again with population in the long run.

Even if increases occur in the percentage of animals receiving veterinary attention and pet owners spend more on animal health there is a limit to potential earnings from cats and dogs.

1. Chaseling (2001), 'Pet Populations in Australia', Urban Animal Management Conference Proceedings 2001, Australian Veterinary Association.

For vets, average income for 2006 was $61,464, a 41 percent increase on 1996 figures. According to data from Access Economics, in 2006 male vets earned average annual income of $71,552, while females earned average annual income of $50,908.

This compares with the average annual income earned by the ten medical subgroups2 Access economics examined in its report of $86,371 (males) and $68,848 (females) and the average Australian annual income of $51,225 (males) and $33,852 (females). Of the ten medical professions examined by Access Economics, vets were the fourth highest paid, after general medical practitioners, dentists and pharmacists. Vets earn 43 to 50 percent more than the average Australian income of $51,225 for males and $33,852 for females.

Current figures show men are much more likely to own a veterinary practice than women, with the split being 36 percent female and 78 percent male. Male practice owners also earn higher incomes ($82,000 per annum) than female practice owners ($51,000 per annum).

Women are more likely (38 percent of all female vets) to work part time (less than 40 hours per week) than men, with only 15 percent of male vets working part time. Comparing vets working the same hours, men still earned 30 percent to 60 percent more than women.

During the last ten years many female vets have been employed in city practices, where markets may be saturated. The vast majority of female vets are employees, and gender income disparities for employed vets are larger in the city practices that largely treat cats and dogs, compared with country practices that treat large animals such as cattle and horses. Gender income disparities are also greater for those who have been in the workforce for less than ten years, relative to those who have been working longer.

In 2001, average annual income for male vets that own vet practices was $82,000, with female practice owners earning average annual income of $51,000.

Male vets that own city practices earned an average annual income of $88,000, while their female equivalents earned average annual income of $57,000. In the country, male practice owners earned average annual income of $74,000 and females earned average annual income of $42,000.

Male vets who had been working for less than 10 years earned average annual income of $67,000, while females earned average annual income of $49,000. Males that had been working for between 10 and 20 years earned average annual income of $85,000 and females $49,000.

Employed male vets earned average annual income of $51,000 in 2001, while their female equivalents earned average annual income of $40,000. Employed male city vets earned average annual income of $54,000 and their female equivalents earned $43,000. In contrast country employed vets earned average annual income of $46,000, with female country employed vets earning average annual income of $38,000. Employed male vets that had worked for less than 10 years earned average annual income of $43,000, with their female equivalents earning $34,000. Employed male vets that had worked for between 10 and 20 years earned average annual income of $57,000, with females earning $51,0003.

Veterinarian Annual Income by Status $, 2001

Status	Male	Female
Employed
All	51,000	40,000
City	54,000	43,000
Country	46,000	38,000
Graduated < 10 years	43,000	34,000
Graduated 10-20 years	57,000	51,000
Owners
All	82,000	51,000
City	88,000	57,000
Country	74,000	42,000
Graduated < 10 years	67,000	50,000
Graduated 10-20 years	85,000	49,000
Total	70,000	43,000

Note: 'Owner' includes both sole owners and partners Source: Heath and Neithe (2001)

2. The ten subgroups are: general practitioners, ophthalmologists, radiologists, cardiologists, anaesthetists, gastroenterologists, ear nose and throat specialists, dentists, veterinarians and pharmacists
3. All figures in the two preceding paragraphs sourced from Heath and Neithe (2001)

Dr Stephen Coles is a director of the only listed, aggregated veterinary company in Australia. He thinks larger, hospital-style vet practices, the prevalence of specialists within the field as well as ongoing amalgamation of practices are the future of the industry. According to Coles, one of the main challenges the industry is facing is the changing demographics of the student base.

Coles says "there are major opportunities for specialists in the field because people are treating pets as family and expect them to be treated for all the illnesses and problems people can be treated for." This dynamic is increasing the need for specialists such as ophthalmologists and cardiologists in veterinary science.

For the industry to meet this need, Coles says "practices have to get bigger and better and equipment and facilities have to improve. The days of the one vet practice are numbered, other than for specialist vets. This means there will be amalgamation and the development of larger practices."

"Young vets want to be mobile and flexible; they might want several jobs in their career - no longer do they stay in a job for life," Coles says.

Coupled with the increase in the number of larger practices are considerable advances in technological innovation, which is helping vets to offer a wider range of services, improved diagnosis and more specific treatments.

But a key challenge the industry has to meet is the change in the demographics of veterinary science students. As Access Economics' data suggests, female vets will soon outnumber male vets in Australia, a trend Coles has witnessed throughout his career. When he studied to become a vet in the 1960s, only four or five of the 50 vet science students in his course at Melbourne University were women. "The gender split was about fifty-fifty in the '70s and these days the first year intake is often 90 percent female," he says.

"With the economic boom and the mining boom, guys have gone into finance industries because they perceive greater rewards in these areas. And for many students, especially the children of migrants, vet science isn't considered as having as high a status as careers like medicine. And because the marks you have to get to do the course are so high, a lot of country kids who would have done vet science in the past now can't because they don't get the required marks. You find the people doing the course are private school girls."

To get around the high mark hurdle, some students are starting a science degree before transferring to vet science. Others do an agricultural vet science degree.

Once graduates enter the workforce, many don't want to become junior partners in a practice, preferring instead to work for a number of different vets in a number of different positions during their career. Younger vets also don't want the risk or administrative burden of running their own practice.

This is one of the reasons why amalgamation of vet practices makes sense. "Listed vet groups are not the only solution, but one of the reasons the corporate model makes sense is because it offers a career path because vets can transfer between practices in the same group. Being part of a large practice also means they don't have to be bothered by things like HR issues and GST," Coles says.

A related trend is the need for more widespread take-up of pet insurance among pet owners.

Pet insurance has to have greater penetration into the market so that vets can charge professional fees and earn a decent living.

This will attract more males to the profession. At the moment, a lot of vets do it for the love of it and don't charge properly; for example, vets don't charge like other professions do when they have a phone call with a client. This devalues their skills, which also means they can't pay good staff.

Dr Janet Cridland, principal of the Livingstone Road Animal Health Centre, sees a bright future for the veterinary profession, with lots of opportunities opening up thanks to new technology. But there are also challenges vet practices need to manage as they start to acquire equipment with the latest technology. According to Cridland, the profession also needs to consider how the number of female vets at partner level can be increased.

But ensuring the practice keeps up to date with the latest equipment does not come cheap. Cridland says a basic IT set up for a vet practice costs around $65,000, including new servers and cabling that can cope with technological advances in the future. And that's just the IT system.

"Today's young vets have lots to learn. Veterinary practice is moving towards the model used in the medical profession, which means there are more opportunities to do exciting stuff, using newer, better equipment," she says.

A digital x-ray unit costs around $60,000, an endoscopy machine costs upward of $20,000 and an ultrasound machine comes in at more than $15,000. A machine to monitor blood pressure, respiration, oxygenation and other health indicators costs around $18,000.

"The only way to afford this is to charge properly for your services, look after your equipment and build a good relationship with an equipment leasing agent. Getting the right leases is very important to ensure the total cost of leases is fully tax deductible," Cridland says.

Aside from the enormous cost of equipment, Cridland says a "major challenge is managing the expectations of clients. Lots of people expect the same level of intervention and diagnostics as humans receive. But there's a cost attached to this and no Medicare for animals, which is why there is a real need for pet owners to take out pet insurance or regularly put money aside in case their pet gets sick - and hope they never need to use this money."

Another challenge is balancing the need to market services to build up a practice with the imperative to offer sound advice. "If you offer a good service, the practice should grow itself.

There's little need to market dental services just because it is dental month - if an animal needs dental work, it does. The work shouldn't be carried out just because of a promotion."

Cridland says another challenge is ensuring enough women occupy senior positions in the industry. "The vast majority of partners are male, but there are many more female graduates than male. To get women to partner level there needs to be a change in the paradigm. The hours you have to work at partner level are corrosive and if you want to have a family, it's not easy to do both. To get women to partner level, we have to make practices more flexible," she says.

One approach, says Cridland, might be to have a number of women working in the practice as partners. That way, they can share each other's concerns, as well as the workload.

Dr Veronica Wah Day says she feels lucky to be working in a vet practice where there has been the opportunity for her to become an equity holder, as there's very little opportunity to buy into a practice in Adelaide, where she lives.

"There are a number of vet businesses with four or five practices in Adelaide, which don't really have the need to take on new partners," she says. This limits the opportunities for young vets to become owners in a practice.

Veronica, who's originally from Mildura, says she was fortunate to start working in a practice when she first moved to Adelaide that was owned by like-minded vets, who gave her opportunities to develop as a vet, as well as the opportunity to become a partner in the practice. "I opened a clinic for the practice at Fulham Gardens; although I didn't have any monetary interest in the clinic at the time, I really ran it as my own," she says.

Like Dr Janet Cridland, Veronica agrees one of the biggest challenges veterinary practices face is financing expensive equipment, and making sure staff are properly trained to use the equipment. "We only bought an ultrasound machine after one of our staff did a course to be able to use it," she says.

Unlike others in her industry Veronica isn't seeing a strong trend for pets to be treated in the same way as humans.

"The only real opportunity to buy into a practice is if you take a punt and buy a one-man-band from a vet who's retiring," Veronica adds.

"I think people are realistic and understand many medical procedures are unaffordable for pets. For example, if we found a brain tumour on an animal, we probably wouldn't do surgery. People wouldn't want to put their pets through that in case of disability from brain damage,"

Veronica explains, adding "even making people realise it's important to do blood samples can be hard."

In terms of the breakdown of the animals the practice in which Veronica works sees, she says it's about "60 percent dogs, 30 percent cats and 10 percent 'pocket pets' like rabbits, rats, lizards and birds."

Veronica, who "wanted to be a vet for as long as I can remember", says one of the most challenging aspects of being a vet is dealing with pet owners. "It's one thing to deal with an aggressive pet because their behaviour isn't their fault, but it's another to have to deal with aggressive owners," she says.

This report is designed to shine a light on the current position of practices in the veterinary sector in Australia.

Most of the data contained in this report was prepared by Access Economics in 2008, which was commissioned by NAB Health to:

• Estimate the value in dollars and as a share of GDP of the healthcare industry as a whole compared with 30 years ago and projected forward 30 years.

Estimate the contribution to the current value from:

• general practitioners, dentists, veterinarians, pharmacists and six types of medical subgroups.
• Estimate the current number of people and full-time equivalent people by gender in the workforces of GPs, medical specialists, dentists, veterinarians and pharmacists.
• Estimate changes in average income by gender in the workforce.

The report canvasses:

• Average income earned by vets, with details male and female income split.
• Income earned by veterinary practices and employed veterinarians.
• The changing number of practicing veterinarians in Australia and the trends influencing the number of vets practicing.

Data was also obtained from interviews with three practising veterinarians, Drs Stephen Coles, Janet Cridland and Veronica Wah Day.

Thanks to Janet, Stephen and Veronica for contributing to this report.

more information

For more information speak with your NAB Health financial specialist or contact:

• Craig Anderson, Managing Partner Victoria
  +61(0)3 9630 9405 or Craig.A.Anderson@nab.com.au
• James Carter, Managing Partner New South Wales
  +61(0)2 9433 1922 or James.M.Carter@nab.com.au
• David Backhurst, Managing Partner Queensland
  +61(0)7 3234 5205 or David.J.Backhurst@nab.com.au
• Les Ryan, Managing Partner South Australia
  +61(0)8 8291 3440 or Les.J.Ryan@nab.com.au
• Mike Beckingham, Managing Partner Western Australia
  +61(0)8 9214 6534 or Mike.P.Beckingham@nab.com.au

visit nab.com.au/health

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