Improvements in technology, the strong dollar and increasing global competition have sent 80,000 service sector jobs overseas in the past four years, putting pressure on the country to reinvent its economy before the mining boom ends.
The erosion of the sector suggests time is running out for Australia to remain globally competitive in higher-skilled service-based industries, according to the report by the Melbourne-based National Institute of Economic and Industry Research.
"The window to build a place in the global industry is closing as other players occupy strategic positions," the report said. "There is a danger facing Australia now that not only will we fail to take a role in the global market but that we will de-skill our workforce by moving key parts of the service sector off-shore."
The grim report for Australia's service sectors comes days after the Reserve Bank flagged an earlier end to the mining investment boom, as it cut interest rates to support the weaker patches in the economy. The slowing of the mining boom is expected to put pressure on the economy, which has been buffered from the global financial crisis through buoyant exports for commodities. Overnight, the International Monetary Fund lowered its growth forecast for Australia next year to 3 per cent, from an earlier call of 3.5 per cent.
NIEIR estimates that 20,000 jobs a year in the areas of clerks, accounting, banking and technical support are moving overseas because of technology improvements, the portability of jobs, and the availability of skills abroad, as well as the impact of the strong dollar, which has traded above parity with the greenback for almost two years.
The trend could send between 700,000 and 1 million jobs overseas in the next three decades, not just to lower cost countries like India and the Philippines but to advanced economies like the US, UK and the Netherlands which are investing in specialised skills.
"The potential for a range of functions to be undertaken remotely with existing or emerging technology is evident in all occupations listed," the report said.
After the finance sector, with 24 per cent of jobs 'at risk' of being offshored, 20 per cent of professional, scientific and technical services were similarly at risk. The same proportion of information, media and telecommunications jobs are also at risk.
Finance workers, software programmers, call centre workers, project administrators, information and communication technology workers, financial planners, media workers and illustrators are among the other groups at risk of having jobs sent overseas in the next two decades.
"There is evidence that failure to deal with competitiveness of Australia's services industries is impacting the government's ambition to move toward being a knowledge-based economy and undermining the significant investment being made in education and training services," the report said.
Although jobs in the service sector have been hit hard, Australia's broader economy has seen the creation of 587,000 jobs since September 2008, according to official Australian Bureau of Statistics data, helped both by the mining and non-mining sectors.
Colonial First State analyst James White said the NIEIR report highlighted the importance of maintaining globally competitive skill sets, which will increase local opportunities even as some jobs are sent abroad.
Mr White said that in the current economy there is a "massive role" for a life-long education. "And the government needs to be very clear about how it supports people in life-long education."
JP Morgan economist Tom Kennedy said the services sectors had also been hurt by the high dollar and higher interest rates maintained by the RBA in recent years.
“It makes offshore locations that have been expensive, relatively cheap in comparison,” said Mr Kennedy.
In the near-term, job losses in the service sector may revolve around boosting productivity through cutting costs, said Mr Kennedy.
Labour productivity in Australia lags 13 developed economies including the US, Ireland, Netherlands and Germany, in gross domestic product per hours worked in US dollar terms, according to the Organisation for Economic Co-Operation and Development.
The NIEIR report, which updates a 2008 report undertaken for the Finance Sector Union and the Australian Services Union, said that jobs with a heavy reliance on information technology and routine work was under the most threat.