Apartment & townhouse approvals double in January – catch up or over-shoot in supply?

Building approvals Jan 15

The massive surge in apartment and townhouse approvals in January reported by the ABS today (chart above) is welcome news for the Queensland building industry and people looking to buy or rent an apartment in inner city Brisbane, where much of the development is likely to occur. At the same time, some developers may be concerned about the number of apartment developments there will be competing for buyers, and the implications for the prices of apartments. I expect the supply boost will severely constrain the growth of apartment prices, but I note that consultancy firm Urbis and other commentators last month were more optimistic, arguing the expected supply boost was catch up growth and prices would continue to increase (see New hotspot for Brisbane apartment development). Pete Faulkner has a nice summary of today’s data in his post Queensland leads a building approvals surge:

The scale of volatility in the seasonally adjusted data can be seen in relief when we consider the Queensland data. Here we see an unbelievable 47.8% increase for the month and a 50.8% jump over the year. These exceptional numbers are all down to unit approvals. In Queensland we saw an extra 1564 unit approvals (up 103.2% m/m!); these approvals alone more than account for all the increase seen nationally over the month. House approvals were up just 63 (+3.3% m/m).

Based on Urbis’s research referred to in the article linked to above, it’s possible that we could see a continuation of high rates of approvals for apartments and townhouses in coming months. This is great news, but I doubt it will do much to offset the large negative shock coming from the downturn in the resources sector that I commented on in a post last week. I expect the Queensland economy will still struggle through 2015 with weak growth in output and employment.

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Upcoming event on Steel on Steel – inside story of privatisation of QR’s freight arm

In a post earlier this year, I discussed Stephen Baines’s excellent insider’s account of the privatisation of Queensland Rail’s freight arm, Steel on Steel. Not coincidentally, the Economic Society of Australia’s Queensland branch, of which I’m Deputy Secretary, has arranged for Stephen (photo below) to give a presentation on his new book at a lunchtime seminar on Wednesday 18 March. The event is to be held at Morgans on Level 29 of the Riverside Centre, Eagle St, Brisbane. You can find further details at ESA Qld’s website: Sandwich lunch featuring Stephen Baines. If you would like to do some pre-reading for the seminar, I would encourage you to purchase a copy of Steel on Steel from UQ Press.

Stephen-250x300Stephen Baines – Chief Innovation Officer & Executive Advisor to the Chairman of Aurizon

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MOOCs a game changer for universities – UQ lecture by Roly Sussex OAM

The_Great_Court_at_UQ

Our very own University of Queensland is a world leader in MOOCs. (Image attribution: By James Dover (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)%5D, via Wikimedia Commons)

Last Thursday night, at the University of Queensland’s Customs House in Brisbane, Emeritus Professor Roly Sussex OAM gave a terrific lecture on a recent “game changer” for universities: the rise of Massive Open Online Courses, abbreviated to MOOCs. What makes MOOCs special is that anyone around the world can enroll in a MOOC – so long as they can access the internet and download the lectures and course materials – and they are free. The promotional webpage for the lecture provides a nice summary of the importance of MOOCs:

In 2013 the University of Queensland joined edX, the international consortium led by Harvard and MIT whose goal is to create and deliver learning through MOOCs, or Massive Open Online Courses. UQx, the University of Queensland’s title for its MOOCs, was born. By the end of 2014 there were nearly a quarter of a million enrolments from more than 250 countries and regions in UQx courses. That is nearly five times the University’s current regular enrolment.

I was very impressed by the innovation and quality displayed in UQ’s MOOCs, particularly a recent MOOC that UQ has developed called Denial101x: Making Sense of Climate Science Denial. The video promoting the course is brilliantly produced and gives you a sense of the quality of course content for UQ MOOCs, which typically cost an estimated $50,000 to $100,000 to produce.

The economics of MOOCs are fascinating. The delivery of MOOCs appears to be coming at a significant cost to UQ, and it isn’t recovering the costs of delivery via course fees. So is the university just engaging in a philanthropic endeavour, spreading knowledge to people who previously wouldn’t have been able to access it around the world? In part, the university’s motivations may be philanthropic, but the business case for MOOCs depends on MOOCs exposing the university to potential international students, and those students eventually enrolling in real degrees on campus and paying tens of thousands of dollars in course fees. Time will tell whether this strategy is successful.

MOOCs may also contribute to more efficient and effective teaching at universities. Emeritus Professor Sussex suggested MOOCs may redefine the role of the campus. MOOCs reinforce the trend towards students watching lectures online. This provides flexibility and saves transport costs for students. It also means contact time with teachers can be spent on interpreting and exploring course content, as is done in tutorials, which will increasingly become more important than lectures. With students increasingly being responsible for reviewing course content prior to class (e.g. by course reading or watching a recorded lecture), students may no longer have to attend lectures on campus in the future. This would be consistent with the so-called flipped classroom model. This trend would reduce the need for large lecture theatres, and would free up space at our universities – space that comes at a high opportunity cost, given the prime real estate that, for example, both UQ and QUT occupy.

Posted in Education | Tagged , , , , , , , | 7 Comments

New Qld Government should allow plenty of time for thorough review of spending

I noticed that former Olympian Kieren Perkins has cast doubt on Queensland’s ability to host an Olympic Games and has pointed to the Queensland Government’s lack of a clear strategy to pay down debt (see today’s Courier-Mail). While the Queensland Government could probably borrow the money to pay for Olympics-related infrastructure spending, I agree that would be undesirable from the perspective of paying down Queensland’s debt and eventually restoring our AAA credit rating.

Regarding the Government’s fiscal strategy, while it did produce a high-level strategy for repaying debt before the election, it didn’t present the firm measures required to generate the multi-billion dollar surpluses it will need. As I’ve commented previously, the new Government did ask the public to take a lot on faith, as the bulk of its proposed debt reduction was occurring beyond the forward estimates – i.e. beyond the years that can be properly considered to be budgeted for – from 2018-19 onwards (see my speech on the black hole election). Now the then Opposition is now the Government, it will have to formulate budget measures that will allow it to run the multi-billion dollar surpluses it will need from 2018-19 to repay debt according to its fiscal strategy.

Hence it may be desirable for the Premier to slightly postpone the Budget, usually presented in early June, if it means the Government can give fuller consideration to budget savings measures. A good place for the Government to look for budgetary savings would be the hundreds of millions of dollars that is currently provided annually as industry assistance, and I hope the Government has received a full briefing on the progress and findings of the QCA’s industry assistance review (see my post Government should wait for QCA report before committing to new industry assistance).

Finally, on the merits of hosting the Olympics in Brisbane in 2028, hosting the Olympics would probably fail a cost-benefit analysis even if the State had massively paid down debt by then, as the experiences of past Olympic host cities, most notably Montreal and arguably Sydney, have shown. Queensland’s current fiscal situation makes the case for not going ahead with the Games bid even more compelling.

Posted in Budget, Uncategorized | Tagged , , , , , , , | 4 Comments

Qld receiving huge economic shock from resources sector capital spending decline

construction_work_done_Dec_14

The scale of the negative economic shock Queensland is currently experiencing from the decline in resources sector investment is extraordinary, as revealed by new ABS data on construction work done released today (see chart above, noting “Engineering” covers the heavy construction associated with resources sector and other infrastructure projects). Total construction activity in Queensland in December quarter 2014 was $3.4 billion below its peak in September 2013. This is equivalent to around 4% of quarterly Gross State Product, which is a massive difference.

Obviously, the huge negative shock Queensland is experiencing has profound implications for the economy, and a large range of businesses that supply services to the resources sector are feeling the knock-on effects. So the new Queensland Government may well face further increases in unemployment. Unfortunately, state governments don’t have many levers to affect unemployment, and those that they do have are relatively expensive to use – e.g. directly employing people or boosting subsidies to apprenticeships and traineeships. It appears likely that the new Government will have a testing first year in office.

Posted in Macroeconomy, Mining | Tagged , , , , , , | 1 Comment

Should governments financially support elite sports whose players are such poor role models?

Suncorp-Stadium-Milton-Queensland

An example of massive government support for elite sport – Suncorp Stadium which cost nearly $300 million to upgrade in the early 2000s.

The drugs scandal that has engulfed the Gold Coast Titans raises a question about government support for elite sport, such as the Queensland Government’s commitment to provide $100 million for a Townsville Super Stadium, as a perceptive reader of this blog pointed out to me the other day. Presumably one of the major justifications for government support for elite sports, as opposed to support for amateur sports through grants to local clubs, is that elite sport players are role models for young people and that their sporting exploits encourage young people to participate in sport, improving public health and reducing health costs in the long-run.

The poor off-field behaviour of many elite sports people, however, suggests they are often poor role models. And it doesn’t appear that elite sports people, who are more prominent than ever in the community, promote participation in sport, with participation rates in organised sports having remained static or declined over the 2000s according to a CSIRO study. And it’s well known that rates of obesity and overweight have increased over the last couple of decades, suggesting that people aren’t participating in sports as regularly or vigorously as they once did. The Monash Obesity and Diabetes Institute notes that the prevalence of obesity in Australia has more than doubled in the last 20 years (see Obesity in Australia facts and figures).

So the support of successive governments for elite sports appears to have failed what must be one of its major objectives: to encourage participation in sport and improve public health. Unfortunately, much of the assistance to sport is poorly targeted, as is the case for the Townsville Super Stadium which appears unworthy of public support given Townsville already has a football stadium, and surely there are better uses for $100 million in the city?

Governments across Australia should urgently review levels of assistance they provide to elite sports. The assistance doesn’t appear to be achieving any valuable public policy objectives, and the money would be better spent improving health and education services. Finally, several of the elite sporting organising bodies such as the NRL do very well out of TV rights and, if a new stadium is required for the good of the sport, then they should pay for it.

Posted in Industry policy | Tagged , , , , , , , , | 8 Comments

One-in-four part-time workers underemployed

Queensland’s relatively weak labour market is reflected not only in the unemployment rate of 6.5%, but in a relatively high rate of underemployment, with around one-in-four part-time workers in Queensland underemployed (i.e. preferring to work more hours than they actually do). This corresponds to around 180,000 part-time workers (see chart below based on ABS data published yesterday). The predominance of women in underemployment reflects the predominance of women in part-time employment generally.

Underemployment is an important aspect of labour utilisation, which is a broader measure of the state of the labour market than the unemployment rate. As Pete Faulkner has previously posted on, labour utilisation has worsened in Queensland in recent years (Underutilisation data). So Queensland’s lacklustre economy impacts not only those without jobs, but those with jobs, too, particularly casual workers who can’t get as many hours work as they would like.

Underemployed_Feb_14

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