Townsville’s double digit unemployment rate signifies major downturn in region


Yesterday afternoon I had a good chat with Pat Hession on Townsville ABC Radio about the latest discouraging unemployment data for my old home town of Townsville. Readers will be familiar with the vastly different economic conditions across Queensland (see my post on the June ABS labour force data), and the latest detailed regional labour force data from the ABS confirm just how bad economic conditions are in Townsville (see chart above), as the region struggles at the end of the mining boom, and after it has suffered large cuts to public service jobs in recent years. The Townsville Bulletin reports today that:

“TOWNSVILLE has recorded its worst unemployment rate in at least 20 years as the business community pleads for government investment in major projects to create jobs.

Australian Bureau of Statistics figures released yesterday revealed a 14.8 per cent unemployment rate for June.

The jobless rate is the worst in ABS records going back to 1998. The next worst was 14.2 per cent in February 2003.”

The Bulletin is reporting raw, seasonally un-adjusted data from the ABS and it is important to recognise that, due to the relatively small number of households sampled by the ABS in the Townsville region, there is a large degree of sampling error in the unemployment rate estimate. So a smoothed “trend” estimate is likely to give a better reading of the unemployment rate. Using a twelve-month moving average, the Queensland Treasury estimates the current Townsville unemployment rate at 9.7 percent (and rising), while Cairns region economist and former London investment banker Pete Faulkner from Conus estimates the trend rate at 12.6 percent using a more sophisticated statistical technique (see Pete’s latest post Regional jobs data; improving for Cairns, worsening for Townsville). I suspect Pete’s estimate is closer to where the real Townsville unemployment rate is, as it is not as backward-looking as the Treasury trend estimate.

I doubt that major projects can come quickly enough and absorb enough local unemployed workers to make a major impact on the regional unemployment rate, so I have not called for major projects as a solution to Townsville’s unemployment problem. (Also we need to consider whether major projects pass the cost-benefit analysis test and are good value for money, of course.)

A summary of my conversation on Townsville ABC Radio yesterday with Pat Hession by the Insentia media monitoring company which was forwarded to me by a contact gives a reasonably accurate summary of the points I made, including the need to cut taxes and charges on business that are holding back job creation (e.g. payroll tax):

Hession says there is plenty of interest in the employment market. He says there are not enough jobs to go around. He says Tunny is a former Treasury Economist. Tunny shares his thoughts regarding Townsville’s unemployment rate. He mentions the figures are from the ABS. Hession mentions there are significant job losses through the closure of Qld Nickel. Tunny mentions the Townsville Chamber of Commerce stated that they have had significant job losses. He says there must be a substantial flow on. He says it is not just Qld Nickel but the mining downturn itself. He says the drought is affecting the economy too. He mentions there are positive signs in the construction industry. He says the economy is not in a good state. He says the Townsville Bulletin has recently reported an increase in bankruptcies. He makes suggestions on what governments can do to improve the situation. He says he suggested the relocation of something like Work Cover in the Courier Mail a few months ago. He says it would be great if a significant government agency can be moved to Townsville. He says governments could look at cutting the cost to businesses hiring people. He says they could look at cutting stamp duty. He says there is a limit to what the government can do. He says people in Townsville need to accept that things will be tough for a while. He says it may take some time for things to get better. He mentions JCU has been doing great.

Posted in Labour market, Townsville, Uncategorized | Tagged , , , , , | 10 Comments

HILDA reveals very wealthy Canberra households, while Queenslanders much less wealthy

The relatively high salaries of Canberra public servants are allowing them to build up healthy asset portfolios, while average Queenslanders are much less wealthy, according to the University of Melbourne’s Household, Income and Labour Dynamics Australia Survey, the latest report from which was released earlier this week (see chart below based on Table 5.3 data on p. 60 in the report). According to the HILDA Survey, Median household wealth in Queensland is the second lowest in Australia, with only the median Tasmanian household being less wealthy. There is certainly scope in Queensland to improve our educational system and to remove unnecessary regulations with a view to boosting our economy and improving average incomes and wealth.


You may recall that the HILDA Survey finding that the rate of home ownership in Australia is declining received some coverage in newspapers yesterday. The HILDA Survey is an outstanding resource and I highly recommend the latest report for its insights into Australian households and how they have fared over the last decade.

Posted in Education, Labour market, Macroeconomy, Uncategorized | Tagged , , , , , , , | 2 Comments

Judith Sloan right to criticise over-reliance on renewable energy

Judith Sloan, Contributing Economics Editor to the Australian, has a brilliant op-ed in the paper today (see Energy price reveals folly of renewables) criticising policies targeting renewable energy, following the wholesale electricity price spike that occurred in South Australia last week:

“What is clear is that overdevelopment of variable generation using renewable resources is a recipe for higher prices and lower than expected reductions in emissions because of the increasing costs of ensuring system stability and reliability.

Feasible storage options are down the track and, in any case, likely to be expensive.”

The high cost of renewable energy is likely to be one reason that energy giants such as BP are forecasting that, while renewable energy will grow strongly over the next two decades, it will not come to dominate power generation (see chart below based on BP Energy Outlook data).


I have previously questioned the wisdom of the Queensland Government’s 50% renewable energy target (Qld Renewable Energy Taskforce asked to achieve impossible 50% target), and last week’s electricity price spike in SA makes me even more confident that the policy should be reconsidered. Indeed, it probably will be reconsidered as the high cost of the policy becomes apparent.

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IR reforms could improve employment opportunities for young Australians

Almost eight years after the 2008 financial crisis, young Australians still face a significantly tougher job market than before the crisis. To illustrate, the employment-to-population ratio for young Australians aged 15 to 24 remains well below rates experienced prior to the crisis (see figure below based on the latest ABS Labour Force data released last Thursday). The crisis and resulting loss in business confidence saw a sharp fall in the employment-to-population ratio for young people over 2008-09, and after that it continued to decline (more gradually) before starting to recover over the last 1-2 years. It is arguable that industrial relations changes, particularly the introduction of the 2009 Fair Work Act, have constrained employment opportunities for young people to some extent in the post-financial crisis years.


On 612 ABC Brisbane last Tuesday morning, in an excellent interview regarding Queensland’s high rates of youth unemployment in many regions, CCIQ’s Director of Advocacy Nick Behrens highlighted several ways that IR rules are constraining employment growth. For example, Nick noted that minimum engagement periods (e.g. an employee must be given a shift of three hours at least) are too long, and this rules out some employment opportunities, such as two hours of employment after-school for a young person. Hence, Nick recommends lowering the minimum engagement period. Also, Nick advocates reinstating junior rates of pay for twenty-year old retail workers and adopting the Productivity Commission’s recent recommendations regarding penalty rates. Finally, Nick is concerned about recent increases in first and second year apprentice pay rates that have made them unaffordable to some employers.

IR changes along the lines recommended by CCIQ would no doubt be unpopular with many, particularly with current workers who would lose out, but changes such as those recommended should be considered if we are genuine about improving employment opportunities for young Australians.

Posted in Labour market, Macroeconomy, Uncategorized | Tagged , , , , , , , , | 4 Comments

Qld unemployment rate creeps up to 6.5 percent due to ongoing weakness in regions

NAB Chief Economist Alan Oster had a memorable quote regarding the latest NAB Business Survey results published in The Australian yesterday:

“West Australia is going backwards, South Australia is in no great shakes and Northern Queensland is just as bad, but the eastern seaboard, from southeast Queensland through NSW and Victoria, are shooting the lights out.”

Oster has correctly identified the divergence in economic performance between SEQ and regional Queensland. This divergence means it is difficult to characterise how the total Queensland economy is performing. The ongoing economic weakness in regional Queensland has contributed to the Queensland unemployment rate increasing slightly to 6.5 percent in June, up from 6.4 percent in May (see chart below and Queensland Treasury’s Labour force brief). This is much higher than pre-financial crisis lows, but is much lower than historical double-digit highs, last seen in the early 1990s when the unemployment rate reached 10-11 percent. That said, the Queensland outback had a double-digit unemployment rate in May of nearly 12 percent and Townsville had an unemployment rate over 9 percent, according to Queensland Treasury’s smoothed estimates of the ABS original data (see Treasury’s Regional Labour Force brief).


While SEQ appears to be performing reasonably well, it is obvious that jobs growth in SEQ is being offset to a large extent by job losses in regional Queensland, producing a relatively low rate of employment growth of only 0.3 percent over the year to June, compared with 1.9 percent nationally (see chart below).


As I have commented previously, Queensland’s under-performing economy may have discouraged many people from looking for work, resulting in a reduction in the labour force participation rate (see chart below). Indeed, our participation rate has converged to the national rate (now 64.9 percent), while historically Queensland had a significantly higher participation rate.


On the June labour force data released by the ABS today, also see Pete Faulkner’s post:

Jobs data disappoints for QLD again

Posted in Labour market, Macroeconomy, Uncategorized | Tagged , , , , , , , , , | 2 Comments

ANU’s Ben Phillips quantifies the real per capita earnings declines in Qld and WA post-mining boom

ANU Associate Professor Ben Phillips, who was in the same UQ Economics Honours class as me, has released an excellent note Trends in Household Living Standards in Australia: 1990 to 2016, which shows significant declines in real per capita earnings in Queensland and WA since the end of the mining boom (see my chart below based on figures I estimated consistent with Ben’s methodology). You may recall Ben’s analysis featured in an article by David Uren in yesterday’s Australian. Ben notes:

“Without the mining boom Queensland and WA wages are falling (in real, per capita terms). Over the past three years Queensland wages are down 4.4 per cent and WA wages are down 6.8 per cent.”

This is having a profoundly negative impact in the mining regions. And the associated decline in spending is having adverse flow-on impacts in a range of industries across Queensland. For example, the Gladstone Observer published this article yesterday:

Sex trade’s bottom line hit by mining downturn

The adjustment to the mining downturn continues to be a challenging one.


Posted in Macroeconomy, Mining, Uncategorized | Tagged , , , , , , , , | Leave a comment

Heat map of Brisbane metro property prices – big opportunities in the Western corridor?

It is well appreciated that people are willing to pay more for properties that are closer to the CBD, have a greater range of services close by (e.g. transport, retail) and offer an attractive lifestyle (e.g. a cosmopolitan community, river views). Given the large variations which exist in these features across suburbs (as well as due to variations in property sizes) there is thus a great disparity in median house prices across the Brisbane metro area (see the map below based on the May 2016 CoreLogic data published in the August issue of Your Investment Property magazine). So New Farm and Teneriffe have median house prices around $1.5 million, while median house prices in many suburbs in Ipswich and Logan are in the $300-400k range. With recent improvements in services and amenities, particularly in Springfield (e.g. shopping centre expansion, rail line, Robelle Domain), and the large projected population growth in the Ipswich region, relatively low property prices could make the western corridor and Ipswich good places for investors to consider.

Median house prices_Brisbane metroSource: CoreLogic May 2016 median house price data published in the August issue of Your Investment Property magazine. N.B. data unavailable for some suburbs (coloured white on map).

I have previously discussed the long-term prospects for Ipswich:

Coles backs Ipswich – good investment given strong population growth

 N.B. The usual disclaimer applies, that this does not constitute investment advice.

Posted in Housing, Uncategorized | Tagged , , , , , , , | 2 Comments