Qld Government likely to go into election campaign with weak economy

New ABS data released today show a large drop in engineering construction activity – i.e. the heavy construction activity that has been largely associated with the resources sector in recent years. At the same time as this drop is occurring, building construction activity isn’t replacing engineering construction as a source of demand (see the chart below and Pete Faulkner’s post Qld leads the way in construction work done slowdown). Although data from earlier this month show building approvals are trending upwards, there’s no reason to expect a big surge in building construction anytime in the near future. Taking into account other facts, such as the weak labour market evidenced by a 7% unemployment rate, it’s looking very likely the Queensland Government will go to the next election, expected late February or March next year, with a relatively weak economy. Treasurer Tim Nicholls will be very busy next election campaign. He will need to sell both the asset leases plan and a new credible economic strategy in place of the now redundant Four Pillars Plan.

Construction_Sep14

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10 Responses to Qld Government likely to go into election campaign with weak economy

  1. Mark Beath says:

    The four pillars plan is redundant? Ahhgggggghhhhh Nooooooo!

    *tears own head off and screams incoherently*

  2. Craig Wilson says:

    good post

  3. Jim says:

    Gene

    Now that construction is in the doldrums with no obvious upside in sight, perhaps we could have a “three pillar economy” for the next election? We could use some rhetoric about a three legged stools wobbling less than ones with four legs (less wobbling being a good thing). Therefore “strongest and smartest choice” was to move to a “three pillar economy” (all typed with tongue planted firmly in cheek!).

  4. Mark Beath says:

    An interesting outcome in NSW with a suggestion it will be reflected in lower asset prices. With a Queensland review to follow not sure what implications it may have for electricity asset valuations here which could throw Tim Nicholls something else to think about?
    http://www.smh.com.au/business/jobs-axed-asset-prices-slashed-on-nsw-power-price-cut-20141127-11vayl.html
    .

    • Jim says:

      Because the value of the assets to any investor is effectively the capitalised value of future expected profits, the decisions of regulators have a massive impact on asset values. This includes both the economic regulator based on expected revenue/price caps, and other technical regulators (levels of service, safety, environment etc).

      It will be interesting to see who does the Qld review and what the terms of reference will be for the reviews. Also, will we see more reviews across other assets in the privatisation / lease sights?

      Interestingly the QCA has just laid off the Directors of the the OPBR, Rail and Ports and the Water teams (all old school economic regulators). With the QCA’s relatively new CEO having a background in finance (not regulation), are we about to see a very different approach to regulating utilities in Queensland? Where will the regulatory pendulum swing between the interests of asset owners and consumers? Who knows, but economic regulation might actually get interesting for a while!

    • Gene Tunny says:

      Yes, possibly very interesting. Thanks Mark.

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