I’m unsure if the Queensland economy is at a standstill, as suggested by the federal Treasurer Joe Hockey (see today’s Courier-Mail report), but, at best, it is moving slowly and sluggishly. This has meant the Queensland unemployment rate has remained stuck above 6 per cent, but so has the national unemployment rate, which is only slightly lower than Queensland’s. The Queensland economy is currently enduring a major shock from the end of the mining boom. As I’ve commented in a previous post, the economy is enduring the shock as well as can be expected.
The economy is currently being propped up by recoveries in residential construction, particularly associated with the boom in approvals and construction of apartment towers (see Qld economy propped up by residential building as business investment slumps), and tourism (see the International Tourism Snapshot). And measures of confidence are improving, particularly in the building industry (see Gold, Sunshine coasts drive construction confidence: Master Builders).
That said, business is legitimately concerned about future levels of infrastructure investment, and is eagerly awaiting the State Government’s draft State Infrastructure Plan, to be released later this year. There is no doubt the business sector was looking forward to the $8 billion of infrastructure spending that was to be funded from privatisation proceeds by the previous government. This funding is no longer available for new infrastructure, so the business community is anxiously awaiting the current Government’s plans to be set out later this year.
A good post, but I’m not sure how the “end of the mining boom” could ever be considered a “shock” – economic or otherwise. It was entirely expected and is simply part of the investment cycle.
People have very short memories and forget that the unprecedented boom of the past 15 or so years is not actually the long term normality.
I just had a quick look at the labour force stats for Qld (they go back to 1978). The average seasonally adjusted unemployment rate in Queensland is a full percentage point higher than the current rate. The current rate is also in the best third of monthly results since 1978.
Probably time the commentators took their fingers off the panic button and got a bit of perspective….
Thanks Jim. Yes, you’re right, the end of the mining boom was to be expected, but I don’t think the pace and magnitude of the reduction in capex was perceived by many. You’ve correctly noted the problem of short memories. I’d also suggest there was a bit of the this-time-is-different syndrome with people recognising booms had busted before, but thinking we were in a commodity price super cycle, or whatever they were calling it at the time.
On the unemployment rate, that’s right, it looks ok from a historical perspective. But I suspect the natural rate of unemployment or NAIRU has come down and we should expect a rate of 5% or so to be the new normal.