At the end of the mining boom, as capital expenditure plummets (chart above) from an elevated level, and ten thousand new jobs expected in the Galilee basin now appear unlikely, it is probably not surprising that some commentators are getting hysterical and calling for the Queensland Government to stimulate the economy (see today’s Courier-Mail report). But, considering the pattern of employment growth over the last five years (see chart below), the Government is right to note the economy is broader than mining, even if one of its examples of where future jobs may come from, i.e. movies, is weak. Major areas of expected jobs growth in Queensland certainly include health, disability and aged care, and tourism, even prior to the Commonwealth Games on the Gold Coast in 2018. I’ve noted in a previous post that tourism (which has received a boost from the depreciating dollar) and our cafe culture are helping us endure the end of the mining boom.
I am even more confident about the prospects for tourism after listening to Justin Fung from Aquis at the recent Futures Summit in Brisbane. While he is not a disinterested observer, the points he made about the massive expected growth in Chinese tourism yet to come were very powerful. The Great Barrier Reef is on the bucket list for many people and Far North Queensland is the major gateway. It is great news that international passenger numbers at Cairns airport are trending upward (see That airport data again).
There may be a lot of jobs in the health and aged care sector but these industries are mostly funded by the government. How will the government get money to fund more and more jobs if there is very little private sector profits to tax?
Brad, no doubt these cost pressures could push up the government share of GDP. This may not be desirable from an efficiency point of view and would likely mean lower productivity but I have no doubt it could occur. Compare Australia with some European economies for example. The funding problem will become acute as you forecast and to avoid tax increases we really need micro reform of our health and education systems to encourage greater self reliance and user pays. Thanks for your comment.
Good post and good reply from Brad. It would be interesting to look at your time series graph over a longer period. 2005 (the start of your series) is actually well within the construction phase for the Queensland mining and energy boom. I suspect even the lowest point of the “building and structures” category you have shown is above long term averages (particularly if you separated out the housing construction). Like I’ve said before, what we are experiencing was 100% expected by any economist with a time horizon longer than a goldfish.
We seem to a have a construction and engineering sector that was more than happy to privatise the gains of the upswing in the boom, that are now pushing to have the downside cushioned by State expenditure (particularly for dubious projects that don’t pass a basic benefit-cost test – think dams, stadiums and roads to nowhere).
Besides, the downturn in activity will actually have a few positive spinoffs as the price of construction and the associated labour used should actually become more affordable to other sectors as the two-speed economy returns to more of a one-speed economy.
Everyone is getting overly gloomy about “the recession we are not even having”. But some of us are old enough to remember the “recession we had to have”. It is time we all had a bit of long-term perspective.
Jim, good idea about having a look at a longer time series. I might look at %’s of GDP, too. Thanks for the comment and suggestion.
Gene, Brad, Jim one deductive theory I have is that countries/states/cities/economies/societies and parts thereof must go through suffering (or dissatisfaction) now and then to force efficiencies and ingenuity and bring people together – as a result items of what I would call “resilient value” are produced, some of which have economic or financial value. Is there a deductive or inductive theory in economics or business that captures this? Is there any empirical evidence to support such a view. Do you disagree or concur?
I think Joseph Schumpeter had a theory like that – a recession is a good cold douche/shower. There may well be some truth to it. Thanks for the comment, Apolitical.