Qld economy patchy – SEQ appears fine, but much of rest of Qld struggling

I had a nice chat with Ben Davis on his 4BC Live program yesterday afternoon about the state of Queensland’s economy, a discussion which was inspired by the flurry of press releases that came from the State Government in the morning regarding jobs growth in different regions. I explained to Ben that economic conditions are different across the State, and while South-East Queensland might be fine, partly due to the apartment construction boom in Brisbane and Commonwealth Games’ preparations on the Gold Coast, the rest of the State is struggling in many parts due to the mining downturn and the drought (see the chart below, illustrating the stark difference in conditions in SEQ and the rest of Queensland).

SEQ vs non-SEQ_Jan16

I mentioned to Ben that economic conditions vary by industry and by region. Tourism is a well-known bright spot, due to the lower value of the Australian dollar, and that has helped improve conditions in Cairns, for example. But the Mackay, Rockhampton and Townsville regions, for example, have suffered as a result of the mining downturn (on Townsville and Cairns, see Pete Faulkner’s latest post).

To further make the point about the variability of conditions, I mentioned that health, aged care and child care workers appear to be in demand across Queensland, and there are shortages of some health professionals in regional areas, according to the Commonwealth Department of Employment’s Skill Shortage List. Also, the National Disability Insurance Scheme (NDIS) will boost demands for disability care workers as it is rolled out over the next few years.

The flurry of press releases from the State Government I referred to earlier was very likely prompted by two columns in Friday’s Courier-Mail questioning the strength of the Queensland economy, both of which included quotes from my recent posts. One of the columns also included an unfortunate off-the-cuff remark I made to one of the journalists while chatting on the phone (see image below).

IMG_0157

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10 Responses to Qld economy patchy – SEQ appears fine, but much of rest of Qld struggling

  1. Craig Wilson says:

    Useful post

    Sent from my iPhone

    >

  2. Jim says:

    Gene

    The off the cuff remark might have been a bit harsh, but it isn’t that far from the mark. It is actually good to see someone telling it like it is!

    Jim

  3. NSSfT says:

    Hi Gene,

    you might have been talking off the cuff, but I think you told the hard truth. The reality is that the regions are largely stuffed and its very hard to see how this will reverse. Cairns and a few other locations can trade on tourism but for the rest? Well it turns out they relied on government spending and resources. However, governments will no longer spend they way they have in the past and coal is in structural decline. Meanwhile other resources will be down for possibly half a decade or more and agriculture is in a very, very bad way. When markets do return, so will automation and lean systems and the truth is that there will not be the need for large numbers of workers or the high wages that were once needed to attract workers.

    I think we are witnessing the big unwinding of regional Queensland. Economically, I am not sure it pays its way anymore, climate change will keep rolling on and the costs of insurance and provision of services will keep rising. Townsville and Mackay are clearly in depression – take a look at their realestate markets, UE and population ‘growth’.

    Things come, things go, thats how economies work and I think for people like me prosperity lies in the cities. Government can’t fix everything. Instead of ‘developing the north’ with population and yet more uneconomic infrastructure, I think in 10 years time we may see that 2016 marked the moment of ‘strategic retreat from the regions’.

    Cheers,

    • Jim says:

      NSSfT

      I’m not sure I’d be quite so pessimistic. But when it comes to regional and northern Queensland we need to view ‘development opportunities’ through a few fundamental realities:

      1) The regions will always be dominated by a very few export sectors (mining, energy, broad scale agriculture, tourism) that are highly cyclical. Boom-bust cycles are the norm, not the exception.
      2) A lack of economic diversity reduces the ability of regions to diversity risk (climate or market risk). This just exacerbates the highs and lows of the boom-bust cycle.
      3) The region’s competitive advantages into key current and emerging markets are actually quite limited (particularly if new capital investment is required to achieve commercial returns). Too often governments focus on the supply side of markets when developing economic development strategies (e.g. see Northern Australia white paper), rather than the demand side of key markets and the regions’ competitive advantages in meeting that demand.
      4) The cost of government service delivery per capita is generally a lot higher in the regions. The economic sugar hit of new developments often comes with a fiscal bitter after taste for the taxpayer.

      If you accept these realities, any approach to regional development would be very different. Less viewing opportunities through rose coloured glasses, and more hard-nosed risk assessments underpinning development. And it might involve some facilitated strategic retreat from some locations.

      • NSSfT says:

        Hi Jim,

        I think we are violent agreement. The thing is, when you take into account your four fundamental and the many more that exist, I have reached the conclusion that the economic role for the regions has declined to the point where we cannot sustain the number of population centres we have up here into the future.

        Glen, I do understand your perspective, my family have been involved in the northern beef industry for >150 years and I know how people feel about government regulations and green tape. However, there are realities that are fixed, these are the same realities that people and businesses face day by day in southern centres. Unfortunately, the economics of the north are such that it’s not really possible to make projects viable unless we toss out regulations and environmental concerns. But we know this is not an acceptable approach in 2016, nationally or internationally – we have to be responsible and deal with the world that we have.

        I know I may seem pessimistic but my views have been developing over years and a long life. World wide cities and urbanisation are the future of strong economies.

      • Glen says:

        Jim some very valid points and yes there are some towns that may have to face an eventual demise or at best, a stagnation that if those who are left are happy to accept the town may plod along. I was heartened greatly by Bernard Salts presentation in Townsville a couple of weeks ago of which was glowing of the future of Townsville ( looking through the the current clouds on the horizon) and gives some great ideas to transform the economy and create opportunities. The business I look after in the North still has good commitments to Townsville and recent announcements of large projects both private and public in Townsville indicates others share our optimism. We do however have minimal confidence in other regions in the short or medium term, we have completely withdrawn from Cairns a while ago and have some small involvement in Central Qld and Darwin. I agree with NSSFT that the Northern White Paper is a short sighted document of little substance to quell some political disquiet. This is however where the next battle for the North is, the political one. This will not make Gene happy but there is a quiet, considered building of political will in the North, not the ramblings of some mindless separate state wafflers, but a determination to secure an outcome within the current system. The current state of politics in Qld would give 6-8 seats control in the majority of elections, the 3 amigos up here have pricked the conscious of many in regard to getting the balance of power in Qld, and I think it’s only the start.

  4. Glen says:

    Gene it might be buggered up here at the moment but these things always turn around at some stage. The fate of the regions lie with the govts at both levels, not so much in what they spend but by how much they restrict what people in the regions want to do, particularly in regards to foreign ownership and rediculous environment legislations that render many projects unviable.
    Tree clearing laws, water runoff reporting regime that would send any man off the land, green zones that have sent 75% of the northern trawler fleet broke, onsite treatment requirements that are so high we will probably never see an Island resort built again and some may even close down, as well as the endless court challenges to mines and other industry approvals are all part of the problem. A reluctance of govt to commit to base load power in the north is also restrictive in attracting investment.
    Our biggest meat works in the North in Townsville is currently in its longest shutdown in memory because it can’t secure the cattle it needs to open. 600 people without income for 4 months. Yet we have companies, mainly foreign, who want to spend billions of dollars opening up the Cape and other areas to create large scale pastoral holdings that would ensure it supply but the govt won’t approve it because it’s foreign money. Even Australian businesses are prevented from investing in the North, a company called Wellards have had an application in for 2 years to build a 50,000 head feedlot just south of Townsville that the govt have stalled.
    I travel extensively right across the North and every town has a story of a project that has stalled because of govt interference on many levels, many just give up and look elsewhere for opportunities, money is like that, it follows its easiest path and if you put obstacles in its way it will simply find another path.
    I don’t expect the govt to fund the North in a disproportionate way but I don’t expect it to restrict our opportunities in a disproportionate way either, just get out the way and let us get on with our lives and secure our future. We may be buggered at the moment but I think the people in Brisbane and Canberra have to accept some responsibility for our current state, we are told to diversify our economy away from mining and have many opportunities to do so, but the govt and a very vocal public minority down south need to give the North the freedom to do so.
    Whilst many like NSSFT are preparing for a strategic retreat, there are some of us digging in to fight for our future and provide opportunity for our families to stay and live in the North, lets hope we succeed, or we will all be adding to your traffic problems down there in the future.
    All the best.

  5. Pingback: Last Week in Queensland – 29 February 2016 | Ethical Consulting Services

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