CCIQ’s Joseph Kelly has published a nice note titled Business 2018 examining the outlook for Queensland business in 2018, in which he suggests “2018 has all the elements to be the year for business.” Factors that will boost Queensland’s economy in 2018 include the Commonwealth Games in April and the resurgence in the resources sector. But energy costs will continue to weigh on businesses. Mr Kelly notes that overall “Queensland’s economy goes into 2018 with momentum”. My own view is that this momentum should continue through 2018. Queensland’s economic conditions will most likely remain “sound”, as the Queensland Treasury described them in the Mid Year Fiscal and Economic Review (MYFER) published in mid-December. Expect health, aged care and education to continue to perform well in 2018, as well as new mining and renewable energy investments to provide a boost in regional areas across Queensland (e.g. see this Townsville Bulletin report and this Queensland Government media release from last October).
Based on data published so far this year, such as the retail trade data for November, which were boosted by iPhone X sales but still show weaker growth in Queensland than for NSW and Victoria (see chart below), I wouldn’t yet adjust the MYFER forecasts Queensland Treasury made for Queensland economic growth: 2.75% in 2017-18 and 3% in 2018-19. Growth will continue to be respectable, but not extraordinary, so don’t get too excited about the Queensland economy just yet. The resources sector may be expanding its exports and boosting growth, but some other sectors (e.g. manufacturing, retail) remain lacklustre.
The ABS job vacancies estimates for November released by the ABS on Wednesday showed a reasonable level of vacancies for Queensland, but I was disappointed the upward trend in vacancies has stopped and that vacancies have not continued to surge as in NSW and Victoria (see chart below and Pete Wargent’s post NSW jobs are absolutely booming).
As such, the number of unemployed people per job vacancy has not fallen in Queensland by much over the last year compared with the falls in NSW and Victoria. In NSW, in November there were 2.2 unemployed people for every vacancy, compared with 3.9 unemployed people per vacancy in Queensland (Hat tip to Pete Wargent whose chart on the national unemployed to vacancies ratio prompted me to look at what has happened in Queensland).
Unemployment is still a major issue in some regions, such as the Queensland outback and Wide Bay-Burnett (see chart below), but the labour markets in Townsville and Cairns especially have improved greatly over the last twelve months, as noted by Pete Faulkner in a recent post Regional Labour Force and Industry Jobs data (NB my chart below uses Queensland Treasury’s 12 month moving average estimates of regional unemployment rates, while Pete generates his own trend estimates using a seasonal adjustment routine).
I would be more excited about Queensland’s economic outlook in 2018 were it not for the outlook for the building industry which is fair at best. Building approvals have settled down to more reasonable levels after the apartment construction boom of the last few years (chart below), and non-residential building approvals are suggesting only modest growth in non-residential building in 2018. Over the twelve months to November 2017, the value of non-residential building approvals was only 3.1 percent higher (in nominal dollar terms) than in the twelve months to November 2016.
Upcoming events on the economic outlook
Finally, you may be interested in some events covering the economic outlook for Queensland and Australia in Brisbane in February:
- Economic Outlook Briefing 2018 with Paul Bloxham, HSBC Chief Economist Australia & NZ at Clayton Utz on 1 February, and
- CEDA 2018 Economic and Political Overview at BCEC on 16 February featuring Michael Blythe (CBA Chief Economist), Jim Chalmers (Shadow Finance Minister), and Nicholas Gruen (Director, Lateral Economics), among others.