One in every one thousand people in Qld in quarantine with more to come given sharply rising COVID numbers

According to the Courier-Mail, over 5,400 people, or around one in every one thousand people in Queensland are in active quarantine, mostly because they’re close contacts of COVID cases (see the charts below with data for the Queensland Hospital and Health Service regions). I expect the number in active quarantine will increase substantially over the next few weeks, given our rapidly rising COVID case numbers. We will no doubt start to see short-staffed businesses as quarantined people are unable to turn up to work. Note the figures for Metro North in the charts below are most likely abnormally high due to the region including Brisbane CBD and Spring Hill, where a lot of quarantine hotels are located. 

Source: Qld Health data published by the Courier-Mail.

It didn’t take long for Queensland to record triple-digit COVID cases as we did today with 186 new cases, and we’ll probably be looking at daily cases of 1,000+ in a week or so, I guess. So far the Queensland Government appears to be keeping calm, but there’s much suspicion in the community that the Government will go further than re-imposing a mask mandate – i.e. possibly even a lockdown to “flatten the curve” – not long after Christmas. Let’s hope it remains calm, because tourism and hospitality businesses are counting on a strong Summer season. Anecdotal reports are that Gold Coast and Sunshine Coast accommodation bookings are very strong, partly because they benefit from the drive-in market from Brisbane, but the difficulties in traveling interstate (i.e. the PCR test requirement which hopefully will be relaxed) mean that North Queensland destinations may not experience as strong a season as they’d like. 

Source: Qld Health data published by the Courier-Mail. Incidence rates were calculated by adjusting HHS population estimates for 2019 to reflect Qld Treasury’s current population estimate boosted by 100k to account for additional people from interstate in the lead up to Christmas. 

The big unknown, with huge implications for policy, is how our public hospital system, which was already feeling the strain before the border re-opened, will cope with sharply rising cases which will surely bring sharply rising hospitalisations, even though at a lower number than if we didn’t have the vaccine coverage we do. I should note that Queensland’s vaccination coverage could be a bit higher, as at 85% double-vaxxed it’s third lowest among the states and territories, with Queensland only beating NT and the remote hermit kingdom of WA (see COVID-19 vaccine rollout update – 21 December 2021). Could we have done better if our former CHO, now Governor, hadn’t raised doubts about the safety of AstraZeneca earlier this year? Hard to say. But once we’re out of this pandemic, we need to examine government policy advice and decision making during the pandemic with a highly critical eye. Too many people have suffered from cruel and inconsistent government policies and those in power should be held accountable. 

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Optimism at home, big inflation concerns abroad – catch up with my livestream at 11.30am AEST

While Australian economic policy makers are forecasting a growing economy with moderate inflation, policy makers elsewhere are concerned about accelerating inflation. In the federal budget update released yesterday, the Treasury has forecast a growing economy with inflation within the RBA’s 2-3% target band over the next three years. The RBA is signalling it won’t increase the cash rate next year (Reserve Bank of Australia insists economic conditions ‘still a fair way’ from an official interest rate hike), but there’s always the possibility it could be forced to, if inflation accelerates further than policy makers are expecting.

Elsewhere, the Bank of England has finally increased Bank Rate from 0.1% to 0.25%, after inflation increased to a ten-year high of 5.1% (see Interest rates rise for first time in three years). And the US Federal Reserve has had what the Financial Times has described as a “hawkish pivot on inflation”, and it has signalled three interest rate increases next year. Also, somewhat bizarrely, Turkey is increasing its minimum wage 50% in response to an inflation rate of over 20%, a move which many economists have criticised as potentially contributing to an inflationary spiral. I’ll cover all these developments in my livestream later today (link below).

In Australia, the budget updates from the federal and state government yesterday reflected the general optimism about the domestic economy as we approach 2022. The November labour force numbers published yesterday by the ABS were extraordinary, with unemployment below 5% in all the states except Tasmania (where it was just over 5%) and below 4% in WA (see chart below). This is probably related to immigration not adding to labour supply during the pandemic. Once immigration resumes to near previous levels we may no longer be seeing unemployment rates with a 4 in front of them.

Unemployment rates in the major Australian states are below 5%, while WA is below 4%.

Yesterday, the ABS also published updated interstate migration data, confirming just how many people have relocated to Queensland during the pandemic, nearly 31,000 in the 2020-21 financial year. With interstate borders reopen, I suspect we’ll see strong interstate migration next year as more people flee from Sydney and Melbourne. Of course, COVID is coming to Queensland, so maybe we won’t look so good in a few months time. As always, the future is highly uncertain.

Queensland is gaining over 30k people from interstate each year, while NSW and Victoria are losing 17k and 18k respectively.

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Coal the dirty secret behind Qld budget improvement

The super high coal price is the main reason Queensland Treasurer Cameron Dick will report a much improved state budget balance this week. However, yesterday the Brisbane Times reported:

Mr Dick said the silver lining of the pandemic was an increase in employment and a lower deficit of $937 million – the result of Queensland’s COVID response that allowed businesses to stay open.

But the state Treasury was never assuming in its budget forecasts we’d have prolonged lockdowns in Queensland, so the budget improvement can’t be due to our COVID response, which was already factored into the numbers. Instead, the budget improvement, which I take it is a reduction of the 2021-22 net operating deficit from $3.49 billion to $937 million, a $2.5 billion improvement, must largely be due to the super high coal price, a result of global economic recovery from the 2020 COVID recession and a global gas shortage (noting coal can be a substitute for gas in energy generation). I covered this on QEW a few months ago (e.g. Super high coal prices will boost royalties and slow the increase in Qld state debt). To keep you up to date, here’s the latest coking coal price chart, showing current month and 12-months ahead futures prices, which signal that coal prices are still much better than state Treasury expected.

Super high coking coal prices will slow the growth of Queensland state debt.

For 2021-22, Queensland Treasury assumed an average price for hard coking coal of 130 USD/tonne (see p. 253 of Budget Paper 2), while it’s ended up selling for 300-400 USD/tonne for the last few months. As Treasury notes (on p. 253 of Budget Paper 2):

A one per cent variation in the average price of export coal would lead to a change in royalty revenue of approximately $33 million.

I won’t do a back-of-the-envelope calculation because I’d need to consider the thermal coal price as well, but it’s pretty obvious coal price increases of the magnitude we’ve seen mean billions of extra dollars for the Treasury, and we should learn the Treasury’s precise estimates this week when the mid-year budget update is released.

Finally, I should observe that, today, Queensland’s cruel and shameful interstate border restrictions come to an end. It’s about time. It’s good news for the state economy, especially for our tourism operators, and let’s hope the state government holds it nerve as COVID cases climb, and we don’t see costly restrictions re-imposed.

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Was COP26 just a talkfest? Latest podcast episode with Scott Hook, a former COP adviser for Pacific nations

I caught up with my colleague Scott Hook recently to review the outcomes, or arguably lack of outcomes, of the COP26 climate change summit which was held in Glasgow last month (see Economics Explored episode 117). Scott has previously attended several COP meetings as an adviser to the delegations of Pacific island nations, so I appreciated his insights.

In particular, from Scott, I learned about the major climate change adaptation measures being pursued in Pacific island nations at risk from sea level rise such as Fiji. The Fijian Government, supported in part by the NZ Government, is moving whole communities at risk from sea level rise (New Zealand commits millions to climate relocation fund for Fiji). I couldn’t find any specific mention of Australian support for Fiji’s Climate Relocation and Displaced Peoples Trust Fund, but Australia does provide tens of millions of dollars of development assistance annually to Fiji, so we can’t be accused of shirking.

Let’s hope we don’t need to consider similar relocations of coastal communities in Australia. Earlier this week, it was reported Parts of major Queensland cities could be under water within 80 years, modelling shows. Check out how badly Cairns and Noosa in particular would be flooded in the case of storm surges in 2100 via the Coastal Risk Australia site. I can’t assess the accuracy of these long-run projections, obviously, and these awful projections may not eventuate, but they’re probably worth considering if you’re looking at investing in coastal property. That said, it’s difficult to be too worried about bad things which may happen in 2100, when we’re still stuck in a pandemic in 2021, and Queensland is about to experience a wave of COVID cases as we open up to interstate visitors on Monday.

While chatting with Scott, it became apparent to me just how difficult it will be to get any sort of binding international agreement which ensures all countries follow through on their climate change commitments. Although Australia is criticised for not putting forward ambitious targets, at least we tend to meet our commitments. Some other counties may make large commitments but won’t necessarily follow through, and there’s no point Australia bearing the cost of large greenhouse gas emission reductions if other countries aren’t going to do the same. I should note Scott is much more optimistic about the UN process ultimately achieving something than I am, so please have a listen to our conversation and let me know what you think.

Coastal communities, such as this one in Fiji, are at risk from sea level rise associated with climate change.

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Great Resignation chat with Anthony Bersz and Louise Gibson, Remedy Resourcing

The Great Resignation is the label given to the record numbers of people leaving jobs in the US and the UK. For a variety of reasons, many people have re-evaluated their lives and careers during the pandemic. People have quit their jobs to either take up a different job, set up a business, retire early, or have a sabbatical. In Episode 116 of my Economics Explored podcast, I chat about the Great Resignation with Anthony Bersz and Louise Gibson from Remedy Resourcing. Anthony and Louise are located just around the corner from me in the serviced offices at the Johnson, Spring Hill, Brisbane.

Drawing on their industry experience, Anthony and Louise confirm what economists have observed in the Australian labour market data, that the Great Resignation is not occurring here (See Australia’s ‘great resignation’ is a myth — we are changing jobs less than ever before and No sign yet of the “great resignation” phenomenon in Australia). However, Louise makes the great point that, as we re-open to the world, we may see a big outflow of young professionals moving to take up jobs in London, New York City, etc. Hence, it may be too early to conclude that we won’t see a Great Resignation in Australia.

Here’s a video recording of my conversation with Anthony and Louise via YouTube:

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Livestream featuring US jobless claims, Aussie GDP + farewell to Tony Makin

I did a livestream earlier today with my regular co-host Tim Hughes on the latest economic news of the week, including the latest US initial jobless claims confirming a strong US economy, the impact of the omicron COVID-variant on equity markets, and the September quarter Australian GDP figures which revealed the adverse impacts of NSW and Victorian lockdowns. You can click on and watch the video on YouTube below. You can also download the slides I showed.  

In the livestream, from around 22:05, I reflected on the late Professor Tony Makin’s contributions to the Australian economic policy debate, particularly on whether we should worry about the current account deficit in the late 80s/early 90s and on the effectiveness of the Rudd Government’s fiscal stimulus. On the current account deficit, Tony’s articles, along with the contributions of John Pitchford, clearly led to a change in the policy consensus on the current account, so it was no longer something that would be a macroeconomic policy target. Sadly, Tony died unexpectedly earlier this week. This came as a huge shock to so many of us, and it’s obvious from all the conversations I’ve had about Tony over the last few days just how much respect and admiration his colleagues and former students had for him. Tony’s funeral is on Monday on the Gold Coast (see notice below). 

Funeral notice for the late Griffith University Economics Professor Tony Makin, who will be greatly missed by his family, friends, colleagues, and former students.

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Gov’t and renewables making disproportionate contributions to demand growth in Qld

The September quarter National Accounts published by the ABS yesterday revealed that the general government sector made a disproportionate contribution to Queensland state final demand growth that quarter, suggesting a strong pick up in the hiring of public servants, contractors, or consultants (see chart below).* 

A chart showing government consumption spending contributed 0.6 percentage points to Queensland’s state final demand growth of 1.8% in September quarter 2021.

This was one reason, though not the only reason, that Queensland’s economy saw strong growth in state final demand in September while NSW and Victoria’s economies were adversely affected by lockdowns (see the chart below). I should note that government consumption spending grew even faster in NSW and Victoria than in Queensland (5.0% and 3.4% vs 2.8%), but total state final demand in those states fell due to big falls in household consumption spending.

A chart showing state final demand growth by state, with positive growth across states expect in NSW and Victoria where the prolonged lockdowns had large adverse impacts.

As noted above, in Queensland, total government consumption spending increased 2.8% in the September quarter. In its National Accounts writeup, the ABS observed this increase was “led by increased frontline services including police, fire and emergency services and hospitals due to ongoing border closures and COVID-19 responses.” Based on the data, it must have been more than this, however, as there was a large increase in federal government spending, too. For state and local governments, the increase was 2.1% and for the federal government the increase was 3.6%, quarterly growth rates which are obviously unsustainable I should add. Certainly there was some additional ADF activity in Queensland which could explain a fraction of the increase in federal spending (see e.g. Troops to be deployed to Queensland border to counter ‘real and present’ threat of NSW COVID-19 Delta variant outbreak). But federal consumption spending in Queensland increased by $336 million in September quarter, much more than could be attributable to ADF personnel being used to help enforce state border restrictions. Possibly the federal government has boosted spending to bolster its election prospects in Queensland.

In contrast to fast-growing government consumption spending, household consumption spending grew at only 0.3% in September quarter, much lower than the pre-COVID average of around 1%. Even considering Queensland’s reduced rate of population growth during the pandemic, this strikes me as a sub-par result on household consumption, and isn’t encouraging. 

What is encouraging, however, is that business capital investment in Queensland was up 3.7% in September quarter, and it added nearly 0.4 percentage points to state final demand growth. Total private sector capital investment, including investments in dwellings, was up 4.6%. In its commentary on the Queensland data, the ABS observed this was related in part to the “increased expenditure on renewable energy projects.” Solar PV and wind farms don’t tend to provide a lot of ongoing employment, alas, so they may not be such a boon for the economy as one would hope. Also, we still need to resolve the big challenge of integrating so much renewable energy into the grid without threatening the reliability of electricity supply. 

*SFD measures domestic sources of demand in an economy. It does not account for net exports. That is, it does not add exports attributable to a state to the figure, nor does it subtract imports into that state, as would be done in a Gross State Product measure.

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No way Qld Gov’t can cancel 17 December reopening to other states – Omicron be damned

Fortunately, the Queensland Government gave a firm commitment to reopen the state to interstate visitors on 17 December, and I doubt the Omicron variant will force the Government to cancel that reopening. It would wreck the government politically, just as the carbon tax wrecked the Gillard Government and the U-Turn ultimately wrecked Ted Heath’s UK Government. Cancelling the 17 December interstate reopening would cause hardship for families looking to reunite and would shatter business confidence in the tourism sector, so I strongly expect the reopening will proceed as planned.

The reopening to overseas arrivals is being delayed, but from a macroeconomic perspective that isn’t a big problem because, pre-COVID, international travel meant money actually left Australia in net terms. Pre-COVID, Australians spent more money overseas than foreigners spent here, around $19 billion more (see the National Tourism Satellite Account). Of course, I should note there will be some impact of the delayed international reopening, particularly as it may delay the entry of some skilled labour needed by industry, and also it will restrict the arrival of potential foreign investors wanting to check out prospective investments in Australia.

Tomorrow, the ABS will publish the latest National Accounts which will show the full extent of the costly lockdowns in NSW and Victoria, and we will see a fall in GDP of a few percent in Australia in September quarter (see Treasury Secretary Steve Kennedy’s remarks last month reported in Australia’s economy expected to have shrunk about 3% in September quarter). Obviously, the National Accounts will reveal Queensland had a much better September quarter than NSW and Victoria, as we only had two mini-lockdowns compared with their crushing months-long lockdowns.

October retail turnover data suggest the NSW and Victorian economies recovered partly once the lockdowns were ended, NSW much more so than Victoria (see the chart below based on ABS data published last Friday). WA is way out in front, and Queensland is second among the States, in terms of retail trade relative to pre-COVID levels.* The WA and Queensland Governments will argue data such as these help justify the harsh and cruel border restrictions they have imposed. But those restrictions came at a large social cost, preventing families from reuniting and blighting the lives of many Queenslanders who have been stranded outside the state. What a shameful and awful policy measure.

Retail trade snapped back in October in NSW after the lockdown ended. WA and Queensland lead the Australian States in terms of retail trade relative to pre-COVID levels. NB estimates rebased to February 2020. SA stands for Seasonally Adjusted.

*Among States and Territories, NT is in second place, at 17.3% above the pre-COVID level, while Queensland is 16.6% above. WA remains the clear leader, at 23.1% above.

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Qld reopening proceeding despite state gov’t generating confusion about entry requirements

Queensland tourism operators would have breathed sighs of relief yesterday after it emerged interstate travellers could rely on PCR tests paid for by Medicare to enter the state. This came after some confusion and anxiety generated by the state government about whether travellers would have to pay for them. Federal health minister Greg Hunt is right to demand an apology from the Queensland Premier for the “unnecessary stress she has caused to Queenslanders and those planning to travel there” (see this Courier-Mail report). Queensland is well-placed to have a strong 2022 as interstate tourism is revived, but the Queensland Government could still stuff things up through incompetence and panicked policy responses. 

Queensland’s big test will come after 17 December when we reopen to NSW and Victoria and COVID comes in. Will our health system cope with the COVID case load, particularly with possibly thousands of unvaccinated staff unable to work, as suggested by this Sky News report? Of course, Queensland’s good weather and low population density will help slow the spread of COVID as it has in the past, so let’s hope those factors and our relatively high vaccination rates in many parts of the state keep us out of trouble (see the heat map of first dose vax rates below thanks to Adept Economics Research Officer Ben Scott). The SW-Queensland border town of Goondiwindi stands out with a first dose rate of 95%+.

Heat map of first dose vax rates for Qld regions showing Goondiwindi in the lead at 95%+. NB data are unavailable for much of the Queensland Outback and Cape York.

I was concerned about provincial cities such as Townsville, Cairns, Rockhampton, Mackay, and Bundaberg, but first dose vaccination rates there are all over 80%. For first doses, Townsville is at 83.1%, Cairns is at 85.9%, Rockhampton is at 82.1%, Mackay is at 86.4%, and Bundaberg is 88.5% (for the data go to COVID-19 vaccination – Geographic vaccination rates – LGA). Bundaberg is actually beating Brisbane which is at 87.2%. I’m hopeful the vax rates we’re seeing in these cities will mean local hospitality businesses won’t suffer hugely from having to turn away unvaccinated customers after 17 December, a state government policy which I think is absolutely wicked and over-the-top, for the record. 

We see lower vax rates in some remote areas, probably because locals perceive the risk of getting COVID is low. Most worryingly we see some very low rates in Indigenous communities such as Cherbourg (57.4% first dose rate) and Yarrabah (60.2%). We could have a major public health disaster if COVID gets into some of our Indigenous communities given the high prevalence of chronic health conditions. 

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PM calls jobs boom, RBA warns of crypto crash, and UK inflation highest in 10 years – upcoming livestream

As I’ve been covering on QEW and will discuss on today’s livestream (link above), there’s a lot of exuberance and optimism about the great Aussie reopening, and PM Scott Morrison has forecast a “jobs boom” based on healthy job vacancies data (see the chart below).

We’re hearing calls from business groups to resume high levels of immigration to help fill vacancies and address skills shortages and, implicitly, to put downward pressure on wages growth (e.g. see Increase skilled migration to 200,000 per year, says leading business group). I suspect we’ll see a vigorous debate in coming months about whether we return to previous levels of immigration or instead opt for lower levels which would place less pressure on services and infrastructure and would be easier to absorb into the labour market.

In today’s livestream, I’ll also cover accelerating inflation in the UK, where the 4.2% through-the-year inflation rate recorded in October was the highest in 10 years (see chart below).

We’ll also cover the RBA’s warning about cryptocurrency earlier this week (see RBA warns of ‘faddish’ crypto crash). Crypto prices have been falling this week (see chart below), reminding us of their volatility and the unreliability of cryptocurrencies as stores of value. Of course, they have proven to be extraordinarily successful investments for many people, but we should remember that investing in crypto is akin to gambling.

Please feel free to comment below. Alternatively, you can email comments, questions, suggestions, or hot tips to I also post from time-to-time on my business website, so please consider subscribing to updates there (Get in touch). Also please check out my Economics Explored podcast, which has a new episode each week.

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