The Queensland economy is more diverse than you think with 80% of the economy services driven
3 September 2015: You wouldn’t be blamed for thinking Queensland’s economy was down on its luck, with commodity prices crumbling, gas construction running out of steam, the devastating drought, and the latest unemployment figures ticking up to six and a half per cent from six per cent. So what’s to love?
In its September Queensland Business Outlook – titled Confidence for Tomorrow - with the completion of BG’s Curtis LNG project, BHP’s Caval Ridge mine and the Hay Point terminal upgrade, there is now capacity to significantly increase resource exports from Queensland.
“With China slowing this is conditional of course on demand,” said Chris Richardson Partner Deloitte Access Economics, who launched the 2015 Outlook with Deloitte Queensland Managing Partner John Greig.
Richardson said: “Australia faces a bunch of challenges, and Queensland can add a few of its own to that list. Yet despite being on the wrong side of some challenging trends, our outlook for the Queensland economy over the next five years sees an improvement on current conditions.
“There are a number of critical transitions yet to play out – including managing the shift from construction to production in the resources sector, which has significant implications for the State’s economic growth prospects over at least the next year.”
Looking beyond 2015-16
Deloitte expects the recent lows in the Australian dollar and interest rates to boost Queensland’s non-resource sectors, while mining, and in particular LNG, are expected to remain a key driver for the State’s headline economic growth figures.
“With the commodity price falls of late, this will be an export story rather than an income story,” Richardson said. “But the negatives are more newsworthy than the positives.”
John Greig said: “It is hard at the moment for most Queenslanders to see any potential upswing in the State’s economy. However our research shows that Queensland is second only to West Australia in its overall investment pipeline. We also predict Queensland will outperform both New South Wales and Victoria over the coming years, in terms of employment growth and overall economic growth.”
Richardson said: “The Queensland economy is more diverse than people think, with 80% of the economy services driven. A more diverse economy is the natural hedge to the volatility of commodity markets.”
The Deloitte Queensland Outlook points out that Queensland’s challenge is to transition its economy towards growth in industries that can supply reliable, sustainable and specialised products and services.
Greig said: “To spur a more diverse economy, Queensland should invest in assets and capabilities where we have strong competitive advantage in growth industries.”
Deloitte Access Economics formally launches its Brisbane office
Greig said: “To this end we are formally announcing the establishment of our Queensland Deloitte Access Economics’ office in Brisbane. In fact the Deloitte Access Economics presence in Queensland has been growing over the last four years and we now have a team of 20 practitioners based locally who focus on:
- Health and social policy
- Energy and regulation
- Transport and resources.”
Mark Ingham, who leads the Deloitte Access Economics Brisbane practice said: “The local practice is supported by the national Deloitte Access Economics team which has a significant national profile and footprint that combines technical economic capabilities with deep industry insights.”
Ingham said: “Along with Luke Baxby, who heads the health and social policy side of our business, we are committed to growing the local team over time, as our aim is to help Queensland and Australia to create ‘A better future’.”
Greig added: “The timing is right for the launch of Deloitte Access Economics in Brisbane, in conjunction with the Queensland Business Outlook, given the economic uncertainties and the role we believe we can play in supporting government and industry navigate through the State’s economic transition to renewed prosperity.
“In addition to producing quarterly outlooks, Deloitte Access Economics is also planning to hold facilitated sessions with government and industry on important economic policy questions. The outcome from these sessions will form part of our perspectives and contribute to the economic and social policy debate in Queensland.”
Outside of the resources sector, some transport and health infrastructure projects are underway, though the pipeline for large public infrastructure projects is weaker than recent years. Growth in both housing construction and housing finance has been strong, fuelled by interest rates at record lows. Despite having a strong impact on the housing market, the low interest rate environment has still to stimulate significant growth in consumer spending, with growth in retail spending lower than expected.
Nevertheless the weakening Australian dollar has supported the potential for better growth in both Queensland’s tourism sector - with a new focus on making the state more attractive to the growing Chinese tourist industry - and the agricultural export sector, although production here still continues to be hit by drought. But Richardson concluded: “Droughts don’t last for ever.”
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