The national & state economic results are in. The Queensland economy – in our opinion – deserves a B-.
Our report card comments would be…
“Trying hard; is tentative most of the time; much more focused since 24 March last year but is capable of a better result. Continuation of the current work ethic will help turn the B grade into an A. Removing all distractions would be a big help.”
Here are ten things about the Queensland economy.
- Queensland economic growth is expected to fall to 2.8% during fiscal 2014, down from 3.3% during 2012/13. Picking up again in 2015, with an annualised expansion of 3.1%.
- According to Standard & Poor’s, Queensland currently has a AA+ credit rating.
- Good news is the projected turnaround in the Qld state budget, from a -$6,699 million deficit this year, to a $783 million surplus in 2013/14. By the middle of 2015, Qld could have $2,700 million in the state coffers. Fingers crossed.
- State fiscal consolidation is to keep unemployment relatively high, at about 6% for the next 18 to 24 months.
- Qld shares 20% of Australia’s economic growth. Household consumption makes up for half of the Qld economy, followed by the public sector (25%) & private business investment (21%).
- When it comes to industry type, services makes up for two-fifths (44%) of the Qld economy. Retail trade holds a 12% market share; followed by mining & construction with 10% each. By way of comparison, mining makes up 35% of the WA economy & accounts for 20% of the economy in NT.
- Another positive is population growth. Qld’s annual population growth is now over 91,000 per annum; almost double that of just two and a bit years ago.
- Capital expenditure is yet to peak – expected to take place this quarter – as the new LNG construction of recent years is taking some time to kick-in, economically speaking.
- The recent coal price rises are positive, but volumes traded are not expected to lift in coming years. Any ‘hole’ in this resource income is forecast to be filled by an increase in LNG exports from the mid-decade.
- New housing starts continue to slide sideways, but growth – albeit slow – is expected in the new housing construction over the next 12 months. More starts are expected in fiscal 2015 & 2016. Fingers crossed again.
My comments are as follows:
Queensland must return to a budget surplus & fast.
It looks like this will be the case. Higher unemployment is the short-term fallout, but a higher credit rating will see even more business & construction investment in the state.
Whilst population growth is increasing, little is coming (yet) from interstate.
Most is from natural increase (more babies compared to deaths – due largely to the baby bonus of recent years) & from overseas migration; many are from nations with large family households or from areas less fortunate than Australia. Hence they migrate. Sharing rental accommodation is the norm.
The end result is less new housing starts than at this stage of the cycle when compared to past upturns. It will take some time before Qld’s current population growth translates to new housing demand. It will happen, as migrant prosperity grows & as young families upgrade, but not for a few years yet.
Higher net interstate migration will also return to Qld, especially from N.S.W. & especially from western Sydney. Available work in Queensland & low housing affordability in Sydney are the two main drivers.
They will start working, in tandem, in Qld’s favour in coming years. Interstate migrants – in the past anyway – equate to more new housing demand. A new interstate start often means a new house.
So this is good news.
The B- grade should turn into an B+ to A- by this time next year.
If things go to plan, Qld should get back its AAA rating within the next 24 months. For the third time this Missive…fingers crossed.
Michael is the director of independent property advisory Matusik Property Insights and writes the Matusik Missive which is free, however, reprinting, republication or distribution of any portion of this material, or inclusion on any website, is strictly prohibited without the written permission of Matusik Property Insights and may incur a charge.
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