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Queensland economy in transition: a bumpy ride in short term but foundations solid


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1 August 2013:  With the fading of the mining boom, the Queensland economy has entered a period of transition, but is forecast to emerge in a strong position.

Launching the 2013 Gala Edition of the Deloitte Queensland Index with Deloitte Access Economics’ Professor Ian Harper, Deloitte Queensland Managing Partner John Greig said that as the growth impetus from the investment phase of the mining boom receded, Queensland would rely on mining exports and stronger activity in non-resource-related sectors.

“Overall, the outlook for Queensland’s economy is positive, but just as with the national economy, the State is undergoing a period of transition,” Mr Greig said.

“In the short-term, this could be a bumpy ride, particularly as the non-resource sectors struggles to throw off the shackles of a high exchange rate, pockets of residential over-building, cautious households unwilling to loosen their purse strings and cutbacks to government spending.

“However, in the medium term and beyond, many of the foundations for prosperity that have served Queensland well in the past appear to be intact.”

These include:

  • The natural endowments that attract people to live and work in Queensland, and visit the State, and that provide raw materials for exports
  • Proximity to Asia, the global economy’s engine room
  • Macroeconomic trends such as lower interest rates and a lower exchange rate will also be favourable

Professor Harper said: “Growth in Queensland has been strong over the past decade and, for the immediate future at least, the resource and resource-related sectors, will continue to lead the way.”

“However, the two-speed economy remains an issue, with growth in non-resource sectors still soft.

“Compared to other states, residential construction has been weak, despite the demand created by natural-disaster-related construction.

“Tourism continues to contend with the strength of the Australian dollar, and exports of education services have declined in recent years.

“As a result, Queensland unemployment has risen above the national average and job gains have been modest.

“With investment in engineering construction across a number of LNG projects expected to peak this year, and with little else in the resources pipeline, a significant increase in production and exports should now follow, which will help to sustain the State’s rate of economic growth.

“Even then, however, investment in other parts of the economy will need to take up the slack left by sharply lower levels of engineering construction.”

Professor Harper said Asia would also remain a long-term positive for Queensland.

“In addition to providing large export markets, there is huge scope to forge closer ties with the region’s businesses and burgeoning middle-class to create economic links that will be robust at both the peak and trough of the cycle,” he said.

“Tourism remains a key industry for Queensland and, notwithstanding the high value of the Australian dollar, inbound Asian as well as local domestic tourism has been growing strongly over the last year. These trends are expected to continue and strengthen if the long-anticipated depreciation continues.

“Combined with the lower interest rates and forecast stronger income growth over the next few years, these developments should support household consumption and housing construction.

“The trend in dwelling approvals is rising, and although monthly approvals are still well shy of ‘average’ levels, the sector should contribute to growth going forward. This will have a positive impact on jobs growth, which should in turn improve the outlook for the State’s unemployment rate.”

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Contacts

Name:
Ian Harper
Company:
Deloitte Access Economics
Job Title:
Partner
Phone:
+61 3 9671 7536
Email
iaharper@deloitte.com.au
Name:
Simon Rushton
Company:
Deloitte
Job Title:
Corporate Affairs and Communications
Phone:
Tel: +61 2 9322 5562
Email
srushton@deloitte.com.au

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