New decade – same story?

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  • LNG export prices increased, their value outstripping thermal coal exports over 2019
  • Metal exports expected to grow further in 2019-20, mainly due to aluminium production
  • The Queensland Budget remains in surplus – wafer thin – but needs more to keep expenditure under control and a renewed focus on the long term balance sheet of the state
  • Ongoing drought conditions weakened the agriculture export outlook since the Budget
  • Metallurgical coal spot prices and spot thermal coal prices also reduced (by around 10%)
  • Economic growth in Queensland now 2.5% in 2019-20, down from 3% original forecast.
  • 10 February 2020: Deloitte Access Economics’ assessment of Queensland’s quarterly business outlook is a call to action to both business and government. Each needs to trade on the great positives of Queensland’s more affordable housing, growing population, and a larger, diversifying economy to manage the continued uncertainty, confidence deficit, and more challenging international story ahead.

    “We know that coal prices are well down on their peaks. And China has reason to start switching its stimulus efforts from construction, which has been great for our big exports, to consumers. This will require us to play a smarter game,” says Deloitte Access Economics leader Dr Pradeep Philip.

    “As we know things are bigger in Queensland, whether that’s the Big Pineapple, the Big Mango, the Big Crab, or the remarkably big Great Barrier Reef. But then so are our business cycles. They tend to be bigger than most states because of exposure to global commodities, seasonal weather, and climate change.

    “Queensland’s degree of diversification has helped to clip the peaks and troughs of these business cycles, but even the economic diversity of the state hasn’t helped much lately. Housing construction activity has slid, partly in response to the earlier glut of apartment building. And so has business investment, much of which is still due to the completed work on big LNG projects, despite their timing being determined long ago.”

    “Wobbly wage growth, plus falling housing construction hurts state GST monies. So, it is good the state is keeping up its infrastructure spending. Delivery is key,” Dr Philip said.

    The report also describes how natural disasters and trend shifts in climate change already have, and will likely continue to have, long-term impacts on the budget bottom line. “We will hear about the impact of our drought and bushfires earlier than usual this year, with the 2020-21 Queensland Budget due to be tabled in State Parliament on 28 April 2020,” said Dr Philip.

    Adding that, “Despite global trade tensions, uncertainty and ongoing drought, the Government’s Mid-Year Fiscal and Economic Review expects Queensland to continue its strong population growth, with low interest rates and the low Australian dollar helping to mitigate some of the negative impacts on the state’s economy.

    “Queensland’s unemployment rate remain subbornly higher than it should be. With more people entering the jobs market, this improvement in the State’s participation rate is expected to pay dividends in comning years, with Queensland expected to carve out a larger share of Australia’s economy and population over the forecast period. But to do so, it is critical to keep a strong focus on jobs, jobs, and jobs, across Queensland. So, more work to do here.

    “While the Budget remains in surplus, it is wafer-thin and could disappear far too easily. More needs to be done to keep expenditures under control and attention needs to be paid to the longer term balance sheet of the State.”

    “And although this new decade appears to be the same story as the last. It isn’t. Queensland has moved further down the diversification track, enabling its State Final Demand forecast to grow and track above the national average, at 3.2% to 2023,” Dr Philip said.

    NB: See our Queensland Quarterly Business Outlook Feb 2020 here and media releases and research at deloitte.com.au.

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