ISSUE 2 QUARTERLY UPDATE 05/2021

Townsville & North West Economic Outlook

1. Outlook May 2021

1.1 MACROECONOMIC significant future growth already The Australian Dollar sits at around OUTLOOK priced into global stock markets. $0.77 USD, trending over 10 USc Within , the recovery from the higher than 12 months ago. Any After the stark shock that was brought initial pandemic-driven downturn has further appreciation to above upon by COVID-19, the world is continued despite minor outbreaks, $0.85 USD may begin to impact the continuing to rebuild. The ongoing competitiveness of key mining and including in . roll-out of vaccines has allowed agricultural exports. This will be a improvement of middle-term outlook The Reserve Bank now projects consideration for the Reserve Bank as of the global economy. GDP to grow it considers a potential winding back It is expected that remaining of monetary stimulus measures over domestic and in time international approximately 3.5% p.a. the coming quarters. restrictions will ease, allowing a return While the overall outlook for the over the next two years after a to more normal levels of economic national and global economy activity. The IMF currently projects the contraction of 2.0% during 2020. is positive, it remains subject to global economy to grow by a robust With unemployment now at a significant uncertainty. The record 6% during 2021. moderate 5.6% and strong labour debts and deficits accrued to support Equities markets continued to force participation, the national economies during the pandemic demonstrate uncanny resilience economy appears to have (estimated at over $US 16 trillion into early 2021 despite the uncertain transitioned well initially from globally) will require strong and conditions. Record low borrowing the JobKeeper and JobSeeker sustainable growth to recover over costs and government stimulus subsidy schemes. the coming years. In the meantime, many economies remain vulnerable measures persist in driving The Federal Government’s budget to any future shocks or setbacks in investment into higher yielding assets. commitment to expansionary fiscal the recovery. Investors should pay close attention policy should continue to underpin to any signs of inflation returning or activity and confidence. Significant roadblocks to the COVID-19 recovery, budget deficits are projected each such as occurring in India, given the year until 2024-25.

A JOINT INITIATIVE BY REGIONAL ECONOMIC ADVISORY AND REGIONAL DEVELOPMENT AUSTRALIA TOWNSVILLEAND NORTH & WEST WEST QUEENSLAND ECONOMIC OUTLOOK 1 1.2 REGIONAL OUTLOOK

The Townsville and North West schemes. Continued growth in the inland freight route from Mungindi Queensland economy continues to labour force will be key to support to , upgrades to show significant resilience. activity in the region, with many the Bruce and Flinders Highways, sectors beginning to feel pressure $600 million National Recovery Total Gross Regional Product (GRP) from labour shortages due to and Resilience Agency, and the declined 2.1% during 2019-20 as a restricted access to international announcement of a $250 million result of COVID-19. However, many labour and skills. Building Better Regions Funding round for shovel ready infrastructure projects. areas within the region managed The regional property market has continued its recent resurgence, These projects will occur alongside to achieve positive economic driven by renewed in-migration proposed regional catalyst and population growth which is a and strong affordability compared developments including the $1 billion significant achievement. to Australia’s capital cities. The Australia – Singapore Military Training Federal Government’s proposed Initiative, $663 million Agripower The unfortunate social distancing $10 billion re-insurance pool Australia fertiliser project, $450 million restrictions imposed over the Easter should continue to support strong The Hive mixed use project, $193 million travel period was another hit to the interest in home ownership, while Port of Townsville expansion, $1.5 billion hospitality sector. Primary research by also helping to alleviate the cost CopperString 2.0 transmission the CCIQ estimates losses for small pressure and insurance risk for many line, $700 million Kidston pumped to medium businesses averaging local businesses. hydro scheme, and an $80 million between $13,000 and $74,000 due to hotel development by Morris Group reduced trade. A strong pipeline of projects in and around the region continues to drive adjacent to The Ville Resort-Casino. Despite this further setback, initial a solid outlook. feedback indicates the region has transitioned successfully from the Recent announcements in the federal JobKeeper and JobSeeker subsidy budget include a $400 million

TOWNSVILLE & NORTH WEST QUEENSLAND REGIONS

Mornington Carpentaria Total 2019-20 GRP for Townsville Doomadgee & North West Queensland -2.1% annual decline Burke Hinchinbrook Total population growth +0.6% Palm Island Townsville Townsville

Burdekin

Mount Isa Charters Towers

McKinlay Richmond

Cloncurry Flinders

Boulia North Queensland Mid-West Queensland Western Queensland

TOWNSVILLE & NORTH WEST QUEENSLAND ECONOMIC OUTLOOK 2 2. Key Indicators and Regional Development News

2.1 NORTH QUEENSLAND

Indicator Townsville Hinchinbrook Burdekin Palm Island Charters Towers

Gross Regional Product $10.6 B $420 M $969 M $43 M $ 685 M 8.0% (GRP) (2019-20) 1.0% -5.0% -5.1% -4.6% annual annual annual annual annual Annual Growth Rate growth decline decline growth decline

6.1% 6.1% 5.4% 38.2% 6.7% Unemployment -0.4 -0.8 -0.5 -6.3% -0.8 (Dec Qtr. 2020) ppt quarterly ppt quarterly ppt quarterly ppt quarterly ppt quarterly decline decline decline decline decline

Median $337,000 $215,000 $170,000 $200,000 House Price 5.3% 7.5% 0.9% NA 2.6% annual annual annual annual (2019-20) growth growth growth growth

196,800 10,645 16,953 2,684 11,731 Population 0.9% -0.4% -0.1% 0.5% -0.1% (June 2020) annual annual annual annual annual growth decline decline growth decline

Table 2.1: Headline Economic Statistics North Queensland Source: NIEIR (2021), QGSO (2021)

OUTLOOK REGIONAL DEVELOPMENTS

The North Queensland economy continues to gather Fertiliser producer Agripower Australia has secured momentum through 2021. Unemployment has a $71 million loan through the Northern Australia decreased across the region and building approvals Infrastructure Facility (NAIF) to develop one of the world’s have surged in Townsville (quarterly approvals up largest resources of biogenic amorphous silica. nearly 80% from a year ago) on the back of the The project, which includes a mine near Greenvale Federal Government Homebuilder Scheme and and processing located near Charters Towers, has ongoing Queensland Government support for new the potential to support 345 Full Time Equivalent (FTE) home builders. construction and 171 FTE operational jobs with a projected Tourism remains a significant area of weakness, with mine life of up to 200 years. regional visitation numbers down by around a third The Great Barrier Reef Marine Park Authority (GBRMPA) over calendar year 2020 due to the pandemic. The has announced plans to relocate into The Hive recent federally subsidised flights to Townsville have development in Townsville’s CBD. provided a significant temporary boost to the sector. GBRMPA will be the anchor tenant for the up to $450 A drop in GRP and continued population decline in the million mixed use project which will redevelop an entire key agricultural centres of Burdekin and Hinchinbrook city block bounded by Flinders Street, King Street, The remains a significant concern. Industry diversification Strand, and Wickham Street. is a key goal for both regions, with a number of The project forms another key step in the revitalisation promising opportunities across grains, protected of Townsville’s CBD alongside Queensland Country Bank horticulture, aquaculture, and value adding proposed. Stadium and the $40 million under construction Reef As per the previous quarter, a strong pipeline of HQ redevelopment. projects is expected to see improved economic The establishment of a regional hydrogen industry performance continue. The continues to gather momentum with the Port of has a particularly strong investment outlook, including Townsville and Origin Energy signing a Memorandum of Big Rocks Wier, Agripower Australia fertiliser project, Understanding (MOU) to export green hydrogen. and the Ravenswood and CitiGold mine expansions. The deal assists in establishing the supply chain as part of Origin Energy and Japan’s Kawasaki Heavy Industries proposed 36,500 Tpa liquid hydrogen project.

TOWNSVILLE & NORTH WEST QUEENSLAND ECONOMIC OUTLOOK 3 2.2 MID-WEST QUEENSLAND

Indicator Flinders Richmond McKinlay

$128 M $100 M $523 M GRP (2019-20) -31.4% -10.3% -2.1% Annual Growth Rate annual annual annual decline decline decline

3.6% 3.7% 3.7% Unemployment 0.3 0.4 0.4 (Dec Qtr. 2020) ppt quarterly ppt quarterly ppt quarterly increase increase increase

$85,000 Median $100,656 $110,000 House Price annual change -20.3% annual change N/A annual N/A (2019-20) decline

1,512 813 823 Population 0.6% 0.4% 0.6% (June 2020) annual annual annual growth growth growth OUTLOOK Table 2.2: Headline Economic Statistics Mid-West Queensland Economic conditions in Mid-West Source: NIEIR (2021), QGSO (2021) Queensland have continued their recent trends, with key indicators REGIONAL DEVELOPMENTS Multicom Resources proposed showing mixed results. The 2020 financial year has seen 10,000 tonne per annum All three Local Government Areas near Julia the Mid-West region return to vanadium project showed slight upticks in the Creek has received conditional population growth. All three Local unemployment rate, however Government Areas registered environmental approval from the local labour markets remain growth of approximately half Federal Government. very tight at under 4%. GRP data a percent representing a The approval includes a requirement was highly volatile, with the large significant milestone. for environmental offsets to protect decline in Flinders Shire impacted Population decline has been a major against potential impacts on habitat by the conclusion of major challenge for the region dating back of the rare Julia Creek Dunnart. developments including stage to the 1990s when the agricultural The mine which has the potential one of Kennedy Energy Park. industry transitioned from labour to provide 250 construction and 150 The tourism sector has also intensive wool production to operational jobs still requires State fared better than most through extensive beef cattle grazing. New Government approval to proceed. the pandemic due to a focus on investments in mining, energy, and Strategic Minerals Corporation has domestic travel. The Outback irrigated agriculture have been the proposed a $200 million gold mine tourism1 region still recorded major drivers drawing new residents north of Richmond. an annual visitor decline of to the region. approximately 25% during The Woolgar project is now seeking calendar year 2020. Anecdotally for a lease extension to allow for the visitation levels have improved in construction of a processing plant recent months, with the easing of and associated infrastructure. restrictions and increased interest If it proceeds the project has the in domestic travel. potential to employ up to 350 FTE.

1 The Outback tourism region covers Mid-West, Western as well as .

TOWNSVILLE & NORTH WEST QUEENSLAND ECONOMIC OUTLOOK 4 2.3 WESTERN QUEENSLAND

Indicator Cloncurry Mount Isa Boulia Burke Doomadgee Mornington Carpentaria

$938 M $2.1 B $34 M $31 M $34 M $33 M $132 M GRP (2019-20) -8.9% -8.8% -6.1% -12.6% -26.8% -22.1% -12.7% Annual Growth Rate annual annual annual annual annual annual annual decline decline decline decline decline decline decline

6.2% 8.3% 25.9% 25.7% 25.7% 25.6% 3.1% Unemployment 0.9 0.8 no ppt 2.9% 2.6 2.5 2.4 ppt ppt ppt ppt ppt ppt (Dec Qtr. 2020) quarterly quarterly quarterly change quarterly quarterly quarterly quarterly increase increase increase increase increase increase

Median $150,000 $245,000 $190,000 NA NA NA NA House Price 27.7% -3.9% -16.3% annual annual no change no change no change no change annual (2019-20) growth decline decline

3,004 18,578 416 354 1,534 1,231 1,970 Population -1.4% -1.0% -1.7% 0.0% 0.5% 0.1% -0.3% (June 2020) annual annual annual annual annual annual annual decline decline decline growth growth growth decline

Table 2.3: Headline Economic Statistics North West Queensland Source: NIEIR (2021), QGSO (2021)

OUTLOOK The outlook for Western Queensland is improving following a difficult 2020. Population growth rates were low to declining and GRP declined significantly in the region’s largest centres (Mount Isa and Cloncurry). However, a turnaround in base metal prices and renewed REGIONAL DEVELOPMENTS investment interest in the region Planning works for a $600 million solar-thermal renewable energy project should see economic indicators in Mount Isa are underway with an agreement between state-owned improve over the coming months. Stanwell Corporation and Vast Solar. Local unemployment continues The 50-megawatt green energy project is currently under feasibility to be a primary concern at above investigation with development scheduled for 2023. 25% for the remote communities of Burke, Doomadgee, Mornington The $1.5 billion CopperString 2.0 project continues to progress with a $17 and Carpentaria. million investment by Sun Metals Zinc Refinery owner Korea Zinc Company. The transmission line connecting the North West Minerals Province (NWMP) to the National Electricity Grid is of key interest to Korea Zinc as a major energy user and component of the NWMP supply chain.

TOWNSVILLE & NORTH WEST QUEENSLAND ECONOMIC OUTLOOK 5 3. Business Confidence

Business confidence in Queensland’s OVERALL QUEENSLAND 12-month outlook significantly BUSINESSES REPORTED improved in the December quarter IMPROVEMENTS IN: (+9.2 ppt) to a current index of 42.5, • Sales and revenues +3.7 ppt continuing the steady recovery from • Profitability +2.5 ppt the pandemic’s effects. • Operating costs +6.0 ppt Businesses have become more optimistic that the worst A strong positive result also reported of the COVID-19 health crisis in regard to labour costs (+7.0 has passed, with easing social ppt), which was driven largely by distancing restrictions delivering the conclusion of JobKeeper and confidence for a return to smoother JobSeeker subsidy payments and business operations. the reopening of the domestic Queensland economy. Whilst there is an overall positive trend, the tourism industry While initial indications for the job continues to predict a slower market are positive, it remains to be recovery as global uncertainty seen how smoothly the economy persists. Continued domestic COVID will transition from the significant outbreaks have maintained a wage subsidies. significant level of uncertainty for Political and economic stability, as many businesses. well as the level of demand, remain the most significant concerns for businesses across the state.

Indicator Index Dec 2020 Quarterly Change

12 Month Outlook Queensland 42.5 +9.2

General Business Conditions 48.0 +7.9

Sales and Revenue 49.6 +3.7

Labour Costs 58.6 +7.0

Profitability 40.7 +2.5

Employment 46.3 +0.9

Capital Expenditure 46.0 +2.4

Table 3.1: Queensland Business Confidence Dec 2020 Source: CCIQ (2021)

TOWNSVILLE & NORTH WEST QUEENSLAND ECONOMIC OUTLOOK 6 4. Industry Profile: Mining

Each quarter the Townsville and The regional industry produced relatively weak GRP during 2019- North West Queensland Economic 20 (-4.0% annual growth since 2016), with commodity prices and Outlook profiles a key regional global supply chains impacted by the COVID-19 pandemic. industry sector. This quarter reviews the Mining industry. Region IVA (2019-20, $M) 4 Year Average Growth INDUSTRY OVERVIEW Northern $519.3 -3.1% Townsville and North West Mid - West $262.0 -15.4% Queensland hosts a major mining Western $2,387.6 -2.7% industry, contributing $3.2 billion Total Region $3,168.9 -4.2% (nearly 20%) to GRP in 2019-20. The majority of mining activity Table 4.1: Townsville North West Queensland Mining Source: NIEIR (2021) occurs in the Western region, which Industry Value Added (IVA) hosts the highly productive NWMP. The NWMP produces a majority of Mining was Australia’s boom sector prior to the Global Financial Crisis (GFC) Australia’s base metals (specifically in 2009. Demand growth driven by industrialisation in emerging markets copper, lead, and zinc) in addition to (particularly China and India) led to rapid price growth and investment in Incitec Pivot’s Phosphate Hill mine. new production capacity. Mining production in the Northern Infrastructure stimulus post the GFC downturn led to a strong initial recovery. region comes predominantly from However, in recent years price levels have been much lower. China has gold operations located around moved to a slower and more sustainable growth trajectory, with less focus Charters Towers and Ravenswood. on infrastructure and manufacturing and greater growth in services. Global The Northern region also hosts growth has been relatively modest with a number of setbacks. significant value adding activity, However, the sector appears to have entered a cyclical upswing in early 2021 including the Sun Metals Zinc and as global demand recovers post the COVID-19 pandemic. Many countries Glencore Copper refinery. Minerals have delivered significant public infrastructure stimulus which has supported produced in the NWMP are also demand for hard commodities. typically exported via the Port of Townsville. The Northern region supplies significant Fly in Fly Out (FIFO) and Drive in Drive Out (DIDO) labour and expertise to the NWMP m o GFC o COVID -19 Recovery and the Bowen and Galilee coal B t e basins located to the south of rk a M the region. g in erg The Mid-West region also hosts Em notable mining activity, including South 32 Cannington, one of the world’s largest silver and lead mines. The operation is responsible for 6% of global silver production.

Figure 4.1: Base Metals Price Index Source: RBA (2021) (Special Drawing Rights, 2019-20 = 100)

TOWNSVILLE & NORTH WEST QUEENSLAND ECONOMIC OUTLOOK 7 4. Industry Profile: Mining continued

OUTLOOK Overall, the regional mining sector for lithium-ion batteries has also communities, which have already is in a strong position over the spurned interest in extraction of rare been affected by the rise in FIFO and coming quarters. The recent cyclical earths located within the region. DIDO working arrangements. upswing has brought forward a Regional production which focuses It is critical that local communities number of new and expansion on base metals has a reasonably are able to maximise the economic projects across gold, base metals, stable outlook, however the cyclical benefits from regional mining fertiliser, and new potential nature and volatility of the industry operations, including value adding resources including vanadium and will in all likelihood continue. to raw commodities. Remote scandium (see Table 4.2). A key trend towards automation of communities also need to continue There is also strong renewed interest labour within the industry (including to diversify their economies to assist in the value adding sector, including driverless vehicles) will likely lead in smoothing out the boom/bust Sun Metals $400 million expansion to a decline in the traditionally high cycle associated with the mining and the proposed Pure Minerals paying jobs provided by the sector sector. (nickel, cobalt and alumina) refinery over time. This trend may have a in Townsville. Growing demand significant impact on remote mining

TOWNSVILLE & NORTH WEST QUEENSLAND ECONOMIC OUTLOOK 8 Project Location Proponent Commodity Status Capex ($M)1

Charters Towers 130km SW Publicly Citigold Gold $246 Gold Townsville announced 150km S of Mount Carlton Evolution Gold Committed $60 Townsville Ravenswood 92km SSE of EMR Capital and GEAR Gold Committed $300 Expansion Project Townsville Joint Venture

Agripower Greenvale with Amorphous Funding Australia Processing at Agripower Australia $663 Silica secured Project Charters Towers

SCONI (Norinco) Greenvale Metallica Minerals Scandium Publicly $1,300 Scandium Project announced 120km north of Publicly Woolgar Project Strategic Minerals Gold $200 Richmond announced 25km E of Publicly St Elmo Multicom Resources Vanadium $470 Julia Creek announced Mount Isa North 40km N of Summit Resources / Triuranium Publicly $600 Uranium Project Mount Isa Paladin Resources Octoxide (U3O8) announced 350km NW of Copper, Publicly Walford Creek Aeon Metals $785 Mount Isa Cobalt, Zinc announced 115km S of Ardmore Centrex Metals Phosphate Feasible $58 Mount Isa

D-Tree Project 110km NW of Legend International Publicly $500 – (Paradise Phosphate Mount Isa Holdings Inc. announced $1,000 Phosphate)

Mount Elliot – Publicly Cloncurry Chinova Copper- Gold $1,800 Swan Project announced

Table 4.2: Proposed Mining Developments Source: Office of the Chief Economist (2021), RDA (2021)

Note: 1 Capital estimates based on publicly available information at the time of writing and may not reflect the most recent project estimates.

For Further Information

The Regional Development Australia Regional Economic Advisory (REA) Townsville and North West Queensland provides specialised economic (RDA) Committee is pleased to partner consultancy services to the with Regional Economic Advisory on this communities of Central, Northern, North initiative to provide a quarterly update West, and . on the region’s Economic Outlook. REA is passionate about unearthing For more information on investment and new, evidence-based opportunities that Cr Frank Beveridge growth opportunities within our region, Mr Matthew Kelly help regional centres prosper long into Chairman Principal Economist please don’t hesitate to contact RDA the future. CEO Ms Glenys Schuntner.

Regional Development Australia Regional Economic Advisory Townsville and North West 07 4767 7234 / 0417 790 016 Queensland Inc. [email protected] 07 4410 3655 regionaladvisory.com.au [email protected] Level 1, 33 Palmer Street rdanwq.org.au South Townsville QLD 4810 Level 1, Enterprise House 6 The Strand, Townsville QLD 4810

All care and diligence has been exercised in the preparation of this report. Forecasts To receive future copies of the or projections developed as part of the analysis are based on adopted assumptions and can be affected by unforeseen variables. Consequently, Regional Economic quarterly Economic Outlook, Advisory gives no warranty that a particular outcome will result and the authors please subscribe here. accept no responsibility for any loss or damage that may be suffered as a result of reliance on this information.