Townsville North Queensland Economic Snapshot – November 2020
TOWNSVILLE NORTH QUEENSLAND QUARTERLY ECONOMIC SNAPSHOT
NOVEMBER 2020
MAJOR SPONSOR
MAJOR SPONSOR 1 Townsville North Queensland Economic Snapshot – November 2020
TOWNSVILLE NORTH QUEENSLAND NOVEMBER 2020 QUARTERLY ECONOMIC SNAPSHOT
The Townsville North Queensland Economic Snapshot provides a regional economic outlook and commentary with key quarterly statistics including unemployment, business confidence, building approvals, property, and tourism.
This edition breaks down the Townsville North Queensland region into two Statistical Areas (SA): Townsville SA3 and Charters Towers – Ayr – Ingham SA3.
1 OUTLOOK FOR TOWNSVILLE NORTH QUEENSLAND
1.1 Key Macroeconomic Trends
To date, COVID-19 has had significant implications on worldwide health with over one million lives being lost. Strategic lockdowns have been implemented to help stop the spread of COVID-19 and to ease the pressure placed on hospitals and health systems around the globe, but these lockdowns have had considerable impacts on local economies and on international supply chains.
Activity increased in May and June as some economies eased their restrictions, with some even allowing international travel. However, not all countries followed suit, with many still cautious about the health implications and the capacity of their hospital systems. Some countries, such as the UK, are reinstating partial lockdowns to moderate second and third wave increases in virus transmission in a bid to ensure hospital systems are not overwhelmed.
The International Monetary Fund (IMF) forecasts a decline in global growth of 4.4% in 2020, this is a downward revision from the previous June 2020 forecast . There are factors which could result in a change in growth including ongoing outbreaks and subsequent economic and social lockdowns, trade policy uncertainty, geopolitical tensions or a faster return to ‘normal’1.
Current indications are that former Democratic Vice President Joe Biden has been elected as the 46th President of the United States. The impact that his presidency will bring to foreign policy and international trade relations is currently unknown.
1 IMF (2020). World Economic Outlook – October 2020.
MAJOR SPONSOR 2 Townsville North Queensland Economic Snapshot – November 2020
1.2 Regional Outlook
The COVID-19 outbreak is having a number of significant global and national ramifications, including negative effects on employment. This largely affected business confidence in Townsville, with the confidence drop being greater than the drop experienced after the 2008 Global Financial Crisis2. However, with the easing of restrictions in Queensland, business confidence has been on the rise as Townsville starts its path to recovery.
It’s welcomed news that from 1 December, Queensland borders will reopen to Victoria and all of New South Wales as intrastate travel is crucial to support recovering businesses. The Townsville Statistical Area 3 (SA3) has experienced a 50% drop in domestic overnight interstate travelers from June 2019 to June 2020, highlighting the impact that border closures have on the regional economies.
Although the recent lockdowns have placed pressure on a number of businesses in the region, Townsville is currently showing strong signs of recovery post-COVID-19. As stated, business confidence is on the rise, employment numbers are strong with the continuation of JobKeeper packages, and residential vacancy rates are the tightest they have been since immediately after the 2019 floods.
However, continued investment in infrastructure works will further contribute to economic recovery efforts through supporting job creation and the local supply chain. Recent commitments in the Townsville North Queensland region such as Lansdown, Drive It NQ, Big Rocks Weir, Townsville Hospital infrastructure upgrades and the Magnetic Island road upgrades will support post COVID-19 recovery and build upon Townsville’s resilience.
2 PVW Partners (Unpublished). Business Confidence Survey. Email received 22/04/2020.
MAJOR SPONSOR 3 Townsville North Queensland Economic Snapshot – November 2020
1.3 Agriculture
Sugar
As of September 2020, sugar prices averaged $390/MT which is below the long-term average of $400/MT. Sugar prices are bouncing back after experiencing a significant decrease from pre-COVID-19 peaks of $490/MT in February 2020. The peak in February 2020 was the highest it has been since March 2017, subsequently many growers in the region took advantage of such high prices through forward pricing opportunities.
Global sugar prices are being impacted by COVID-19 through the sharp reduction in global oil prices, which are encouraging Brazilian sugar millers to favour sugar production over ethanol. The price outlook remains steady with reason for optimism with concerns over the strength of Brazil’s future crop due to unseasonably dry conditions impacting yields.
Figure 1.1. Raw Sugar Prices (AU$/MT Actual)
650
600
550
500
450
400
350
300 Raw Sugar Prices (AU$/MT Actual) (AU$/MT Prices Raw Sugar 250 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 Apr-20 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Feb-16 Feb-17 Feb-18 Feb-19 Feb-20 Aug-17 Aug-20 Dec-15 Aug-16 Dec-16 Dec-17 Aug-18 Dec-18 Aug-19 Dec-19
Sugar Price Source: Index Mundi (2020).3
Beef
The sale price for a medium cow has increased by approximately 32% over the latest year to reach 315.8 c/kg lwt. As displayed in Figure 1.2, throughout the COVID-19 pandemic beef cattle prices have continued to rise reaching its highest point over the three years analysed. These high prices are reinforced by a tightening market, driven by the loss of cattle in the 2019 North West QLD floods and a demand from southern enterprises to restock following decent winter rains. MLA also expects export volumes are also likely to tighten.
Demand in Indonesia, Australia’s largest cattle export market, is still subdued due to mounting COVID-19 impacts and rising costs. However, the Indonesia-Australia Comprehensive Economic Partnership Agreement that was implemented in July 2020 will support the beef cattle industry into the future. The tariff on frozen beef will be cut to 2.5% (reduced from 5%) and be eliminated after five years, while live male cattle volumes of up to 575,000 in one year will be duty free (reduced from 5% tariff)4.
3 Index Mundi (2020). Sugar Monthly Price – Australian Dollar per Kilogram. Retrieved from https://www.indexmundi.com/ commodities/?commodity=sugar&months=60¤cy=aud
MAJOR SPONSOR 4 Townsville North Queensland Economic Snapshot – November 2020
Figure 1.2. Queensland Saleyard Indicators (Sale Price – Medium Cow)
350
300
250
200 Price (c/kg lwt)
150
100 2017 2017 2018 2018 2019 2019 2020 2020
Source: MLA (2020).5
Figure 1.3. Live Export Trade from Townsville
400,000
300,000
200,000
100,000 Volume Traded (Head)
0 2014 2015 2016 2017 2018 2019 2020 Indonesia Vietnam Other
Note: Latest data available until September 2020. Source: Department of Agriculture (2020).6
4 DAF (2020). Indonesia-Australia Comprehensive Economic Partnership Agreement: Outcomes. Retrieved from https://www.dfat.gov.au/trade/agreements/ not-yet-in-force/iacepa/Pages/ia-cepa-key-outcomes-for-australia 5 MLA (2020a). Meat Livestock Australia. Retrieved from https://www.mla.com.au/ 6 Department of Agriculture (2020). All Livestock Exports. Retrieved from https://www.agriculture.gov.au/export/controlled-goods/live-animals/live-animal- export-statistics/livestock-exports-by-market
MAJOR SPONSOR 5 Townsville North Queensland Economic Snapshot – November 2020
2 KEY QUARTERLY INDICATORS
2.1 Labour Market
Unemployment in the Townsville Statistical Area 3 (SA3) has experienced a decline from December 2019 through to June 2020, decreasing by approximately 0.4 percentage points over two quarters. This is due to employment experiencing a net additional increase of 1,823 people.
Similarly, the unemployment rate in the Charters Towers – Ayr – Ingham SA3 has experienced a decline of 0.8 percentage points from December 2019 to June 2020. The regions employment has also experienced a net increase of approximately 354 people.
Of more significance, it must be noted that in each region, employment numbers increased from March 2020 to June 2020. The introduction of restrictions due to the COVID-19 pandemic came into play at the end of March /beginning of April, however the employment impact of these restrictions has not been realised due to the introduction of the JobKeeper subsidy. As of June 2020, the Townsville SA3 had a total of 4,031 people on JobKeeper while the Charters Towers – Ayr – Ingham had a total of 1,195 people on JobKeeper7.
Figure 2.1: Labour Force Activity
140,000 16.0%
120,000 14.0%
12.0% Unemployment Rate (%) 100,000 10.0% 80,000 8.0% 60,000 6.0% Persons (No.) Persons 40,000 4.0%
20,000 2.0%
0 0.0%
Charters Towers - Ayr - Ingham SA3 Labour Force Townsville SA3 Labour Force Townsville SA3 UR Charters Towers - Ayr - Ingham SA3 UR Queensland UR
Source: DoESE (2020)8.
7 Treasury (2020). JobKeeper Postcode Data. Available from: https://treasury.gov.au/coronavirus/jobkeeper/data. 8 DoESE (2020). Small Area Labour Markets Publication - June Quarter 2020. Department of Education, Skills and Employment
MAJOR SPONSOR 6 Townsville North Queensland Economic Snapshot – November 2020
2.2 Property
The Townsville and Charters Towers – Ayr – Ingham SA3 have continued strong growth over the last 12 months with the value of residential building approvals increasing by 20.4% and 4.4% respectively. These gains come despite considerable downward pressure on residential building activity elsewhere in Australia due to COVID-19, particularly in capital cities.
The reasons for these gains in North Queensland are due to the uptake of the Federal Government’s HomeBuilder scheme and relative availability of land in Townsville, southern demand for residential property in a region relatively unscathed from the health and economic impacts of COVID-19 and the ongoing recovery from the 2019 floods.
Vacancy rates are tightening in Townsville since the outbreak of COVID-19, following a State-wide trend. Vacancy rates in the region began tightening after the 2019 floods with an undersupply of houses and are once again showing signs of similarity with a vacancy rate in the June quarter of 1.7%9. Consultation with industry suggests that vacancy rates are still tightening in the region.
The current gains in the residential property market is offsetting recent declines in the non-residential property sector, which experienced decline from June 2019 to June 2020. Although the non-residential property sector is down from levels last year, values are still strong, totalling $298 million in the 12 months to June 2020. The non-residential building sector is coming off the back of a strong year in 2019, with the finalisation of some major regional projects such as the Queensland Country Bank Stadium.
Table 2.1. Building Approval Activity
Residential Non-Residential Indicators No. Dwelling Units Building Value Building Value ($'M) ($'M) Townsville
12 Months to Jun 20 516 $203 $298
12 Months % Change 15.4% 20.4% -10.9%
Charters Towers - Ayr - Ingham
Charters Towers - Ayr - Ingham 67 $31 $29 12 Months to Jun 20
Charters Towers - Ayr - Ingham 13.6% 4.4% -21.0% 12 Months % Change
Queensland
Queensland 12 Month % Change -22.3% -18.0% -0.3%
Notes: (a) 12 Months to June 2020. (b) 12 Months % Change Source: QGSO (2020)10.
9 REIQ (2020). Record low rental stock across entire state. Retrieved from https://www.reiq.com/wp-content/uploads/2020/08/REIQ-Media-Release- Quarterly-Vacancy-Rates-June-2020-10082020.pdf 10 QGSO (2020). Building Approvals, Australia. Queensland Government Statisticians Office.
MAJOR SPONSOR 7 Townsville North Queensland Economic Snapshot – November 2020
2.3 Business Confidence
Townsville’s business confidence is still in negative territory for the third month in a row, however Townsville’s businesses are increasing their optimism surrounding the COVID-19 pandemic. The reopening of business and hospitality venues, along with State and Federal Government assistance (JobSeeker and JobKeeper) have softened the immediate impact of the pandemic in the region.
The September 2020 quarter’s confidence index moved upwards by two index points, with a third of survey respondents believing that the opening of the Queensland border will not impact on their recovery efforts8. This highlights the importance of local tourism and spend within the Queensland economy and the confidence businesses have on intrastate travel.
The survey identified that 80% of respondents believe future spending on key infrastructure will support recovery efforts and assist businesses to navigate through the COVID-19 pandemic8.
Figure 2.3: Business Confidence Change Index – Townsville
Source: PVW Partners (Unpublished). 11
11 PVW Partners (Unpublished). Business Confidence Survey. Email received 07/07/2020.
MAJOR SPONSOR 8 Townsville North Queensland Economic Snapshot – November 2020
2.4 Tourism
Overall, Visitation in Queensland was down 67.1% in the June 2020 quarter compared to the previous June 2019 quarter12. Interstate visitors saw the largest decrease (93.2%), followed by holiday visitors (85.7%) and visiting friends and relatives (64.9%)12 due to border closures coming into place on 3 April 2020.
In the year ending June 2020, the Townsville SA3 region attracted approximately 1.8 million visitors over the period of 12 months. Throughout June 2019 to June 2020, total visitation decreased by approximately 25% which has been the largest drop experienced throughout the five-year period examined in Figure 2.2 below. Decline was experienced over all visitor types: > Domestic Day – 17% decline > Domestic overnight: > Interstate – 50% decline > Intrastate – 27% decline > International – 28% decline
This decline in visitation is attributed to COVID-19 impacts. Restrictions and interstate border closures prohibited nonessential travel throughout the June quarter, with overnight visitation only coming into effect on 1 June for Queensland.
Figure 2.2. Townsville SA3 and Charters Towers – Ayr – Ingham SA3 Tourist Visitation (Year Ending June)
2,500 40.0%
2,000 25.0%
1,500 10.0% (%)Growth
Visitors (000s) 1,000 -5.0%
500 -20.0%
0 -35.0% 2015 2016 2017 2018 2019 2020 Townsville Charters Towers - Ayr - Ingham Townsville Growth Charters Towers - Ayr - Ingham Growth
Note: Year ending June. Source: TRA (2020).13
12 TEL (2020). Tourism Quarterly Data Report: October 2020. 13 TRA (2020). Tourism Research Australia.
MAJOR SPONSOR 9 Townsville North Queensland Economic Snapshot – November 2020
In October, AirBnb bookings in Townsville indicated that occupancy rates were tightening, increasing by 13% on the previous month to reach 80%. This highlights the easing of restrictions with the allowance of intrastate travel.
The Charters Towers – Ayr – Ingham SA3 region experienced a visitation decline of 14% over the 12 months ending June 2020. This decrease was largely driven by the drop in domestic overnight and international visitors, decreasing by 26% and 23% respectively.
For the month of October 2020, Townsville’s accommodation occupancy saw a year on year decline of 9.5% and Rev PAR dropped by 10.5%. This decline in occupancy can be attributed to the above COVID-19 impacts. Comparatively to the rest of the State, Townsville’s accommodation occupancy and RevPAR performed strongly as demonstrated in the graph below.
Figure 2.3. Queensland Average and Townsville Occupancy and RevPAR for October 2020
Source: STR (2020).14
Regionally, the Townsville market has reported higher levels of performance across the Demand, Occupancy Rate, ADR and RevPAR metrics since the move to Stage 2 restriction on June 1.
During the time Queensland borders have been closed to Victoria and Greater Sydney, the destination has been more reliant than ever before on intrastate travel. Restrictions lifting in Queensland was a welcomed first step to allow Queenslanders to travel anywhere within the State from the 1 June. Local tourism has been key to supporting the recovery of businesses and their survival during the COVID-19 pandemic. In further positivity, from 1 December borders will reopen to Victoria and all New South Wales.
14 STR (2020). Association of Australian Convention Bureaux Inc. October 2020.
MAJOR SPONSOR 10 Townsville North Queensland Economic Snapshot – November 2020
3 PROJECT SNAPSHOT
MMG Limited Dugald River Operations
The North and North West Queensland region is the most strategically important export supply chain in Northern Australia. New economy minerals, such as zinc, are essential in the manufacture of many end-uses important to everyday life. Demand for zinc is growing exponentially as market conditions respond to the rapidly changing nature of emerging technologies, including electric vehicles, renewable energy products, low-emission power sources, consumer devices, and high-tech products used in advanced manufacturing for medical, defence and scientific research applications.
Dugald River is owned by MMG Limited and is one of the world’s top 10 zinc operations. Located approximately 65km north-west of Cloncurry in Queensland, the operation employs around 500 employees and contractors on a fly-in, fly-out and local residential basis.
The first production of finished zinc concentrate leaving Dugald River was on 8 November 2017. With existing guidelines in place for 2020, Dugald River was expected to produce between 170,000 and 180,000 tonnes of zinc in zinc concentrate and C1 costs of US$0.70-0.75/lb. However, the company’s latest quarterly report showed that Dugald River clocked up a new record for ore mined, producing and exporting one million tonnes of zinc concentrate in just three years. The achievement, which was celebrated by MMG in Townsville this month, signalled a strong foundation for the mine’s ongoing operations as the North West Queensland operation continues to ramp up.
Townsville Enterprise will continue to advocate the realisation of opportunities across Queensland’s North and North West Minerals Provinces, developing a clear strategy for a resource-led recovery and closer relationships between government and industry.
MAJOR SPONSOR 11 Townsville North Queensland Economic Snapshot – November 2020
Townsville Enterprise Limited Phone: +61 7 4726 2728 380 Flinders Street, Townsville Email: [email protected] Queensland, 4810 Australia Web: www.townsvilleenterprise.com.au
The Townsville North Queensland Quarterly Economic Snapshot is a joint initiative of Townsville Enterprise and AEC Group Limited.
Disclaimer: Whilst all care and diligence has been exercised in the preparation of this report, AEC Group Pty Ltd does not warrant the accuracy of the information contained within and accepts no liability for any loss or damage that may be suffered as a result of reliance on this information, whether or not there has been any error, omission or negligence on the part of AEC Group Pty Ltd or their employees. Any forecasts or projections used in the analysis can be affected by a number of unforeseen variables, and as such no warranty is given that a particular set of results will in fact be achieved.
MAJOR SPONSOR 12