Townsville North Queensland Economic Snapshot – November 2020
Total Page:16
File Type:pdf, Size:1020Kb
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% (%) Rate Unemployment 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.