ISSUE 1 QUARTERLY UPDATE 02/2021

Townsville & North West Economic Outlook

1. Outlook February 2021

1.1 MACROECONOMIC OUTLOOK

Entering 2021 the global economic The Australian dollar has The outlook is expected to continue outlook continues to be dominated appreciated strongly along with to improve through early 2021. by the COVID-19 pandemic. The virus key commodity prices including However, recent COVID outbreaks and measures implemented to coal and iron ore as a result of in the New South Wales Northern control its spread have resulted in the improved sentiment. However, Beaches area and Greater ’s a severe global recession, with GDP ongoing trade tensions with China precautionary lockdown are timely shrinking by 4.4% from the previous continue to cloud the outlook for reminders of the risks still facing the year (IMF, 2020). The outlook remains ’s major resource and Australian economy. highly uncertain, with rising infection agricultural exports. The longer term implications of rates in the United States and Europe the pandemic are less clear. The weighing against promising progress The domestic economy bounced significant public debts and deficits towards a vaccine in the first half of back in the second half of 2020, with generated to fight the pandemic 2021. Ongoing political unrest in the will likely lead to future reductions in US post the presidential elections GDP growing by 3.3% expenditure and potential increases further clouds the economic outlook. in the September Quarter as COVID in taxation. Key industries such as Equity markets have recovered restrictions eased. international tourism will almost strongly to new highs despite the certainly take years to recover from downturn, driven by the impending Unemployment edged lower to 6.6% the downturn. vaccine development and record in December as the nation continues The risk of future pandemic low interest rates which have to gradually transition from the outbreaks will also need to be moved capital into higher yielding Jobkeeper and Jobseeker subsidy factored into both business assets. Emergency global monetary programs which have served to planning and public policy given policy is likely to continue for some boost expenditure and confidence the significant integration of global time, as inflation remains low throughout the pandemic. supply chains. to negative globally.

A JOINT INITIATIVE BY REGIONAL ECONOMIC ADVISORY AND REGIONAL DEVELOPMENT AUSTRALIA AND NORTH WEST QUEENSLAND.

To receive future copies of the quarterly TOWNSVILLE & NORTH WEST QUEENSLAND ECONOMIC OUTLOOK 1 Economic Outlook, please subscribe here. 1.2 REGIONAL OUTLOOK

The Townsville and North West The regional property market The ACCC has released its Northern Queensland economy benefited has also experienced a recent Australian Insurance Inquiry Final from the rising commodity prices Report and while this focus on resurgence, with limited rental and reopening of Queensland’s the issues has been welcomed, State borders at the end of 2020. vacancy, record low interest there are concerns that the While the region has experienced rates, and improved borrowing recommendations do not go minimal direct COVID cases, the conditions combining to drive far enough. border closures and restrictions As with the national economy, the increased transaction activity on business operations has had a region remains vulnerable to any and rental/ price growth across devastating impact on a number further COVID outbreaks. Ongoing of industries. many parts of Townsville and North trade relations with China will The tourism sector, including West Queensland. need to be monitored for their aviation and hospitality as well as implications on the key mining and international education have been Despite the improving outlook, agricultural export sectors as well as particularly hard hit. However key the availability and affordability broad business confidence. regional sectors including mining, of insurance for businesses and agriculture, health care and parts households in the region is an of the retail sector were able to escalating issue and has the continue operations, with some potential to derail the economic sectors experiencing increased recovery. Strata titled units and demand due to the pandemic. leisure/recreational businesses have been particularly impacted, with Sectors such as seasonal rapidly escalating premiums and a horticulture and re-opening highly limited pool of insurers willing hospitality businesses have reported to service the region. difficulty in securing workers, with regional employers forced to compete with both the increased Jobseeker subsidy and the absence of seasonal international labour. Mornington Carpentaria Doomadgee

Burke Hinchinbrook

TOWNSVILLE & Palm Island Townsville NORTH WEST QUEENSLAND Townsville REGIONS Burdekin

Mount Isa Charters Towers McKinlay Richmond

Cloncurry Mid-West Queensland Flinders Western Queensland

Total 2018-19 GRP for Townsville Boulia & North West Queensland is $16.9 billion -1.1% annual growth

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 $10.2 B $509 M $1.03 B $42 M $ 680 M (GRP) (2018-19) -0.8% -6.2% -4.0% -7.6% -1.1% Annual Growth Rate

7.1% 8.1% 6.5% 54.9% 8.7% Unemployment -0.2 -0.3 -0.2 -3.1% -0.5 (June Qtr. 2020) ppt quarterly ppt quarterly ppt quarterly ppt quarterly ppt quarterly decline decline decline decline decline

Median $320,00 $214,000 $165,000 $190,000 House Price 3.2% 7.0% -0.6% NA -5.0% annual annual annual annual (2019-20) increase increase decline decline

195,032 10,687 16,971 2,671 11,739 Population 0.5% -1.1% -0.6% 1.29% -0.9% (June 2019) annual annual annual annual annual growth decline decline growth decline

Table 2.1: Headline Economic Statistics North Queensland Source: NIEIR (2020), QGSO (2020)

OUTLOOK REGIONAL DEVELOPMENTS previous stages developed at The Stand and John Brewer Reef. MOUA The North Queensland economy Works are set to begin on the Big will serve as a key driver to support has begun to pick up momentum Rocks Weir project north of Charters the recovery of visitation to North in late 2020. Unemployment has Towers with the Australian and Queensland post-COVID-19, with the come down slightly across the Queensland governments each potential to generate up to 50,000 region and building approvals committing $30 million towards visitors per annum and contribute in Townsville have increased the development. $22.5 million to GRP. dramatically in recent months, The weir will provide an estimated The opportunity for a regional albeit from a very low base. 10,000 megalitres of water hydrogen industry has continued A strong pipeline of projects allocations per annum for urban to gather momentum with Origin is expected to see improved and agricultural use supporting Energy announcing plans for a economic performance continue $35 million per annum in increased 300MW electrolyser in Townsville with through 2021. Economic risks agricultural production. The aims to produce 36,000 tonnes of remain, including further fallout project forms stage one of the green hydrogen a year for export. from COVID-19 and low projected proposed $5 billion Hells Gates The future prices for the region’s key Irrigation Scheme. sugar industry. has identified Townsville as a key North Queensland’s Museum gateway for hydrogen production, of Underwater Art (MOUA) is and has committed a further $10 on schedule to be completed million over the next four years to during 2021 following a commitment support the industry’s development. to the final $1 million funding by the The State’s initial $5 million in State Government. funding for the region will be used The final installations to be located by local zinc manufacturer Sun at Magnetic and Palm Islands will Metals to develop the region’s first complete the experience alongside renewable hydrogen facility.

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

Indicator Flinders Richmond McKinlay

Gross Regional Product $157 M $78 M $675 M (GRP) (2018-19) -4.6% -2.4% 9.1% Annual Growth Rate

$80,000 $95,000 Median $90,000 House Price 23.1% -5.0% annual change annual annual N/A (2019-20) increase decline

1,505 810 818 Population 0.5% -0.5% -0.5% (June 2019) annual annual annual growth decline decline

OUTLOOK Table 2.2: Headline Economic Statistics Mid-West Queensland Source: NIEIR (2020), QGSO (2020) Economic conditions in Mid-West Queensland have remained REGIONAL DEVELOPMENTS The Richmond Agriculture Project steady as key indicators have Works have continued towards is a $210 million project aiming to shown mixed results. developing major regional irrigated irrigate 8,000 ha for broadacre While unemployment statistics agricultural developments across cropping. The proposal would are not gathered consistently for the Mid-West, including: support 55 ongoing FTE jobs on these local government areas the border of the Richmond and The 15 Mile Irrigation Project individually, the Mid West region’s McKinlay Shires, using existing northwest of Hughenden has been unemployment is currently infrastructure to transport produce. approved and aims to provide water estimated at a very low 3%. to 300ha of high value agricultural Mineral Resources Grants of up The housing market has had land. Once completed the project is to $200,000 were approved by significant variation in results expected to create 165 ongoing jobs the Queensland Government which were impacted by the for the region. in 2020 to explore possible new typically low sales volumes. resource sites in a number of areas The Hughenden Irrigation The return to modest population across the West and Mid-West. Project (HIPCo): Works continue on growth in Richmond and Flinders The $200,000 grants will be used the detailed business case for the is a significant milestone, given to employ an electromagnetic $300 million + project which plans to the long-term trend of population survey to identify base metal provide 30,000 megalitres of water decline. A number of small and deposits. Key opportunities include allocations to irrigate over 2000 ha large developments including the new gold deposits in McKinlay of agricultural land. The scheme Kennedy Energy Park, Hughenden Shire. The exploration could see will support high value perennial Recreational Lake, and the Viper continued recovery and growth in crops such as citrus and mangoes polyethylene pipe manufacturing the mining sector, which supported alongside fodder crops to intensify facility have helped support the local economy through the the regional beef cattle industry. growth and improved sentiment COVID downturn. The project has the potential to in the region. grow the regional economy by Major irrigation, meat processing, $72 million per annum and support and mining projects proposed 490 ongoing jobs. for the region have the potential to be game changing over the coming years.

TOWNSVILLE & NORTH WEST QUEENSLAND ECONOMIC OUTLOOK 4 2.3 WESTERN QUEENSLAND

Indicator Cloncurry Boulia Burke Doomadgee Mornington Carpentaria

Gross Regional Product $1.1 B $2.13 B $29 M $21 M $27 M $34 M $114 M (GRP) (2018-19) -1.6% -1.2% -3.5% -3.19% -9.6% -11.3% -6.3% Annual Growth Rate

5.0% 6.9% 2.3% 22.6% 22.4% 22.3% 22.4% Unemployment -0.6% -0.8% 0 -3.6% -3.7% -3.7% -3.7% (June Qtr. 2020) ppt ppt ppt ppt ppt ppt ppt quarterly quarterly quarterly quarterly quarterly quarterly quarterly decline decline change decline decline decline decline

Median $120,000 $190,000 $250,000 NA NA NA NA House Price -29.4% -9.5% annual no change no change no change no change no change quarterly (2019-20) decline decline

3,047 18,595 423 354 1,526 1,230 1.977 Population -1.4% -1.5% -0.47% 0.6% 0.5% 1% -0.15 (June 2019) annual annual annual annual annual annual quarterly decline decline decline growth growth growth growth

Table 2.3: Headline Economic Statistics North West Queensland Source: NIEIR (2020), QGSO (2020)

OUTLOOK The outlook for Western Queensland regions remained steady entering 2021, with generally lower unemployment offset by weakness in GRP and ongoing population decline in the region’s largest centres (Mount Isa and Cloncurry). Despite the labour market improvements, REGIONAL DEVELOPMENTS local unemployment remains a major concern at above 20% The CopperString 2.0 project has continued to progress with the draft for the remote communities of Environmental Impact Statement released for public consultation and a Burke, Doomadgee, Mornington further commitment of $11 million from the Australian government to fast and Carpentaria. track the project. The recovery in key base metals The $1.5 billion transmission line aims to connect the community of Mount prices at the end of 2020 has Isa and the North West Minerals Province to the National Electricity Grid. helped to strengthen the regional Economic modelling estimates 3,500 regional jobs and $79 billion in outlook entering 2021. economic activity will be created over 30 years due to additional resource projects made viable through lower electricity costs. A final investment decision for CopperString 2.0 is expected during 2021. Grand Central Industries are continuing to progress the Cloncurry Intermodal Terminal. The project is shovel ready and finalising project finance. The debottlenecking rail infrastructure will increase the capacity of the Great Northern Rail Line by up to 4 million tonnes per annum and provide greater rail access for junior miners.

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

Confidence in Queensland’s OVERALL QUEENSLAND Political and economic stability, as 12 month outlook significantly BUSINESSES REPORTED well as the level of demand remain improved in the September IMPROVEMENTS IN: the most significant concerns quarter (+8.3ppt), as the state • Sales and revenues (+15.5ppt) (particularly for small businesses) across the state. economy continues its recovery • Profitability (+7.8ppt) from COVID-19. • Operating costs (+7.4ppt) While there is increased optimism Positive results were also reported for the coming quarters, caution in regard to labour costs and remains due to the recent employments levels, which was domestic outbreaks of COVID 19 driven largely by a decrease in and the impending finalisation the Jobseeker supplement and of the Jobkeeper and Jobseeker the reopening of the domestic subsidy programs. Queensland economy.

Indicator Index Sep 2020 Quarterly Change

12 Month Outlook Queensland 33.3 +8.3

General Business Conditions 40.1 +9.7

Sales and Revenue 45.9 +15.5

Labour Costs 51.6 +8.1

Profitability 38.2 +7.8

Employment 45.4 +6.1

Capital Expenditure 43.6 +3

Table 3.1: Queensland Business Confidence Sep 2020 Source: CCIQ (2020) Image credit: Cam Laird

TOWNSVILLE & NORTH WEST QUEENSLAND ECONOMIC OUTLOOK 6 4. Industry Profile: Agriculture Forestry & Fishing

Each Quarter the Townsville and The outlook varies significantly The Townsville and North West North West Queensland Economic between commodities. The Queensland region hosts a number Outlook profiles a key regional region’s traditional sugar crop of proposed major agricultural industry sector. This quarter reviews has been impacted by stagnating developments. Key current the Agriculture, Forestry and global demand due to increasing opportunities under investigation Fishing industry. health concerns associated with as identified in the Townsville and excess consumption. Beef on the North West Queensland Economic INDUSTRY OVERVIEW other hand has continued to see Recovery and Growth Strategy The Agriculture, Forestry and Fishing strong demand and price growth, (2020-2030) are summarised in the industry is a major economic predominantly driven by changing table below. sector in Townsville and North West consumer preferences in Asia. Local Combined the economic impact Queensland, contributing $867 horticultural production continues of these projects could be game million to GRP (5.1%) in 2018-19 and to be constrained by the limits of changing for the region. If all supporting over 4,500 regional jobs. domestic demand and increasing projects were to go ahead they North Queensland (specifically export access will be key to realising would be estimated to create Burdekin and Hinchinbrook) is one future growth. up to 20,000 Full Time Equivalent of Australia’s most productive Despite these macro trends, all (FTE) jobs during construction and sugarcane regions alongside of Townsville and North West contribute nearly $4 billion dollars diversified broadacre cropping Queensland’s major agricultural to GRP (including direct and flow on (cotton, legumes). North Queensland industries have experienced construction impacts). also hosts a notable aquaculture significant periods of growth and Potential ongoing impacts from industry including black tiger decline in recent years (see Figure increased agricultural output total prawns, redclaw crayfish, 4.1). The fluctuations which are approximately 5,000 direct and barramundi, and cobia. common to the industry have 2,000 indirect jobs and $1.1 billion p.a. The Mid-West and Western regions been driven by weather events in GRP (direct and flow on). currently specialise in extensive (including the 2019 floods which cattle grazing. saw approximately 500,000 head of cattle lost across the region) and 50.0% The industry also supports a 40.0% market fluctuations. 50.0% significant value add manufacturing 30.0% 40.0% sector, including six regional sugar 50.0% 50.0% 20.0% 30.0% mills and the 1,800 head per day JBS 40.0%

40.0% 10.0% Townsville Meatworks. 20.0% 30.0%

30.0% 0.0% 10.0% OUTLOOK 20.0% 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 20.0% -10.0% 0.0%

10.0% (%) Growth Add Value Annual The Agriculture, Forestry and Fishing 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 10.0% -20.0% -10.0% 0.0%

industry has seen significant (%) Growth Add Value Annual 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 0.0% -30.0% -20.0% investment interest over recent 2016/17 2017/18 2018/19 2019/20-10.0% 2020/21 2021/22 2022/23 2023/24 2024/25 Annual Value Add Growth (%) Growth Add Value Annual -10.0% -40.0% years, with rising incomes in -30.0%

Annual Value Add Growth (%) Growth Add Value Annual -20.0% Sugar Cane Growing Outdoor Vegetable Growing Indoor Vegetable Growing emerging market economies -20.0% -40.0% Beef Cattle Farming Aquaculture -30.0% and a growing global population Sugar Cane Growing Outdoor Vegetable Growing Indoor Vegetable Growing -30.0% driving demand for high quality -40.0% Beef Cattle Farming Aquaculture -40.0% Sugar Cane Growing Outdoor Vegetable Growing Indoor Vegetable Growing agricultural produce. Sugar Cane Growing Outdoor VegetableBeef Growing Cattle FarmingIndoor Vegetable GrowingAquaculture Beef Cattle Farming Aquaculture

Figure 4.1: Historical and Projected Industry Growth Source: IBISWorld (2021)

TOWNSVILLE & NORTH WEST QUEENSLAND ECONOMIC OUTLOOK 7 Project Description Proponent Status Capex

140,000 ML dam and distribution network Detailed Business Cave Hill Dam MITEZ $460 million supporting irrigated agriculture. Case Completed

Unlocking an additional 150,000 ML per Detailed Business $358 - $665 million, Burdekin Falls annum of water allocations for agricultural SunWater Case Under depending on the Dam Raising irrigation, mining and urban use. Investigation final height

Awaiting Richmond Irrigated Richmond 8,000 ha irrigated agricultural project. Confirmation of $210 million Agriculture Project Shire Council Water Allocations

Irrigated agriculture and urban Charters Towers Big Rocks Weir water storage for the Township of Funding Committed $60 million Regional Council Charters Towers.

Townsville Detailed Business Hells Gates Dam 50,000 ha long-term irrigation scheme. Enterprise Case Under $5.5 billion Limited Investigation

10,000 ha irrigated agricultural Final Stages of HIPCo Irrigated development for hay, fodder and high HIPCo Design and Business $300 million Agriculture Project value food crops. Case Underway

918 hectare irrigated agriculture precinct 15 Mile Irrigated Flinders Shire Stage 1 Development growing high value table grapes and $47 million Agriculture Project Council Approved citrus crops.

Hughenden Feedlot 50,000 head feedlot and 800-15,000 head/ CVNM Development $100 million and Abattoir day abattoir. Investments Approved

Table 4.1: Proposed Agricultural Developments Source: RDA (2020)

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.