QLD Economic Review

This Travelling Economist has been fortunate enough to spend considerable time in various parts of Queensland in recent months, visiting Cairns, Townsville, Brisbane and the Gold Coast. Queensland is a great example of the ‘multi speed’ national economy, with some parts of the local economy going through some tough times (e.g. tourism and construction -especially in the flood impacted areas), while other sectors are gearing up for a significant increase in mining and gas activity that will likely bring with it much greater wealth and prosperity in the future.

A closer look at the Queensland economy is useful as a guide to the broader Australian economy. What was also interesting from the visits though is how the culture of a particular region is also vital in analysing the outlook for the economy and its ability to restructure and benefit from the enormous potential growth over the next decade.


The global financial crisis was not kind to the Queensland economy, with a significant downturn in the economy in 2009, with the contraction in state final demand reaching 4.3% for the 12 months to September 2009 (versus +1% for Australia wide). This compares to an average growth rate of 7.7% between 2004 and 2007 and a peak rate of 12.9% in June 2009.

There is no doubt that the Queensland economy is very cyclical in its nature, and many Queenslanders are accustomed to this, others are not, herein lies a challenge. The Queensland government forecasts growth to recover to around 5% per year in 2011-2012, but then accelerate to 5.25% per year in 2012-2013 then ease back to 4% after that.


The opportunity, therefore, looks to exist for Queensland to continue to record annual economic growth rates well above the national average as one of Australia’s ‘resources states’. Queensland produced 25% of Australians resources, compared to almost 50% in WA, but only 12% in NSW. Going forward though, the nature and composition of growth will continue to change and currently this is bringing painful structural adjustments to many parts of Queensland. For south east Queensland in particular, the changing structure is bringing enormous challenges given the downturn in the construction sector, weak house prices and headwinds for small businesses. An opportunity though does exist to leverage off the mining and gas led activity as well as important infrastructure projects.


The Queensland economy is very diverse, with significant agriculture, mining and gas assets as well as having exposure to the domestic services sector (especially tourism and some finance) and in recent times a large construction industry. While significant upside potential in growth and employment can be seen in mining, gas and agriculture, the Queensland economy currently remains highly leveraged to the domestic economy, particularly manufacturing, tourism, construction and consumer spending, helping to explain the weakness since 2009. As the table below shows, there remains significant employment in construction, retail trade and services such as education and health care. Mining currently makes up just 2% of employment, but 9% of income generated in the economy. Future employment growth will likely also come from the ancillary services attached to mining and gas works and the construction that goes in to the start up phase of major projects.


Drilling down even further, what is more interesting is the diverse economic structure of particular regions and towns and future economic growth potential. More to follow....