As reported in the Courier Mail recently, Queensland’s unemployment figures dropped to 5.6% in November (against a national average of 5.8%), with the state creating 4700 new positions during the last month – more than a quarter of the national total during that period. Some economists have described the data as evidence that Queensland’s economy was “roaring back”, with Premier Campbell Newman taking some of the credit by claiming with his pro-business agenda was “supercharging” the state.
So the question to be asked on this positive news is this: Is Queensland’s job market finally over the GFC and back to above average growth, or is this a statistical blip?
There is little doubt that Queensland’s LNP government has pushed through a number of large projects in recent months, with resources and infrastructure at the heart of their plans. These areas have traditionally been strong drivers of growth for the state in the last decade, and job growth in Queensland has been dominated by these sectors since the early 2000’s.
Anecdotal evidence from our clients in the aforementioned industries suggests the real climate in the Queensland economy isn’t quite as clear cut as the headline figures make out. For instance, in recent months a number of small to medium-sized organisations in the mining services sector have reduced headcount as the pull back in resources projects continues. We have seen a number of these organisations then go back to the market for contract labour hire solutions for pieces of work they secure rather than hiring permanent employees, thus highlighting a lack of confidence in the medium to long term. Conversely, the larger construction companies seem to be finally securing the size of projects (particularly in the government sector) that will enable them to stabilise their workforces. However whether we have seen any concrete evidence of large scale hiring decisions at these organisations in not clear, as productivity gains seem much more in focus than traditional headcount increases.
One sector that does seem to be contributing to the slight upturn in business confidence, is the housing market, with RP Data reporting that house prices in South East Queensland have risen a modest 4.73% in the last 12 months. This has resulted in an increase in confidence amongst residential construction businesses, investors and consumers alike, although no significant increase in job growth within these sectors has yet been seen. It is likely that this sector will continue to grow steadily with job creation a natural outcome, although it is worth noting that house prices in Queensland are still growing at a rate well below the national average of 8.96%. Therefore it is safe to assume that Queensland cannot expect to achieve higher jobs growth on the back of the property sector in the short to medium term.
The Newman government has made it clear that the state’s debt issues are far from over, and as such have actively pursued a policy of encouraging private investment in state infrastructure projects to minimise the burden on the tax payer. Therefore, in terms of job creation, it is likely to be the private sector that will generate the most growth from this policy rather than an increase in public sector workers.
In summary, while it is positive news for Queensland to finally have an unemployment rate below that national average, it seems a little premature to say that the boom times are returning to the state. We envisage a steady pattern of growth in the job market, particularly in the high end construction firms with close government links. However, this will be offset by continued reduction in mining investment (many of the state’s flagship LNG projects will move from the construction to operational phase in 2014, and a push for increased productivity. Queenslanders have weathered the GFC storm well, but should not expect the pre-GFC climate to return any time soon.