19 Jan 2016
Words Catie Langdon

The Future is bright… Just look at what lies ahead

When commentators so often point to the impact of our resources boom cooling and Chin’s growth slowing, it’s easy to lose sight of the positives. But the truth is, there’s plenty to encourage business people – tourism operators especially – as 2016 dawns.

We worry when we hear Australia is now experiencing ‘below trend growth’. But, as pointed out in the latest Deloitte Access Economics’ Business Outlook, although the term might sound disappointing, it should actually be music to our ears.

“Australia just had the biggest boom it’s ever had to merely end up with a phase of below-trend growth, that’s pretty good,” said Deloitte economist, Chris Richardson. “In fact, Australia remains within sight of the world’s record for a period of unbeaten growth.”

Interest rates and exchange rates – what Deloitte calls the “two levers that rock Australia’s world” – are both working in our favour and will do so for some time.

Despite a move by the banks to lift variable mortgage rates, interest rates are broadly predicted to remain low for the foreseeable future, helping credit-related sectors including housing construction and business and property acquisitions. In fact, many have tipped the RBA will cut rates even further to offset the banks’ action.

Sustained low rates, together with stimulus provided by a falling Australian dollar, mean good growth for sectors including tourism and international education.

After peaking at a record 110.55 US cents in 2011, our dollar is now hovering in low 70 cents territory, and the outlook is for it to be sitting around 68 cents in 12 months’ time. AMP economist Shane Oliver even suggested it could slide to 65 cents by 2018.

This means more holidaymakers spending more. The excellent value is encouraging international tourists to come here in greater numbers (arrivals were up 6.5% YE August 2015), and domestic travellers to holiday at home rather than overseas.

The leadership change in Canberra that installed Malcolm Turnball as Prime Minister seemed to instantly shift the emphasis from negative to positive. A rapid move away from a previous reluctance to fund major transport projects, for example, has already delivered progress on some much needed road and rail infrastructure.

In fact, infrastructure development is shaping up to be a major issue at the Federal election, due in the second half of 2016. The opposition has put it firmly on the agenda with its proposal for a dedicated $10 billion infrastructure financing facility. And no one can deny infrastructure is central to driving economic growth.

For tourism operators, Prime Minister Turnbull’s appointment for Australia’s first Tourism Minister since 2013 pointed to a real recognition of the big role this sector will play in Australia’s economic future. The fact that Tasmanian Senator Richard Colbeck hails from a state so heavily reliant on tourism is particularly significant.

So, let’s focus on the positive evidence that we can all look forward with confidence to a bright future. Every state and territory has good reasons for optimism.

Queensland

Some 80% of the economy is services-driven. So Queensland is well placed to benefit from the dual lows in interest rates and the dollar. That spells growth in the tourism and education sectors.

While mining construction has diminished, the completion of big projects means exports will rise. Meanwhile, housing and infrastructure construction is up. Deloitte estimated, as at June, there were $211 billion worth of definite and planned major projects happening. Headlining Queensland’s bright future are:

• Brisbane Airport – Over $1 billion has been spent on infrastructure since 2009, and now a further $3.8 billion is being invested in major projects over the next decade, including Australia’s biggest aviation project, its $1.35 billion new parallel runway.
• Queens Wharf – Echo’s $3 billion transformation of a precinct stretching 10 city blocks along the Brisbane River’s north bank. Due for completion by 2022, the spectacular integrated resort will deliver a glittering new casino, five new premium brand hotels, 50 new bars and restaurants , a breathtaking Sky Deck, public event space the size of 12 football fields, and dozens of unique new attractions including water and light shows.
• 2018 Gold Coast Commonwealth Games – SE Qld will shine under a global spotlight, delivering an unprecedented economic injection. This is a unique valuable opportunity to leverage massive international exposure, and benefit from billions of dollars worth of legacy infrastructure, including the extension of the G:link light rail network.
• Big news in the regions: From Toowoomba ($220m Brisbane West Wellcamp Airport, $1.6 billion second range crossing to start 2016) to Far North Queensland ($8 billion Aquis integrated resort at Yorkeys Knob still planned), opportunities abound

New South Wales

The “Premier State” tops the growth leaderboard. With a strong pipeline of infrastructure projects and a booming housing market, it ranks as Australia’s best performing economy. Transformation urban developments include:

• Transport infrastructure – including the massive staged Sydney Metro rapid transit rail project, the $2.8 billion North Connex tunnel linking the M1 at Wahroonga to the M2 at West Pennant Hills, and the $1.6 billion Sydney Light Rail and, finally, the go ahead for the Western Sydney airport at Badgerys Creek.
• Barangaroo – one of the world’s most ambitious urban renewal projects, the $6 billion 22ha precinct includes a proposed 6-star Crown casino and resort, extensive civic, cultural and leisure attractions, vast parklands and a major new extension of the Sydney CBD.
• Darling Harbour Live and ICC Sydney – a $3.4 billion 20ha transformation incorporating Australia’s largest convention and exhibition facilities, Sydney’s largest red carpet entertainment venue, and a premium harbour side hotel.

ACT

Some might argue that the most significant thing for Canberra has been the switch to a new PM. But the truth is, regardless of who is in The Lodge, the ACT is primarily govermnet-driver and will always be supported by the public sector. Housing construction has gained momentum. Significant economic activity includes:

• Construction projects – $7.8 billion worth of commercial, residential and infrastructure construction projects are underway or planned, including a number of major apartments and hotel projects.
• Renewable energy – more than $1 billion worth of wind farm projects are underway, adding 179 turbines across three projects. And a further $1.38 billion of private wind farm investment is in the pipeline with four more projects planned.

Victoria

Victoria’s population growth leads the nation, an indication of its strong outlook and the appeal of that State. Known for its wonderfully creative and evocative tourism marketing campaigns, Victoria does a good job of selling one of its biggest assets – culture.

• Creative and cultural economy – growing at almost double the rate of the broader economy in Victoria. It generates more than $1.4 billion in exports and attracts cultural tourism worth over $1 billion per annum.
• Melbourne Park redevelopment – the $700 million staged project to establish Melbourne and Olympic Parks as an unbeatable sports and events precinct, home to the Australian Open and some 600 other events.
• Melbourne Metro – an $11 billion underground rail network, due to start in 2018. It’s said it will transform Melbourne’s public transport into a world-class system, comparable with Hong Kong, Paris and London.

Tasmania

Low interest rates and the falling exchange rate are fuelling a turnaround in Tassie’s fortunes, helping housing construction, retail and tourism, plus important export areas like agriculture, fishing and forestry. Building confidence is up too. Notable initiatives include:

• Access 2020 – a 5-year sea and air access strategy involving Tasmania’s Airports, Tasports and the Spirit of Tasmania, to help meet the State’s goals of attracting 1.5 million visitors annually by 2020, and raising the value of agriculture tenfold to $10 billion by 2050.
• Macquarie Point – an $800m development to shape a new future for the 8.6ha former freight facility, promising a dynamic mixed used precinct in central Hobart.
• Tourism initiatives – building on the phenomenal success of MONA (Museum of Old and New Art) and the winter MOFO festival, some great tourism developments are emerging, including the $185 million Musselroe Bay ecotourism resort and $130 million The Icon Complex boutique hotel and conference venue redevelopment in Hobart’s CBD.

South Australia

While South Australia’s car-making and defence manufacturing sectors have been sorely tested, these skills have come to the fore to win some major Department of Defence contracts. SA’s defence sector contributes about $2 billion a year to the State’s economy.

• Warships and submarines – SA has the $8 billion contract to deliver three world-class warships for the Royal Australian Navy, and will also design, build and deliver 12 submarines and related infrastructure
• Land Forces 2016 – Adelaide will host Australia’s largest international land defence exhibition next year, promising to expand key markets and provide a big economic boost. Attracting more than 1100 delegates and 400 exhibitors, the event itself will inject over $16 million and 5000 bed nights into the local economy.

Western Australia

Despite the mining downturn, WA still has strong retail spending, economic growth and construction work. Big resource projects worth $171.0 billion are currently underway or committed, and a further $110.4 billion under consideration.And all that mining money has flowed into other key sectors. Investment in developments like the new Perth stadium at Burswood and new WA Museum are great news for tourism, as are these large-scale undertakings:

• Elizabeth Quay – a $2.62 billion development on the banks of the Swan in central Perth, with 800 apartments, 400 new hotel rooms, and 225,000m2 of commercial and retail space over 10 hectares, due for completion by 2020.
• Perth City Link – a 13.5ha $5.3 billion mixed-use project to reconnect the CBD with the Northbridge entertainment precinct.
• Hotels – the Perth hotel market is in the midst of rapid expansion with 10 new hotels including the 204-room Ritz-Carlton (Elizabeth Quay), 500-room Crown Towers (Burswood), and 364-room Westin (CBD).
• Sea Dragon – It’s also worth noting development in the north of the world’s largest prawn farm. The $1.45 billion Project Sea Dragon will produce black tiger prawns at a 10,000ha ponding facility in the Northern Territory for processing in the Kimberley and shipping to Asia out of Wyndham.

Northern Territory

In the CommSec October State of the State Report, the Northern Territory was top ranked on economic growth business investment and construction work done. Currently, more than $45 billion worth of contracts over 16 major projects are underway. And, while the Top End has a high dependence on mining and mining-related industries, it also has a large public administration and defence presence.

Tourism is another big economic driver. In YE June 2015, more than 1.3 million visitors stayed 12 million nights, spending over $1.8 billion. Forecasts suggest, in the five years from FY18 to FY23, Darwin overnight visitation will increase at an average of 6.5% per year for international visitors and 2% per year for domestic visitors.

• Luxury hotel – The Territory government has called for Expressions of Interest in developing a high-end integrated resort to provide luxury accommodation on a prime 9,000m2 waterfront (Crown land) Darwin CBD site, close to key facilities including the Convention Centre.
• LNG exports – With WA and Queensland, the Territory is ramping up LNG projects. Most significant has been the $34 billion lchthys project in Darwin. Within two years, Australia will have the world’s Largent LNG production capacity, resulting in much higher export volumes.