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The mood doesn’t match the facts - and promise - of Townsville

From Castle Hill, the 300-metre pink granite monolith looming over Cleveland Bay and spectacular Magnetic Island, the city of Townsville looks a like it should be a flourishing economic centre.

The street circuit for the famed Townsville 400 car race winds back and forth across the Ross River, the James Cook University campus sprawls on the edge, one of Australia’s largest military bases is visible and the site for the proposed new $A250 million sports and entertainment stadium sits ready as valuable agricultural and beef properties stretch to the horizon.

"Right here in Townsville we have the best aquaculture science in the country and indeed some of the best in the world."
Professor Chris Cocklin, Right here in Townsville we have the best aquaculture science in the country and indeed some of the best in the world.

It has all the makings of a diverse regional economy – even before considering the Port of Townsville, by some margin the largest port in Northern Australia managing more than 10 million tonnes a year of minerals, agriculture, fuel, vehicles and general cargo. Or a new defence base agreement with Singapore.

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Greater Townsville is the largest population centre in northern Australia with 700,000 citizens and a catchment of one million.

Ok, so Townsville has suffered the ignominy and adverse publicity of the collapse of controversial businessman and ex-politician Clive Palmer’s Queensland Nickel and long periods of drought. But the promise seems so much greater than the mood on the streets.

“Definitely, the facts do not match the sentiment in Townsville at the moment, you see it all the time,” Townsville Enterprise's general manager, economic development Tracey Lines told BlueNotes at the recent Opportunity Asia Townsville event.

“Another example is the merger of Ergon and Energex (two state-owned Queensland power companies). Whatever you think about the energy market, that company is going to be the largest energy group in Australia with $A24 billion worth of assets under management, headquartered here in Townsville.

“But Townsville people do not believe me – I’ve met with the ministers, the chairman’s been appointed, the CEO will be living here - but Townsville, we just have to get out of the mood we’re in at the moment.”

“The Singapore opportunity really opens us up to start looking internationally and what Townsville can be – the gateway to Asia and it makes sense. We’re closer to PNG than we are to Brisbane, that’s the reality of it.”

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PHOTO: Andrew Cornell

PARTICULAR OPPORTUNITY

For Townsville this is a particular opportunity – and challenge – but equally it is one true more broadly in regional Australia where more traditional economic forces are shifting, often to Asia, sometimes to other industry sectors, and without getting permission or planning instructions from governments or policy makers.

At the Opportunity Asia event, moderated by BlueNotes, ANZ’s managing director of corporate and commercial banking Mark Hand sketched out the scale of Australia’s northern opportunity.

The region north of Rockhampton, Geraldton and the Tropic of Capricorn delivers $A5.2 billion of agricultural production, contains 5 per cent of Australia’s population, comprises 44 per cent of Australia’s land mass and receives 60 per cent of Australia’s rain – but only 2 per cent is contained in dams.

While the mining investment boom is indeed winding down and commodity prices continue to languish, and an Asian trade recession is in play, Hand reminded the business leaders of the longer-term opportunity to the north: the Asian Development Bank says $US8 trillion of infrastructure projects are required in the region by 2020 while Australia’s rural exports are likely to more than double to more than $A100 billion over the next decade and a half.

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PHOTO: Andrew Cornell

Increasingly that opportunity is in services, high value-added services like education, health, engineering and architecture in particular.

James Cook University is a particular example. JCU has an established business in Singapore and has the added status of being officially recognised as a university in Singapore, a status further enhanced by the Australia-Singapore Strategic Partnership Agreement.

While the export of teaching services is familiar, JCU vice chancellor Professor Chris Cocklin told the forum it was not just teaching but research adding value.

“Particularly in Asia, one of the areas where they have a deficit situation is in health work, so we are exporting trained professionals who are assisting the development of highly qualified health professionals,” he said.

“Another tremendous growth industry, particularly in Asia, is aquaculture based on competitive science. Right here in Townsville we have the best aquaculture science in the country and indeed some of the best in the world.”

“The ability to develop and export high quality product into Asian markets and to teach the people in Asia about how to do proper science based aquaculture rather than throwing pellets at fish is a massive opportunity for us.”

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PHOTO: Andrew Cornell

ESSENTIAL APPROACH

This sort of approach is essential if Australia – and rural Australia - is going to compete in Asia when there is not a natural and sizeable competitive advantage as there is with bulk commodities and beaches.

It won’t be coal so much as the technology and intellectual capital around mining; it won’t only be beef but genetics; and it won’t just be education but training of educators.

Townsville has an opportunity in a more-established economy with its port. Port chief executive Ranee Crosby noted Townsville is barely on the radar in much of Asia – and even Queensland more broadly needs a higher profile.

“A multi-cargo port like ours is doing 30 different commodities,” she said. “To put that into perspective, Darwin Port is about a third of the size of Townsville Port, Mackay Port is about a third of the size of Townsville Port, we’re six times larger than Cairns Port and we’re about a third of the size of Brisbane Port - and the Brisbane Port size is where we see ourselves getting to in the next 20 to 30 years.”

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PHOTO: Andrew Cornell

Townsville’s port matches the broader Australian trade picture with nearly three quarters of trade Asia-related. And like Australia more generally, the last decade has been skewed by resources and that is shifting. The Asia trend is not though.

“Our top 10 trading partners outside of Australia and the US , they’re all Asian trading partners,” Crosby says. “In the last 10 years, countries like Spain and the UK have dropped off the list, while the emergence of China is substantial. Our imports from China – and I know the focus is exports - have grown 550 per cent over the last 10 years. Our exports to China have increased 200 per cent over the same period.

“We’ve seen phenomenal growth in places like Indonesia which is a real sleeping giant for us, it’s our big neighbour, 250 million people, in the last 10 years, there’s been a 2000 per cent increase in trade growth - and yes it’s of a small scale but the opportunities available to us in places like Indonesia and China are significant.”

With all that opportunity, even before considering tourism assets like Magnetic Island and the growing sophistication of agricultural production, the lack of optimism is a bit bemusing to an outsider – particularly over the longer term.

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PROFOUND

For the local business community in Townsville, including local politicians, yes, there are some policy issues and government interest is always welcome, but the future is largely in their own hands they believe.

Sometimes the challenge is parochial: local efforts have emphasised the importance of a new $250 million sports stadium (housing the Townsville National Rugby League team the Cowboys) however for the business community improved rail and road infrastructure would deliver a greater economic benefit.

If Townsville is emblematic of the opportunity and challenge for regional Australia, the issue is not demand or a tyranny of distance: Asia is on the doorstep, offering consumers and capital.  The evidence for engagement is profound.

Of more than 1,000 Australian businesses surveyed by ANZ, of those already in Asia, 48 per cent say revenue derived from their Asian operations was higher than their domestic revenue. 

Seventy six per cent who have expanded into Asia say profits have increased substantially. Thirty eight per cent of small businesses who are doing business in Asia achieved a return on investment within 12 months. Close to 60 per cent of medium sized businesses and around 40 per cent of larger businesses accomplished this within three years.

Business optimism can be a fragile and intangible attribute and the current global climate doesn’t help. For all that, for regional centres with an opportunity like Townsville there’re plenty of positive signs to be seen if unfounded biases, like those against foreign capital, can be overcome.

Andrew Cornell is managing editor at BlueNotes

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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