Employment conditions have also improved, increasing 2.4 per cent year-on-year in February while the unemployment rate fell to 5.8 per cent - its lowest level in seven years.
"“The ongoing success [of Tassie SME sector] will depend on its resilience and ability to be bold in an effort to adapt to an ever-changing marketplace"
The strong labour market has no doubt been a factor in the state’s accelerating housing market and the recent upswing in prices, with the state capital Hobart experiencing a 13 per cent year-on-year increase to March according to CoreLogic, the highest rate amongst Australian capital cities.
Additionally, the ANZ Stateometer shows Tasmania’s economy has been accelerating, with above-trend growth.
The sentiment among ANZ’s business customers is not dissimilar. In our conversations with Tasmanian customers there’s a strong sense business owners are excited by what lies ahead.
Still, the state’s economy is not without its challenges. These include population demographics, low wages growth and rising indebtedness. Looking forward, the state must continue to build on its recent momentum by focusing on strengthening its capabilities across a number of key sectors.
There are further ways Tasmania’s status can be enhanced, particularly with China, which has only just begun its love affair with Tasmania. Pleasingly, the state’s economy is becoming increasingly diverse, with less reliance on any one industry – a positive development.
It is up to industry, government and big business to support the transition to the new economy industries.
Spirit
It’s essential for the state to continue to encourage the entrepreneurial mindset we see among so many of our small- to-medium business customers.
Making up 97 per cent of Tasmania’s 36,000 businesses, the SME sector is the backbone of the state’s economy.
The ongoing success of this sector will depend on its ability to be bold in an effort to adapt to an ever-changing marketplace - one which embraces new economy industries.
Pleasingly regional cities including Launceston are already producing more output in new economy industries such as finance, education, health and professional services.
Tourism
Although this may not come as a surprise to many, it’s China which represents the biggest opportunity for Tasmania, as the world's fastest-growing source of travellers. Chinese visitors to Australia are expected to reach 3.3 million a year by 2026.
Tasmania has already done an outstanding job of marketing itself to the Chinese tourist. While the tale of China-loved Bobbie the Lavender Bear is well documented, there are hundreds of local tourism operators considering all aspects of their business and how they can better cater for Asia’s rising middle class.
We also mustn’t forget domestic tourists who spend an average of 8.6 nights in Tasmania, giving operators from across the state further revenue opportunities.
Blue Derby Pods Ride, which celebrated its first anniversary in April, is just one example of a company which has carved out a niche experience for domestic travellers.
Owner and recently announced Tasmanian Young Achiever Award winner, Tara Howell, believes Blue Derby’s offering is completely unique with no other Australian company providing a similar experience.
The value in their offering is not in one single thing – it's in the entire experience which includes meals made using Tasmanian produce and accommodation in contemporary, luxury pods located on the Derby mountain bike trails.
As well Australia’s eastern seaboard, the company has also been successful in attracting visitors from the UK and US.
Agriculture
China purchased more than $A10 billion worth of Australian agriculture exports in 2017, making it the single largest market for Australian agriculture.
Companies such as Tasmania’s Mawbanna-based Blue Hills Honey are already realising Asian trade opportunities.
Blue Hills exports about 70 per cent of its production across Asia, the UK, Russia and Germany and is now struggling to keep pace with soaring export demand. Tasmanian manuka honey in China can be seen on-shelf for upwards of $A80 a jar.
Supplying China and other large markets such as Indonesia is not without its challenges. Market access remains elusive for many products and those with access such as Tassie apples and cherries will need to consider China’s food security and safety regulations and scale of supply.
Education
As Tasmania faces disruption and a transition into the new economy, industries need to continue to address education as a state priority.
It’s been pleasing to see a huge amount of progress in this space such as the consolidation and relocation of the teaching facilities of The University of Tasmania.
This has the potential to boost Northern Tasmania’s economic output and employment and create on-flow benefits for the residential property and business services sectors.
Investment in education and initiatives to increase education completion rates and non-school qualifications should also be prioritised.
This can help to position Tasmania as a knowledge-economy, aid the transition to the new economy industries and enhance the employment prospects of Northern Tasmanians.
Greater attention should also be given to attracting more international students to Tasmania given education remains Australia’s third largest export reaching around $A28 billion in value in 2016-17.
Challenges
While we see many opportunities, there are a number of factors which could ultimately hinder their growth agendas.
One of the state’s biggest challenges is population growth, which remains low at around 0.6 per cent a year and is only a little above one third of the national population growth rate.
Combined with an aging population, this could mean a future where less Tasmanians are working, hindering economic output. A number of skills shortages in regional Australia also exist across several industries including education and health.
One way for Tasmania to tackle these challenges would be through migration, both interstate and international. At a time when attracting and retaining families and both skilled and unskilled labour in regional Australia remains a challenge, the experience and skills of migrants are critical to the ongoing economic and social prosperity of many Australian regional cities.
A report by Regional Australia Institute (RAI) showed that in 2016 over 150 regional local government areas welcomed international migrants to assist in combating declining populations.
More broadly, migrants also run one third of small businesses in Australia, highlighting their entrepreneurial spirit and hard-working attitude.
Pleasingly however, net interstate migration to Tasmania is now positive. More should be done to target families from NSW and Victoria where owning a home has become unattainable for many.
Of course working to retain a skilled workforce represents another solution. Engaging and better understanding the motives of today’s young professionals can help address this challenge. Often millennials are looking for more than a ‘job’ in their search for a place to base themselves.
Business owners must also be attuned to the needs of the future workforce and manage staff accordingly. Millennials believe productivity should be measured by output and not hours.
Gareth Arbuthnot is State Manager Business Banking, Tasmania at ANZ
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
23 Mar 2017
12 Sep 2017