18 Jul 2022
Momentum is building in Queensland toward a unique economic opportunity. There will be risk but with astute management across public and private spheres, the willing businesses are well-placed to reap rewards.
To discuss this opportunity and more, ANZ Institutional Insights sat down with Darren Bradfield, ANZ’s Head of Corporate Finance in Queensland, and Michael Rose, ANZ’s Head of Sales, Institutional.
“With this growth comes complications which are creating a lot of challenges for policymakers, at both federal and state level. Particularly in regional Queensland.”
The following is an edited version of that discussion. We started by asking them about the economic outlook for Queensland:
DB: The vibe in Queensland right now is really strong. The state is in a solid position with elevated commodity prices, an outlook for another good season and promising developments in the resources sector. From ANZ’s perspective, everything in Queensland is positive.
Population growth in the state is really gaining momentum. Recent Australian Bureau of Statistics data showed Queensland is the fastest-growing state in the country, adding more than 92,000 new residents in the past year. That's a city the size of Rockhampton.
The impact that will have on the state’s property sector alone is phenomenal. It creates massive opportunities in infrastructure, sustainability and of course social and affordable housing. And that’s before you even get into the flow-on benefits of those.
MR: I agree Darren. It’s almost a perfect storm for the state in terms of the confluence of activities and opportunities.
In resources, as you said, the transition to a low-carbon environment and the shift toward compliant growth - for want of a better word - is a big opportunity for many.
And the state is yet to see a return to pre-pandemic levels in the tourism sector, particularly from overseas, another boost still to come. And of course, the medium-term impact of the Olympics and the associated infrastructure will also be significant.
But with this growth comes complications which are creating a lot of challenges for policymakers, at both federal and state level. Particularly in regional Queensland, there’s a lot of work already underway to address challenges related to infrastructure and satisfying community concerns around that growth.
MR: Many are keeping a close eye on housing in a world of rising interest rates. But in Queensland it’s looking like this will be largely offset by the massive net migration and the reality of forward supply.
There’s a lot of towers and buildings going up in the state but that’s going to take some time. There’s some risk with those in terms of supply chain challenges in the construction space.
But by and large, Queensland is staring into a period of fantastic growth and it looks to be sustainable – based on domestic drivers rather than international ones. But that can bring with it a lot of challenges for all the players and stakeholders.
DB: The challenge in particular in the instituitional space is the cost of imports, inflation, exchange-rate movements and just the sheer demand. We’re hearing of a lot of businesses that can’t fill skills gaps. Assets are sitting underused. You can’t snap your fingers and fix that – it takes time.
You then think about all the long lead items associated with the energy transition and some of the necessary infrastructure will take decades.
Things as simple as poles and wires require millions in investment – not to mention the human capital required to build that. Then comes negotiating with landholders for installation. The logistics of it are crazy.
The opportunity is significant but the risk comes with the rising costs. And that’s being driven by skilled labour shortages.
DB: What’s the solution? Look, some of it will come from migration from interstate but that won’t fill the whole skills demand. From a regulatory perspective, you've got to have qualified people. At best, that's a couple of years to get someone through a trade but they’ll also need experienced hands.
Through time you'll get there but it will change the demographics of many areas because Queensland will need fundamental blue-collar skills. Of course, the people who fill those roles will benefit greatly – probably similar to the way labour was rewarded in the mining boom in Western Australia in the early 2010s.
MR: Yes, I was just going to make that same comparison to the mining boom. What's happening up here with labour reminds me of many of the same issues. There are definitely inflation challenges. And when you have a supply and demand imbalance, obviously costs will become an issue.
That’s a challenge for policymakers dealing with the social cost of that. Investment in financial and social wellbeing become important, particularly around housing.
I think that's where a bank like ANZ can work with the public sector – to partner together and lean in to addressing the housing affordability challenge. Sustainable housing is a key plank of ANZ’s sustainability commitments.
The challenge there of course is that a strong appetite doesn’t change the fact it takes a fair amount of time to get a lot of these developments off the ground. I think that will in the end force various stakeholders – local, state and national players, as well as banks like ANZ, to get together to work out the way forward.
DB: You mentioned sustainability there, which I think is an area we’re going to see a lot of growth. Businesses are not silly and realise liquidity is migrating to that area. They will follow. But geopolitical issues, including what is happening in Europe, may slow that change down more than some had hoped.
There is going to be real economic reasons to transition. Governments are starting to realise the challenge ahead isn't small and just putting some solar panels on roofs isn't the answer.
DB: We have to build networks as we can’t just build outliers and then connect it to the existing network. The network must be designed for wind, solar and green energy to fit. At the moment, the network is not fit for purpose because it was never designed that way.
It's a delicate thing to play with. We need energy security to support jobs and we need to make sure we create an environment to have sustainably-linked jobs.
MR: At ANZ, we’ve worked hard with customers to understand their transition plans and working out what role the bank can play in that.
In Queensland, ANZ is keen to work with governments, agencies and other private players to create a consultative hub where businesses can better understand and execute their transition strategies.
A lot of resources and a lot of capability are required to address these challenges.
MR: Yes and the capital banks like ANZ bring means they add a lot of scale and capability to that effort. That’s critical for the future of the sector given the size of what needs to happen.
DB: Indeed. And that flows out across the region, due to the offshore money – particularly from north Asia – being invested in the state’s energy sector.
MR: Yes, the trade flows are a critical opportunity. Queensland was Australia’s second-largest export state in terms of value in the year to March. That brings opportunities in terms of financing, supply chains, infrastructure and more.
DB: We touched on the Olympics very briefly before but I think there’s a big opportunity there in the institutional space. Brisbane 2032 aims to be the first carbon-positive Olympics.
Indeed, many in the state see the Olympics as a North Star for the infrastructure spending required to address transport congestion and future-proof Queensland for future growth. Already construction around bus networks and additional rail infrastructure is underway.
Even accommodation. As we speak, Brisbane is net short hotel rooms that will be required for the Olympics. That’s another substantial opportunity.
The stadiums, that’s for the event itself. It's the stuff around it which will benefit the south-east corner of the state for longer.
MR: Yes, it’s exciting. And like what we saw in Sydney two decades ago, when you have the world’s captains of industry in town for the Olympics, anything can happen from there.
That can open a lot of eyes around foreign direct investment into Australia generally, which Queensland would be a beneficiary of.
This article was originally published on ANZ Institutional Insights website.
Shane White is an editor at ANZ Institutional Insights.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
18 Jul 2022
07 Oct 2022