28 Mar 2023
Since 2000, the Queensland economy has grown at an average annual rate of 3.4 per cent compared with 2.7 per cent nationally. Among the states, only Western Australia, with its resources boom, has outpaced it but the Sunshine State stands on the brink of even greater opportunity – with the 2032 Olympics an exclamation point.
Queensland’s consistently higher growth has meant that, compared with 1990, the economy is now more than three times larger while the Australian economy is around 2½ times larger.
|"Southerners are being attracted by warmer weather, a better lifestyle, natural assets and relatively lower house prices."
Yet that greater opportunity can take this outperformance up another level by diversifying traditional strengths through emerging sectors.
Under a business as usual scenario, Queensland’s economy will grow 31 per cent over the 10 years to 2032–33. But if new opportunities – for example critical minerals, hydrogen and agtech – are fully developed, a more optimistic scenario emerges, with the state economy expanding 46 per cent by 2032–33.
For that optimistic ‘Seizing the Opportunity’ scenario to happen, the state will require around $230 billion in additional private sector investment, above the business-as-usual baseline, over the decade to hosting the Olympics.
Adept Economics believes the more aggressive growth outlook is very credible if Queensland builds on its existing strengths while maximising the opportunity. Critically, there is also an opportunity cost in not seizing the opportunity as it will in all likelihood be taken up by other states or nations.
Queensland is well placed already but with extra private sector investment and appropriate policy measures to encourage that investment, the future state could be even brighter. The opportunity in sustainability solutions, the critical minerals required for a low emissions economy, the Olympics, the greater attraction for technology workers to work remotely in Queensland and connectivity to Asia are all other critical advantages Queensland has and can take advantage of.
Queensland’s population is growing at 2.2 per cent per annum compared with 1.6 per cent nationally, according to the ABS. In the 12 months to September 2022, the state grew by 114,400 people. Annual net interstate migration is running at nearly 50,000 (46,600 in the 12 months to 30-Sep-22).
Southerners are being attracted by warmer weather, a better lifestyle, natural assets and relatively lower house prices. More of them can potentially be attracted if new hybrid and remote working models make it viable for knowledge workers and professionals, who traditionally gravitated to corporate centres in Sydney and Melbourne, to live in Queensland.
There will need to be investment – in infrastructure, housing and other sectors stretched by population growth. To grow Queensland’s capital stock sufficiently to “Seize the Opportunity”, extra private sector investment (an additional $230 billion above business as usual) is required.
Under the Seizing the Opportunity scenario, the Queensland economy grows at 3.9 per cent per annum compared with 2.75 per cent in the business as usual case. GSP could be nearly $70 billion higher per annum.
That additional $230 billion of capital investment (e.g. in plant & equipment, buildings including commercial and residential, infrastructure, etc.) is required above business as usual. This would mean Gross State Product is $68 billion higher in 2032-33 than in the business-as-usual scenario.
Crucially though, this increment to GSP is sustained into the future. The $230 billion is additional investment in capital assets over 10 years but it helps to boost GSP for many years afterwards. For example, the economic life of a capital asset can often extend for decades.
An additional $68 billion GSP from $230 billion of capital investment would represent an attractive return. Indeed, the capital investment would be paid back after four years of additional GSP of that size.
There is a large benefit from additional investment above the business-as-usual scenario because it means we are substantially increasing our investment relative to the business-as-usual scenario while a smaller percentage of the capital investment is merely replacing depreciating capital.
Seizing the opportunity is not just about turbocharging the state but fortifying it against the impact of decarbonisation and other large structural shifts in the Australian economy.
Gene Tunny is director Adept Economics, and Pete Faulkner is a partner at Conus Business Consultancy Services
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
28 Mar 2023
28 Mar 2023