The Townsville economy, like many other regional areas, has been hard hit by the GFC and the subsequent downturn in the mining sector, including local job losses such as the Nickel Refinery – old news but it has taken its toll. Moving forward there are two key issues for the Townsville economy –
• Long term sustainable employment growth
• General Population Growth
Whilst Townsville currently experiencing significant flood repair work, stadium build, and water pipeline projects, there needs to be sustainable long-term job creation to provide that much needed consumer confidence to spend and invest again.
There are signs of these longer-term jobs on the horizon, but with the caveat that it is early days for many of these projects, and the old adage of “when I see it, I will believe it” is very true for general business and consumer confidence. Some of the major employment projects in the pipeline that have direct and indirect effect on Townsville through employment and/or support services include –
• Lithium-Ion Battery Plant
• Hells Gate Dam
• Hughenden Irrigation Scheme
• Pure Minerals Nickel Refinery
• Sun Metals Stage 2
• Singapore Defense Deal
• Galilee Basin Mining Projects
• North West Minerals Province Mining Projects
• Major Solar Projects and upgrade of Network Capacity
There are many more proposed projects, and a detailed list can be accessed through the TEL and Colliers International Opportunity Report.
Recent data has shown a gradual improvement in the region’s labour market, with the unemployment rate falling 0.6% to 8.5% prior to the flood event. The short-term economic stimulus provided from the flood recovery together with new significant investments in the region (such as the $300 million Sun Metals Zinc refinery expansion, $2 billion Adani Carmichael project (scheduled to have a final decision on environmental approvals by June 13), and the proposed $2 billion lithium-ion battery plant (led by consortium Imperium 3), provides the potential for a sustained economic recovery.
However, the region continues to face a number of economic risks and challenges which must be managed to ensure a positive future. Limited long-term prospects following the economic downturn over recent years have reduced North Queensland’s historically strong population growth to just 0.34% as recorded in 2018. A shortfall of new residents continues to undermine several key population driven sectors, including housing and construction, education, retail/food and beverage and healthcare. A return to strong positive migration levels and broader population growth will be key for the region’s long-term economic development.
The Townsville North Queensland labour market strengthened with the unemployment rate falling 0.6% to 8.5%. Despite the improvement in the labour market, the region requires substantial ongoing job growth to reach Queensland’s average unemployment rate of 6.2%. The economic stimulus provided by the ongoing flood recovery efforts together with promised government spending $54 million to Stage 1 of the Hells Gates Dam including $24 million for feasibility works and $30 million to fast-track construction of the Big Rocks Weir, $225 million Haughton Pipeline duplication and private developments including the $300 million Sun Metals refinery expansion are expected to drive a significant tightening of the labour market over the coming months.
Residential Property Development
A key focus of this analysis is understanding the economic conditions that will drive the development of new residential dwellings and as such increased population the study areas of North Ward, CBD and South Townsville.
New dwelling construction has been on a steady decline for a number of years post GFC. The annual dwelling approvals declined 44.6% (Quarterly Economic Snapshot) during 2019. In a Macro sense Queensland as a whole was down 13.4% over the same period. This reflects a national issue but also highlights the extent of the problem in regional Queensland and particularly Townsville.
There is a decline nationally and a current concern over inflated property values in Sydney and Melbourne. This can have an impact on the market as a whole with tightening of lending criteria and lower construction levels, however it also represents an opportunity for regions such as Townsville. If job creation can become a priority for Townsville, then the tightening in property markets in southern metropolitan areas can lead to significant investment opportunities for southern investors in regional locations such as Townsville.
Price growth in Townsville has declined since the GFC and has remained stagnant to date, however it is worth noting that we are now seeing some green shoots of recovery in the residential sector.
The Flood Recovery has caused a sharp decline in residential vacancy rates however if the market is not underpinned by population growth moving forward, then this vacancy rate may edge back closer to levels around 10% once flood works are completed in approximately 6 months’ time.
A trusted measure of business confidence in the Townsville region is the PVW Partners Business Confidence Index. In May PVW commented on business confidence as follows –
Although Townsville’s business confidence declined in the March Quarter, it should be noted that despite ongoing volatility, confidence has remained in positive territory and has done so since March 2018. The March quarter confidence survey was undertaken before the impacts of the recent flooding which will have further significant implications for local business.
There was a significant divergence in confidence between large and small businesses. Smaller businesses remained more optimistic while larger operators showed concern for the implications of broad macro-economic and political factors such as the Banking Royal Commission and impending Federal Election.
Continued hold ups of the Adani Carmichael Mine also impacted business confidence, with over 85% of businesses indicating that the project was either important or extremely important to the economic recovery of the region.
2 and 5 Year Forecast
The future for Townsville’s economy and subsequent success of development in the study zones is primarily dependent on population growth off the back of longer term employment growth as discussed.
While utilizing the Projected Population Data as supplied by TCC/QRSIS, this reflects a population in 2016 of 192,058. Based on an assessed growth of 0.34% as reported by TEL in the Quarterly Snapshot for May 2019, the population currently stands at approximately 194,000.
The projected population as provided by TCC/QRSIS in 2021 is approximately 204,262. That would require a growth rate of approximately 2.5%pa for the next 12-18 months. That seems unlikely at this stage. The 10 year average population growth to 2019 for Townsville has been 1.08%. This however is heavily skewed to higher growth rates prior to the GFC as opposed to the 0.34% growth rate last year.
If we adopted the current estimated population of 194,000 and the average growth rate of 1.08%, then population in 2 years would be approximately 198,000, and in 5 years it would be approximately 205,000.
Over a 2 year period these population growth figures will have a small effect on the Townsville economy and the development opportunities in the study zone, as there is currently significant existing stock and a much more competitive price point than what new stock can be constructed for. However, over a 5 year period, these increases will start to see some inroads in new development opportunities and it is at this time that Townsville’s “Levers” as referred to in the study will start to become significant in their impact on creating more financially viable opportunities.
Of course, any improvement in these population growth figures will only help to bring forward the timing of new developments, and this is dependent on the ability for the Townsville economy to attract and retain new long term industry and employment opportunities.