FNQ ECONOMIC OUTLOOK 2021
By Stacey Carrick & Danae Jones
What does the future hold for our economy in 2021 and beyond? It is the million dollar question. We have gathered some of the most highly regarded local experts to give some insights on what lies ahead.
The need to diversify our economy is shouted from the rooftops every time there is a tourism downturn, and while many would agree that is necessary, long time local economist Bill Cummings from Cummings Economics says people don’t realise just how robust our economy already is. He agrees that there is still more work to be done, but we have a solid foundation of many other thriving industry sectors that underpin us.
“Cairns’ role as the capital/hub city of the most populous region in northern Australia will be further reinforced in 2021-22 when almost certainly the region it services―south to Cardwell, west to the Gulf and the Northern Territory border and north to the PNG border, will pass the milestone 300,000 population mark.
“While there has been a preoccupation, especially in Cairns and Port Douglas, with the impact of the COVID-19 restrictions on tourism, Cairns as a city services a large robust region with plenty of opportunities that have been and are contributing to continuing growth in earnings from agriculture, marine industries, forestry and mining. The city leads northern Australia in the development of skills-based manufacturing and services in the aviation and marine sectors. Its strategic position means that it is playing a growing role in security and defence activity. Its growing population and industry are leading to a catch up in important services like health and education in which it still lags compared to its population,” said Bill Cummings, Cummings Economics.
He says that in 2021-22, there will still be some negatives and uncertainties around, due to lingering impacts of COVID-19 on international tourism and education, including with our important near neighbours PNG and the Pacific and due to side effects of unease and tensions in relations with China. But there will be positives.
“The impacts of low interest rates and incentives in pumping up dwelling construction seems likely to extend through to 2021-22. The city and region have come through the COVID experience with a positive image as a place to live.
“Clearly, government investment in major infrastructure in the region has been lagging. But if past experiences tell us one thing, it is that the city and region does best when it sets its own course to realise its potential and says to government come with us,” he said.
The phenomenal growth in the construction and real estate industries has got many people talking, and Trevor Gard of National Pacific Valuers says the figures are likely to continue to climb.
“Everyone’s seen the increase in residential dwelling approvals as a result of the government incentives. If you look at the overall building approvals, there were 327 this January compared with 192 last year, so that’s a 69 per cent increase overall. The construction industry has literally exploded. And it’s exploded overnight, and that’s primarily due to the government incentives. We have had a situation where people ended up with more or less an additional $60,000 in their pockets if they were to take advantage of accessing their superannuation as well as the government incentives. And obviously because of low interest rates it has allowed everyone to be able to buy and build during these times, especially in the Cairns region. The only time we have seen those sort of numbers was back pre GFC, and that was a gradual increase that happened over 3-4 years. And now it’s happened over 3-4 months. So we’re expecting that figure to just about double based on current demand. So we’re going to get to about 750-850 building approvals in Cairns in one year, which we haven’t seen in a long time.
“That’s causing building costs to go up, and anyone that’s trying to build a house at the moment, well good luck trying to get it finished by the end of the year as there is a lot of pressure on the construction sector,” said Trevor Gard.
New unit developments are likely to climb next, he predicts.
“We do expect unit approvals to go up soon, as we are seeing a lot of southerners coming to town who are prepared to buy units in the city. But having said that, we are also expecting the building approvals to decrease just as quickly as they’ve started once the incentives dry up.
“A contributing factor that could continue pushing demand in an upward trend however is the fact that we have had 400,000 expats move back to Australia in the past year. Majority of them don’t want to live in the big cities as they don’t want to have the COVID lockdown situations they’ve experienced overseas prior to coming home. And so regional centres have become far more attractive places to live,” he said.
Currently Far North Queensland is outperforming anywhere else in the state with new building approvals.
“An interesting comparison is with what’s happening on the Sunshine Coast. Our increase in building approvals have gone up 36%. And on the Sunshine Coast it’s basically stayed the same, which is very surprising because the Sunshine Coast has been going up and up and up over the past 4-5 years,” said Mr Gard.
According to commercial property expert, Director of CBRE, Danny Betros, there is a lot of money pouring into the city as cashed up investors attempt to snare their very own piece of paradise.
“There is no shortage of money willing to invest in the Cairns area. Putting the obvious issues of COVID aside, there is still a lot of confidence and interest to invest in our region.”
“At the moment we just sold one hotel in the city and we’re in the process of negotiating the sale of two others, so there’s plenty of interest. The buyers and investors in terms of commercial real estate are of the view that we are going to come out of this. I personally believe we will come out of this quicker than what the projections are. If you’re getting nothing out of the bank, you might as well get 3-4% on a capital investment is a lot of the thinking from investors. There’s not a lot of money going into tourism and retail is suffering badly though.
“For half a million dollars you can get a decent house in Cairns. For half a million dollars in Sydney you can get a roller door and a front door, that’s the difference. If you’ve got cash, why not go to areas outside of a capital city. It makes sense. At least Cairns is a dynamic market. We do have big ups and big downs, but it’s a great cosmopolitan market and it’s attracting new blood which is great to see,” said Mr Betros.
Tourism is our life blood and as a region we punch well above our weight in terms of our contribution to the Australian economy. Tourism Tropical North Queensland, CEO, Mark Olsen says it is a factor that needs to be considered by all three levels of government for the rebound ahead.
“We are a $3.5 billion sector, supporting about 25,000 jobs and we’ve seen a billion dollars of that sector wiped off from international travel. So to put that into perspective, international travel to Cairns and the Great Barrier Reef, is greater than the Northern Territory, South Australia and Tasmania combined.”
“We are the most successful international region of anywhere in Australia. That cuts both ways. All challenges come with great opportunities. What this means is we can be a rocket launcher to recovery if we have businesses that are strong, stable and viable to get back in the market. We can be one of the most competitive destinations the world has seen with our nature based tourism, our indigenous experiences and our global outlook. Our position geographically, our great… all those things can be great fillers. But without immediate business support, we don’t have the strength to launch the recovery,” said Mark Olsen.
The majority of businesses in Cairns are categorised as small to micro businesses and supporting businesses so they can continue to keep their doors open and their people employed is critical according to Cairns Chamber of Commerce, CEO, Patricia O’Neill.
“The biggest message I can give everyone is that it is imperative that locals support locals in these times. We started the ‘Keep it in Cairns’ campaign in January last year with Cairns Regional Council. Locals are getting the message and supporting local businesses more so than ever before. It’s about getting the message across and getting people to start thinking about the bigger picture, which means keeping locals in jobs. Every dollar spent in this community, stays in this community and supports local families to live and work in our region,” Mrs O’Neill said.
Easter trade was strong showing positive signs.
“It was heart-warming to see Cairns come alive over Easter this year. People are getting more confidence in terms of job security. Bookings are looking good right through until June. When we have an influx of people, it is of paramount importance that we keep vigilant when it comes to adhering to Covid-safe guidelines. Businesses have been extremely vigilant to date. We do want to see the State Government’s tourism dollars being used here, which would help tourism operators immensely. This is something we continue to work with the other peak bodies on and support each other in our efforts.
“One of the key priorities we are focusing on at the moment is supporting businesses to ensure they can come out the other side still profitable, despite having to make significant changes to their business. There’s a core cost to businesses in terms of adhering to restrictions, social distancing, as well as personal protective equipment (PPE), including hand sanitiser and face masks, which is a cost businesses never had before. This is the same as cleaning. There is a cost not just for the cleaning products, but a cost in terms of time and human resources. Adhering to all of the new COVID Safe guidelines comes at a cost to business. So we see our role in our ongoing recovery to be a loud voice for the business community to make sure they are given every possible opportunity to succeed and barriers are removed wherever possible.
“The Government has assisted with the $10,000 adaption grant, which is one of the areas of success of the Chamber of Commerce. We negotiated with the Queensland Government for two rounds of the adaption grants to assist Cairns businesses and that has been very helpful for many SMEs,” she said.
But Mrs O’Neill says businesses are needing more incentive to keep people employed and their doors open in what has been a very hard hit region due to our heavy reliance on international tourism.
“We are advocating heavily for the Government to look at reducing taxes for businesses to compensate for the outlaying of costs to remain COVID safe. There is an issue in Cairns relating to skills shortages and we are working with the Federal Government on modifications to the Designated Area Migration Agreement (DAMA) agreement. There are professions such as doctors, accountants, mental health professionals, that we are lacking in numbers, which is due to population. There is a shortage of skilled and unskilled workers―we need an injection into the population of the right type of people.
“The DAMA agreement allows businesses to apply to the Cairns Chamber of Commerce, so they can sponsor someone. This is aimed at non-Australians on a tentative visa, who are skilled in a particular area. The business needs to prove they have attempted to hire an Australian worker, if they can’t, then they can apply to be certified under the DAMA to hire a non-Australian. Our first priority is jobs for Australians, if that’s not possible, the DAMA is there to assist them in finding a skilled worker. When COVID struck, a lot of non-Australians returned to their country of origin, which meant there was a massive decline in population, meaning a lot of jobs were left unfilled. We hope to relaunch the DAMA within the next month. We hope this will bring people from capital cities to Cairns. This means we can stimulate the economy as well as addressing the skills shortage. The Chamber of Commerce is the only non-government organisation in Australia that has a DAMA. We are hopeful of an announcement on this front very soon,” she said.