Download Long term economic and demographic projections

Long term economic
and demographic
projections
ADF Posture Review
24 November 2011
Economic and demographic projections
Contents
Glossary ...........................................................................................................................................i
Executive Summary .........................................................................................................................i
1
Background ......................................................................................................................... 6
2
The national outlook ........................................................................................................... 7
3
4
5
6
7
2.1
Population growth ................................................................................................................. 7
2.2
Labour force and output ........................................................................................................ 9
2.3
The mining boom as key driver ............................................................................................ 11
2.4
Industry structure ................................................................................................................ 13
2.5
Key challenges and opportunities ........................................................................................ 14
2.6
Regional growth ................................................................................................................... 17
Western Australia ............................................................................................................. 19
3.1
State overview ..................................................................................................................... 19
3.2
Perth .................................................................................................................................... 21
3.3
Gascoyne and Geraldton (including Exmouth) .................................................................... 23
3.4
Pilbara (Karratha and Port Hedland) .................................................................................... 26
3.5
Kimberley ............................................................................................................................. 29
Queensland ....................................................................................................................... 32
4.1
State overview ..................................................................................................................... 32
4.2
Far North .............................................................................................................................. 34
4.3
Cairns ................................................................................................................................... 37
4.4
Townsville ............................................................................................................................ 39
4.5
Northern SD ......................................................................................................................... 41
4.6
Mackay and Fitzroy .............................................................................................................. 43
4.7
Gladstone and Rockhampton............................................................................................... 46
Northern Territory ............................................................................................................ 49
5.1
Territory overview ............................................................................................................... 49
5.2
Darwin .................................................................................................................................. 50
New South Wales .............................................................................................................. 53
6.1
State overview ..................................................................................................................... 53
6.2
Sydney, Newcastle and Wollongong .................................................................................... 54
Victoria .............................................................................................................................. 56
7.1
8
South Australia .................................................................................................................. 58
8.1
9
State overview ..................................................................................................................... 56
State overview ..................................................................................................................... 58
Bibliography ...................................................................................................................... 60
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of member firms, each of which is a legally separate and independent entity.
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its member firms.
© 2011 Deloitte Access Economics Pty Ltd
Appendix A : Major towns in regions .......................................................................................... 62
Appendix B : Region maps........................................................................................................... 63
Appendix C : Major Projects ........................................................................................................ 71
Appendix D : Forecasting methodology ...................................................................................... 75
Appendix E – Current and projected climate .............................................................................. 79
Limitation of our work..................................................................................................................... 83
Charts
Chart 2.1 : Population forecasts .................................................................................................... 9
Chart 2.2 : Employment and GDP forecasts ................................................................................ 10
Chart 2.3 : Mining projects across the nation ............................................................................. 12
Chart 2.4 : Business investment and the unemployment rate ................................................... 13
Chart 2.5 : Structure of employment by industry, 2010 and 2040 ............................................. 13
Chart 3.1 : Population growth ..................................................................................................... 20
Chart 3.2 : Employment growth .................................................................................................. 20
Chart 3.3 : GRP growth ................................................................................................................ 20
Chart 3.4 : Employment by industry, Perth, 2010 ....................................................................... 22
Chart 3.5 : Employment by industry, Gascoyne and Geraldton, 2010........................................ 24
Chart 3.6 : Employment by industry, Pilbara, 2010 .................................................................... 27
Chart 3.7 : Employment by industry, Kimberley, 2010 ............................................................... 30
Chart 4.1 : Population growth ..................................................................................................... 34
Chart 4.2 : Employment growth .................................................................................................. 34
Chart 4.3 : GRP growth ................................................................................................................ 34
Chart 4.4 : Employment by industry, Far North, 2010 ................................................................ 35
Chart 4.5 : Employment by industry, Cairns, 2010...................................................................... 38
Chart 4.6 : Employment by industry, Townsville, 2010 .............................................................. 40
Chart 4.7 : Employment by industry, Northern SD, 2010 ........................................................... 42
Chart 4.8 : Employment by industry, Mackay and Fitzroy, 2010 ................................................ 44
Chart 4.9 : Employment by industry, Gladstone and Rockhampton, 2010................................. 47
Chart 5.1 : Employment by industry, Darwin, 2010 .................................................................... 51
Chart 6.1 : Employment by industry, Sydney, Newcastle, Wollongong, 2010 ............................ 55
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Tables
Table 2.1 : Migration assumptions ................................................................................................ 8
Table 2.2 : Australian average population growth rates............................................................... 9
Table 2.3 : Public services employment share of total employment .......................................... 18
Table 3.1 : Western Australian forecasts .................................................................................... 19
Table 3.2 : Vital statistics, Perth .................................................................................................. 21
Table 3.3 : Economic forecasts, Perth ......................................................................................... 21
Table 3.4 : Vital statistics, Gascoyne and Geraldton, .................................................................. 23
Table 3.5 : Economic forecasts, Gascoyne and Geraldton .......................................................... 24
Table 3.6 : Vital statistics, Pilbara................................................................................................ 26
Table 3.7 : Economic forecasts, Pilbara....................................................................................... 26
Table 3.8 : Vital statistics, Kimberley .......................................................................................... 29
Table 3.9 : Economic forecasts, Kimberly ................................................................................... 29
Table 4.1 : Queensland forecasts ................................................................................................ 32
Table 4.2 : Vital statistics, Far North ........................................................................................... 34
Table 4.3 Economic forecasts, Far North .................................................................................... 35
Table 4.4 : Vital statistics, Cairns ................................................................................................. 37
Table 4.5 : Economic forecasts, Cairns ........................................................................................ 37
Table 4.6 : Vital statistics, Townsville .......................................................................................... 39
Table 4.7 : Economic forecasts, Townsville ................................................................................. 39
Table 4.8 : Vital statistics, Northern SD....................................................................................... 41
Table 4.9 : Economic forecasts, Northern SD.............................................................................. 41
Table 4.10 : Vital statistics, Mackay and Fitzroy region .............................................................. 43
Table 4.11 : Economic forecasts, Mackay and Fitzroy ................................................................ 43
Table 4.12 : Vital statistics, Gladstone & Rockhampton ............................................................. 46
Table 4.13 : Population characteristics, Gladstone and Rockhampton ...................................... 46
Table 5.1 : Northern Territory forecasts ..................................................................................... 49
Table 5.2 : Vital statistics, Darwin ............................................................................................... 50
Table 5.3 : Economic forecasts, Darwin ...................................................................................... 51
Table 6.1 : New South Wales forecasts ....................................................................................... 53
Table 6.2 : Vital statistics, Sydney, Newcastle & Wollongong .................................................... 54
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Table 6.3 : Economic forecasts, Sydney, Newcastle, Wollongong .............................................. 55
Table 7.1 : Victoria forecasts ....................................................................................................... 56
Table 8.1 : South Australian forecasts......................................................................................... 58
Table A.1 : Major towns in the regions ....................................................................................... 62
Table C.1 : Major investment projects from Investment Monitor .............................................. 72
Deloitte Access Economics
Economic and demographic projections
Glossary
ABARES
Australian Bureau of Agricultural and Resource Economics and Sciences
ABS
Australian Bureau of Statistics
ADF
Australian Defence Force
AE-DEM
Access Economics Demographic Model
BITRE
Bureau of Infrastructure, Transport and Regional Economics
BREE
Bureau of Resources and Energy Economics
CAPEX
Capital expenditure
DAE
Deloitte Access Economics
FIFO
Fly In Fly Out
GDP
Gross Domestic Product
GFC
Global Financial Crisis
GRP
Gross Regional Product
GSP
Gross State Product
IM
Investment Monitor
LNG
Liquefied Natural Gas
R&D
Research and Development
RBA
Reserve Bank of Australia
SD
Statistical Division
SLA
Statistical Local Area
SSD
Statistical Subdivision
WAPC
Western Australian Planning Commission
Liability limited by a scheme approved under Professional Standards Legislation.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its
network of member firms, each of which is a legally separate and independent entity.
Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited
and its member firms.
© 2011 Deloitte Access Economics Pty Ltd
Executive Summary
Deloitte Access Economics (DAE) have been commissioned to provide a study of likely
longer term demographic and economic trends in Australia, with a particular focus on
northern Australia, as input into the ADF Posture Review.
The Australian economy is currently subject to strong countervailing forces:
•
The key positive has been the strength of China’s economy, and the industrialising
Asian region in general. Strong industrial demand has seen commodity prices surge,
delivering a torrent of income to Australia from resources exports and propelling a
further mining investment boom.
•
Against that, the global financial system remains fragile, with major concerns over the
sovereign debt of several European economies, and with a United States economy
which is struggling to develop any momentum.
Across Australia, those forces are playing out differently to different States and regions. In
particular, Queensland and Western Australia are on the right side of the resources boom
at present, receiving very high prices for their resources exports, and those same high
prices have propelled a boom in new investment.
At the same time, negative factors associated with Australia’s mining boom (high interest
rates, a high $A, and rising wages) are constraining regions more exposed to manufacturing,
tourism and consumer demand. That sees differences in projected employment growth
over time, as highlighted in Chart i.
Chart i: Projected average employment growth by State, 2010 to 2040
1.8%
% growth per annum
1.6%
1.4%
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
South Australia New South Wales
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Victoria
Total Australia
Northern Territory Western Australia
Queensland
i
Queensland and Western Australia are the Australian States which are likely to see the
strongest rates of employment growth over the next 30 years. That outperformance may
be more pronounced over the next decade where a big lift in mining investment and output
can reasonably be predicted, thanks to:
• a large number of major mining projects are underway or have been committed to
start soon;
• those projects typically have constructions phases of several years, supporting
economic activity over that time; and
• the macroeconomic environment remains supportive of resources investment for
now with strong demand emanating from China and elevated prices for
commodities.
But over time we do expect to see a decline in mining commodity prices (thanks largely to
greater sources of supply opening up around the world), so the broader economic
environment is likely to become less supportive of future mining activity than it currently is.
That would also mean a likely medium term decline in the value of the $A, taking the
pressure off sectors such as manufacturing, tourism and international education. In short,
beyond the next few years we might see a shifting of growth prospects away from the
current two-speed economy to one which is more balanced.
Over the longer term, Australia’s economic prospects will also be guided by how we
perform on the supply side of the economy. This is encapsulated in the 3 Ps as drivers of
long term economic growth – population growth, (labour force) participation, and
productivity growth. Chart ii shows that Australia’s population growth rate is expected to
moderate over time (and, in particular, the working-age population growth rate), placing a
speed limit on broader economic growth.
Chart ii: Population forecasts
Change on year earlier
2.5%
Forecast
2.0%
1.5%
1.0%
0.5%
0.0%
1980
1990
2000
2010
Total
Deloitte Access Economics
2020
2030
2040
Working age
ii
Much of the focus of this report is on the prospects of particular regions in northern
Australia. Similar themes to those seen at the State level will also be apparent:
• Over the next decade, strongest growth prospects are in those regions where there is
expected to be a large amount of mining investment;
• That growth will be seen more so in output growth, less so in employment growth,
and even less so in population growth;
• Over the longer term more broadly based regions may perform better in terms of
overall employment growth prospects; and
• High growth regions in Queensland may perform better than Western Australian
regions, benefiting from continued migration unrelated to employment prospects.
Chart iii shows that for regions of interest in this report, average employment growth over
the next three decades is expected to range between 2.1% per annum for Cairns to zero for
the Northern SD region.
Chart iii: Projected average employment growth by industry, 2010 to 2040
2.5%
% growth per annum
2.0%
1.5%
1.0%
0.5%
0.0%
-0.5%
Table ii compares our economic forecasts for the northern regions of Australia - including
all of the Queensland regions analysed for this report; all of the Western Australian regions
analysed for this report with the exception of Perth; and the Northern Territory – with the
aggregate Australian figures.
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iii
Table ii: Economic forecasts, Northern Australia v Australia
Northern
Australia
GRP
Population
Working age
population
Employment
Australia
GDP
Population
Working age
population
Employment
10 yrs to 2010
%
change
Level
3.95%
79,821
2.13%
1,230,250
10 yrs to 2020
%
change
Level
3.53%
112,908
1.71%
1,457,449
10 yrs to 2030
%
change
Level
3.11%
153,431
1.56%
1,701,343
10 yrs to 2040
%
change
Level
3.04%
206,995
1.32%
1,940,146
2.41%
3.24%
959,899
649,945
1.96%
1.97%
1,165,281
789,829
1.67%
1.42%
1,375,165
909,052
1.40%
1.27%
1,580,031
1,031,421
3.16%
1.55%
1,283,571
22,299,775
3.08%
1.41%
1,738,118
25,642,412
2.95%
1.22%
2,325,112
28,947,313
2.70%
1.00%
3,036,259
31,985,490
1.78%
2.25%
18,081,351
11,056,539
1.52%
1.65%
21,017,317
13,018,012
1.30%
1.19%
23,916,047
14,652,881
1.09%
0.91%
26,664,950
16,040,868
Note: % changes are average annual changes. Levels are figures as at the end of the period.
Continued strength of our minerals sector, combined with the burgeoning LNG sector, is
expected to generate considerable growth for the northern regions of Australia. In the
decade to 2020, Northern Australia’s output and population is expected to grow by some
0.4% more than the Australian average every year. Or, to put it another way, by 2020,
Northern Australia’s total output will be 45% higher than in 2009-10, while Australia’s
output will be 35% higher, than in 2009-10.
That outperformance for Northern Australia is expected to continue over the decades to
2030 and 2040, though the differential is a little smaller.
Against these projections, opportunities and challenges for Australian economy and its
regions include:
• Australia’s proximity to the dynamic Asian region offers significant opportunity, and
in the short term at least, this is being capitalised on. The challenge for Australia is
to continue it.
• There is considerable potential for Australia to improve its productivity
performance. More can be done by government to improve efficiency, while
Australia’s business R&D performance is modest and therefore offers the potential
to improve and become a growth driver.
• The extent to which Australia can capitalise on current investment opportunities may
be severely constrained by inadequate infrastructure.
• A lack of skilled workers in the right areas could also pose significant problems to
Australia’s future economic prospects.
• Many developed economies are now saddled with large public sector debts. The
risk of default may trigger financial consequences for the rest of the world,
including Australia.
Deloitte Access Economics
iv
These opportunities and risks affect the Department of Defence both directly, and
indirectly. The Department is likely to be subject to savings cuts if they are required in
order to return the Federal budget to surplus. At the same time, the Department is finding
itself competing with the mining industry for a range of skilled workers.
Given the current pipeline for engineering construction projects, competition for
occupations such as engineers, project managers and tradespeople is likely to be fierce,
which will put considerable upward pressure on wages for these occupations.
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v
Economic and demographic projections
1 Background
The ADF Posture Review is a high level strategic examination of the geographic positioning
of Defence to meet Australia’s modern and future strategic and security challenges.
Deloitte Access Economics (DAE) have been commissioned to provide a study of likely
longer term demographic and economic trends in Australia, with a particular focus on
northern Australia, as input into the Review.
This report provides forecasts of expected population, labour force and economic growth
for Australia, for six of Australia’s States/Territories, and for a number of key regions in the
north and north-west of Australia. The forecasts are model based assessments, utilising our
in-house demographic model (AE-DEM), and our in-house employment forecasting
capability. Forecasts are reported on a yearly basis up to 2040.
The structure of this report is as follows:
•
Chapter 2 provides the outlook for the Australian population and economy, and
includes a discussion of key drivers, opportunities and challenges. The current mining
boom is discussed, along with structural change in the Australian economy over time.
•
Chapter 3 outlines expected trends for Western Australia, and then discusses the key
regions of Perth, Gascoyne and Geraldton (including Exmouth), Pilbara (Karratha and
Port Hedland), and Kimberley in turn.
•
Chapter 4 outlines expected trends for Queensland, and then discusses the key regions
of Far North, Cairns, Townsville, Northern SD, Mackay and Fitzroy, and Gladstone and
Rockhampton in turn.
•
Chapter 5 outlines expected trends for the Northern Territory, and then discusses the
key region of Darwin.
•
Chapters 6, 7 and 8 then profile the major southern state economies of New South
Wales (including the Sydney/Newcastle/Wollongong region), Victoria and South
Australia respectively1.
•
Maps, some further tables, and the forecasting methodology are then shown in the
Appendices.
It should be noted that the forecasts presented in this report are best considered as a
central tendency around which unexpected (or unprojected) events will produce different
outcomes. Forecasts shown are of long-term growth paths. Economic cycles are likely to
continue to occur around these growth paths over time.
1
Note that the ACT and Tasmania have not been included in this assessment for a variety of reasons, including
(but not limited to), geography, size of region, potential mining and other business investment and population
growth.
Deloitte Access Economics
6
Economic and demographic projections
2 The national outlook
Through 2011 the Australian economy has been subject to strong countervailing forces:
•
The key positive has been the strength of China’s economy, and the industrialising
Asian region in general. Strong industrial demand has seen commodity prices surge,
delivering a torrent of income to Australia from resources exports and propelling a
further mining investment boom.
•
Against that, the global financial system remains fragile, with major concerns over the
sovereign debt of several European economies, and with a United States economy
which is struggling to develop any momentum.
Both these factors (industrialising Asia, and developed economies weighed down by large
debts) are likely to be continuing features for some time.
Yet over the longer term, Australia’s economic prospects will also be guided by how we
perform on the supply side of the economy. This is encapsulated in the 3 Ps as drivers of
long term economic growth – population growth, (labour force) participation, and
productivity growth.
The following sections provide the expected outlook for the Australian economy over the
coming decades.
2.1 Population growth
Australia’s population growth remains one of the key factors which continues to set us
apart from many other rich nations around the world. Australia’s population gains have
been considerable, and that underwrites more demand strength in Australia than in many
other nations around the world. Population growth in 2009 reached 2.1%, which
represents an additional 450,000 people, (which is around the best this nation has recorded
since the late 1960s), though it has since moderated amid a fall in migrant numbers
(primarily international students).
Western Australia and Queensland have been the main beneficiaries of Australian
population growth, while South Australia, Tasmania, and to a lesser extent NSW have not
fared as well, experiencing population declines, or very slow population growth.
Higher population growth tends to occur in periods of stronger economic growth –
governments, businesses and unions are more receptive to migrants when there are skill
shortages, while expatriates and New Zealanders (who don’t have to meet the same
residency requirements as other migrants) are more likely to come here too.
However, and as is usual in downturns, political pressure to cut the migration intake
mounted in 2009. The argument of ‘why do we need foreigners when there aren’t enough
jobs to go round for Australians?’ seems appealing, but it is not good economics. That is
because migrants earn incomes, and they spend them. In spending them, they create
demand for more workers. Or, in other words, the higher supply of workers thanks to
Deloitte Access Economics
7
Economic and demographic projections
migration is matched by a higher demand for workers thanks to the spending done by
migrants. Cutting migration targets therefore cuts job growth but it doesn’t have much
impact on the unemployment rate.
The Federal Government announced a 20% cut in the skilled migration intake (from
133,500 to 108,100 a year). This has contributed to a fall in total migration numbers over
the past two years (see Table 2.1), with a sharp drop in temporary migrants (primarily
international students) another key factor.
However DAE believes this will be the low point in the cycle – even though developed
economies are still struggling, developing economies are not, and this should add to
demand for population growth in Australia for many years yet. DAE forecasts have a
recovery of net international migration to 190,000 per year after 2012-13 for the remainder
of the forecast period.
Table 2.1: Migration assumptions
Year
Net migration
Year
Net migration
2003-04
100,000
2008-09
298,900
2004-05
123,800
2009-10
215,600
2005-06
146,800
2010-11
180,000
2006-07
232,800
2011-12
185,000
2007-08
277,300
2012-13 and thereafter
190,000
Even with this recovery in migration numbers, overall population growth is forecast to slow
from here, and working age population (those aged 15-64 years) will slow by even more –
as Chart 2.1 shows. The resultant fall-off in gains in working age population will be steady,
but by 2012 the population-driven growth in Australia’s production potential might drop
back to 140,000 people a year, close to the lows we last saw after the recession of the early
1990s.
The widening gap between total population and working age population growth over the
next few years is driven by an ageing workforce, with more and more Australians turning 65
in the next few years.
That is a well known negative for the supply side of Australia’s job markets through to 2020.
In effect, those increased numbers of retirements will be evident in Australian job markets
long before the lift in birth rates evident in recent years shows up as new entrants to the
workforce. The latter lift in student numbers (currently reaching the bottom end of primary
school) won’t enter the workforce until sometime in the early 2020s at best.
This demographic hole (between the retirement surge starting now and a pickup in new job
entrants which is still more than a decade away) is one which will be important to
Australia’s wider economy as well as to the specifics of developments in its job market.
Deloitte Access Economics
8
Economic and demographic projections
Chart 2.1: Population forecasts
Change on year earlier
2.5%
Forecast
2.0%
1.5%
1.0%
0.5%
0.0%
1980
1990
2000
2010
Total
2020
2030
2040
Working age
Source: Australian Bureau of Statistics, Deloitte Access Economics
A look at the table below shows that population growth among the over 65s will be more
than three times faster than growth rates in the other age groups through to 2020. Or, in
other words, the greying of Australia’s workforce is already well advanced, and it will pose
an increasing challenge.
Table 2.2: Australian average population growth rates
Age group
10 years to 2020
% change
Level
10 years to 2030
% change
Level (m)
10 years to 2040
% change
Level (m)
0-4
0.7%
1,557,551
0.7%
1,765,975
0.5%
1,765,975
5-14
1.0%
3,068,038
0.9%
3,555,629
0.6%
3,555,629
15-64
1.1%
16,779,537
0.9%
20,006,646
0.9%
20,006,646
65+
3.5%
4,271,613
2.8%
6,679,696
1.8%
6,679,696
Source: Deloitte Access Economics
2.2 Labour force and output
The ageing workforce will have a large impact on labour force participation, as more and
more Australians turn 65 and consider retirement. Increasingly, those over 65 will choose
to remain in the workforce, either because they need to build retirement incomes further,
or because the Government and employers are increasingly making it more attractive for
older Australians to remain in the workplace, offering flexible working hours and tax
incentives to keep working.
Deloitte Access Economics
9
Economic and demographic projections
This has showed up in rising labour force2 participation rates through to 2010. However,
Australia’s participation rate has levelled off recently. At first glance, that loss of
momentum seems a logical reaction to a matching loss of momentum in jobs. However, it
is possible that this story is a little more complicated than it looks. One of the reasons why
job growth has slowed is simply because working age population growth has dropped back
to recession-like levels. In turn, that means job growth in Australia increasingly has to come
from participation growth – boomer retirement and weaker migrant flows mean that the
‘people numbers’ simply aren’t there, and hence job gains require improving participation
rates.
Slowing population gains now mean that participation has to lift for employment growth to
do the same, and the shortfall in employment gains evident during 2011 reflects not merely
increasingly poor population growth, but also the sectoral squeeze evident off the back of
interest and exchange rates.
That cyclical squeeze should lift over the next couple of years and provide the impetus for a
short-term rebound in jobs growth. However, the moderation in working age population
growth seen in Chart 2.1 above is also seen in employment growth in Chart 2.2 below. The
profile for jobs growth is a little stronger than for working age population growth, as age
cohort labour force participation rates continue to grow over time.
Chart 2.2: Employment and GDP forecasts
Change on year earlier
6%
Forecast
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
1980
1990
2000
Employment
2010
2020
2030
2040
Output
Source: Australian Bureau of Statistics, Deloitte Access Economics
The third ‘P’ as a supply-side driver of the Australian economy is productivity. However,
productivity growth has delivered relatively little to the Australian economy over the past
decade.
2
The labour force is equal to employment plus unemployment, where unemployment includes only those who
are unemployed and are actively seeking work. Hence, a university student who is not seeking work is not
considered to be unemployed.
Deloitte Access Economics
10
Economic and demographic projections
As the Reserve Bank itself recently noted (in addressing the risks to inflation), “Another risk
stems from the outlook for productivity. Growth in both labour and multifactor productivity
over the past 5–10 years has been well below longer run average rates and has contributed
to the pick-up in the rate of growth of unit costs. Looking ahead, a risk is that continued
weak productivity growth will put more upward pressure on costs and hence domestic
inflation, possibly at a time when global inflation pressures are less benign than they have
been over the past couple of years.”
Deloitte Access Economics expects that there will be some improvement in the rate of
labour productivity growth over the next few years. This will occur as part of the economic
cycle as massive new mining investments add to the capital stock (and use relatively few
workers when they are up and running). Other drivers of productivity such as business
innovation and government reform are less predictable and may be harder to deliver on a
consistent basis.
The wedge between GDP growth and employment growth in Chart 2.2 above reflects
labour productivity growth, which is expected to average 1.7% per annum over the decade
to 2020, before averaging 1.8% per annum over the decade to 2030 and over the decade to
2040.
2.3 The mining boom as key driver
This section explores the outlook for the mining industry (including offshore
oil/gas exploitation) as a key driver of the Australian economy, and particularly
key to many of the northern regions which are the focus of this report.
Conditions are in place at present for a massive mining investment boom, and therefore a
major lift in Australia’s capacity to produce and export minerals and energy over the
coming decades. Commodity prices remain at (or near) record highs, seemingly untroubled
by renewed recession risks in the rich economies of the northern hemisphere.
Deloitte Access Economics’ Investment Monitor shows a very large value of resources
projects currently under construction or committed. In total, $380.5 billion of resource
projects are currently shown within the Investment Monitor database. Of this amount,
about 39% ($147 billion) are definite, i.e. ‘under construction’ or ‘committed’; 47% ($179
billion) are under active investigation for a decision in the reasonably near future, i.e. in the
‘under consideration’ category; and 14% ($55 billion) are in the ‘possible’ category.
Within resources investment, liquefied natural gas (LNG) is the current wonder child. By
value some 56% of all resources projects in the Investment Monitor database at present are
LNG projects. Outside of oil and gas, resource projects underway are led very much by iron
ore projects in Western Australia.
Evidence from the ABS CAPEX Survey, the Federal Treasury, and the Reserve Bank of
Australia are consistent and, like Deloitte Access Economics’ Investment Monitor, point to a
surge in mining investment in the next two years.
Chart 2.3 shows that the highest concentration of mega-projects is in Western Australia and
Queensland, with many of them offshore projects.
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Economic and demographic projections
Chart 2.3: Mining projects across the nation
Darwin
North West Shelf: LNG
Bowen Basin/Surat Basin:
Coal and LNG
Pilbara: Iron ore
Goldfields/midwest:
Iron ore and base metals
Brisbane
Hunter: Coal
Perth
Adelaide
Canberra
Sydney
Melbourne
>$5 bil
>$1 bil
>$500 mil
<$500 mil
Hobart
Source: ABARES, Deloitte Access Economics
However, the extent to which Australia capitalises on current opportunities may depend on
two things – skills shortages which may see investment opportunities deferred or lost, and
how long the global economy is able to support commodity prices at elevated levels.
To begin with, the capital expenditure plans of miners are so big that they will have
difficulty in achieving anything like what they’ve said they’d do on the timing they’ve said
they’d do it on.
That is why forecasters – including Deloitte Access Economics – are not factoring in that all
current projects will necessarily be achieved over the next few years. However, an
impressive pipeline of major projects has already commenced or received commitment,
which will see mining investment move higher still over the next couple of years (from what
is already an elevated level).
The key question for Australian miners is how quickly they can expand operations to
increase exports before commodity prices fall. Having said that however, even when prices
do eventually fall, Australian mining export volumes should be much greater than they are
today, resulting in a sector which will play an expanding role in the Australian economy.
Over the next few years business investment is expected to eke out a higher share of the
Australian economy, and that will help to keep Australia’s unemployment rate at a low level
(Chart 2.4). As the decade extends, the business investment share is expected to
moderate, but a continued focus on mining activity should keep it at a reasonably high level
by developed economy standards.
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Economic and demographic projections
Chart 2.4: Business investment and the unemployment rate
20%
Forecast
16%
12%
8%
4%
1985
1990
1995
2000
2005
Underlying business investment to GDP
2010
2015
2020
Unemployment rate
Source: Australian Bureau of Statistics, Deloitte Access Economics
2.4 Industry structure
Australia’s industry structure is likely to continue to change over time. Some regions will be
winners from this longer term structural change while others will be losers.
Chart 2.5: Structure of employment by industry, 2010 and 2040
Health
Retail trade
Construction
Manufacturing
Education
Professional, scientific and technical…
Accommodation and food services
Public administration
Transport
Other services
Financial and insurance services
Admin and support services
Wholesale trade
Agriculture
Arts and recreation
Information media and …
Mining
Rental, hiring and real estate
Utilities
0%
2040
2010
2%
4%
6%
8%
10%
12%
Share of total employment
Source: Australian Bureau of Statistics, Deloitte Access Economics
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Economic and demographic projections
The key structural change for Australia as a whole over the past two decades has been the
decline in the relative sizes the manufacturing and agricultural sectors, and the
considerable expansion in the share of output contributed by the services sector.
Industries such as mining and construction have been more cyclical over time, responding
to changes in global and domestic economic conditions respectively.
Key factors in manufacturing’s decline include strong international price competition,
labour productivity improvements which have limited employment growth, an increase in
outsourcing, and a general shift in the structure of economic activity in most advanced
economies towards services.
As has been the broad trend among advanced economies, Australia has moved strongly
towards a service based industry structure. That trend is expected to continue into the
future, with services sectors expected to account for the majority of jobs growth going
forward.
Chart 2.5 above shows the industry structure of the Australian economy in 2010 and the
projected structure in 2040. The chart shows that key service industries including health,
education and public administration are expected to account for a growing share of total
employment over the next three decades.
More broadly, Australia faces substantial structural changes in the future with recent global
developments including:
•
The global financial crisis (GFC) and accompanying slowdown in the world economy
fostering changes in future financial sector regulations and products/services;
•
The climate change challenge encouraging a future shift toward carbon emission
reduction mechanisms with the encouragement of low-emissions ‘green’ industries
and the shrinking of emissions-intensive industries/activities; and
•
Future growth in rapidly developing nations such as China and India fuelling export
demand for Australia’s strong resources base and sustaining strong growth in these
‘traditional’ areas.
The structural implications for the economy resulting from these developments depend
largely on the ability of Australian industries and individuals to adapt and take advantage of
future developments. For example, the move toward carbon reduction could offer growth
opportunities in areas such as renewable energies and energy efficiency in production
methods.
2.5 Key challenges and opportunities
The longer term projections for the Australian economy shown in this report can best be
thought of as central tendencies over time, against which a number of factors are likely to
cause deviations, particularly in the short term.
There are many key challenges and opportunities the Australian economy will face, which
may produce a stronger or weaker economic performance over time. Some of these are
discussed below.
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Economic and demographic projections
2.5.1
Key opportunities
Australia’s proximity to the dynamic Asian region
Australia’s proximity to the dynamic Asian region offers significant opportunity, and in the
short term at least, this is being capitalised on.
The challenge for Australia is to continue it.
Emerging economies have been the key driver of world economic growth in the past
decade. Reforms in previous decades have opened up countries such as China and India,
transforming rural economies into manufacturing and export-oriented powerhouses. In
contrast, many advanced economies continue to struggle.
Urbanisation is occurring simultaneously with industrialisation across the developing world.
This twin process is reinforcing, with rapid income growth and job opportunities attracting
Chinese workers into cities. In turn, the larger urban population is generating demand for
housing, energy, shopping centres, schools, office blocks and transportation, creating
additional employment demand.
That construction requires raw materials, and the scale of China’s urbanisation which is yet
to come offers huge potential for Australia’s miners. The United Nations estimates that
been 2010 and 2030, China’s urban population will increase by around 270 million people.
By 2050, more than 1 billion people will live in China’s cities – an increase of 400 million
people from 2010. In contrast, China’s rural population is projected to decline by almost
340 million people over the next 40 years.
India’s pace of urbanisation may well be greater. Between now and 2050, the United
Nations is expecting India’s urban population to grow by more than half a billion people.
India currently has 46 cities which boast a population of more than 1 million people. In
2025 that is projected to rise to 63 cities.
Harnessing productivity growth
Productivity growth is front and centre in the minds of the RBA at the moment, resulting
from weak growth over the past decade in Australia. Poor productivity is a concern
because it means that it doesn’t take much wage growth to set labour cost growth moving
quickly.
There is considerable potential for Australia to improve its productivity performance. Some
of this will occur in the short term through a shift to activity to the higher productivity
mining sector. However, more can also be done by government to improve efficiency,
while Australia’s business R&D performance is modest and therefore offers the potential to
improve and become a growth driver.
2.5.2
Key constraints
There are several constraints currently facing the Australian economy which may hinder the
full potential of economic growth. In a two speed economy, there is always the risk ‘slow’
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Economic and demographic projections
becomes the dominant speed. Indeed the $A’s rise above parity with the $US in late 2010
marked the point at which many business models simply came under too much stress.
Adequate infrastructure
Australia has massive opportunities at present, particularly in mining investment.
However, the extent to which we can capitalise on these investment opportunities may be
severely constrained by inadequate infrastructure. The image of tankers queuing for weeks
or months off the Port of Newcastle highlighted the shortcomings exposed during the
previous mining boom (2006 to 2008). Those images could be repeated again as the
current mining investment boom is of a grander scale.
Beyond that, the bulk of Australia’s infrastructure needs are in our major urban centres,
where there has arguably been under-investment in infrastructure over a number of years.
That means congestions costs, blackouts and shortages increasing, unless we can deliver
more infrastructure, or learn to use it in a more efficient manner.
Skilled workers
A lack of skilled workers in the right areas could pose significant problems to Australia’s
future economic prospects.
That is most clearly seen at present in the engineers and construction workers required to
support Australia’s massive mining investment boom. Hance the sector is seeing rapidly
rising wages, and much greater use of Fly In Fly Out (FIFO) arrangements. The risk is that
the right workers become too expensive or simply cannot be found at any price, which
means that major projects are deferred or lost.
More broadly, the more moderate rate of growth for Australia’s working age population
going forward means that Australia’s future problems are unlikely to revolve around where
the next job is coming from, but rather where the next worker is coming from.
Developed economies hampered by large public debts
Many developed economies are now saddled with large public sector debts. The risk of
default may trigger financial consequences for the rest of the world, including Australia.
At present, Europe is the likely epicentre of broader financial contagion. Flows of money
would tighten, and chances are that the response of governments and central banks to
renewed crises would fall short of the flawed-but-still-effective global stimulus of 2008 and
2009 – perhaps disappointingly so.
Australia’s coming decade may be rather different to our last, with the risks dominating the
returns; with the performance of commodity prices, housing prices, wealth and business
investment all under pressure relative to the experience of the 2000s. Albeit in this
downside scenario, a lower $A and lower interest rates would take pressure off ‘two speed
economy’ effects at the sectoral level.
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Economic and demographic projections
2.5.3
Implications for Defence
These opportunities and risks affect the Department of Defence both directly, and
indirectly. Most notably, the Department is subject to Federal Government budget
pressures, and right now this puts Defence firmly in the slower growing part of the
Australian economy. The Federal Government remains committed to delivering a budget
surplus in 2012-13, although this looks increasingly unlikely without further policy changes
and savings measures. The result may be further pressure on all Government departments
to find additional savings, including the Department of Defence.
These cost cutting measures are likely to occur around the same time that the Department
finds itself competing for workers with the mining and construction industry. Given the
current pipeline for engineering construction projects, competition for occupations such as
engineers, project managers and tradespeople is likely to be fierce, which will put
considerable upward pressure on wages for these occupations. Indeed, the competition for
mining sector workers may be stronger during the current mining boom than the one
experienced from 2006-2008, given the number of mining projects either underway, or
commencing shortly. Other sectors too will be vying for these workers, including the
utilities sector, and other departments within the public sector (as major infrastructure is
upgraded or rolled out, such as the NBN).
2.6 Regional growth
Much of Australia’s economic activity has traditionally occurred on the east coast, in the
financial hubs of Sydney and Melbourne, and, increasingly, Brisbane. However, this
dominance will decrease over time, as northern Australia takes a larger share of national
output thanks to the current mining boom. NSW and Victoria currently account for around
55% of economic activity in Australia, compared with around 35% for northern Australia
(Queensland, WA and the NT). However, by 2040 northern Australia is forecast to account
for nearly 42% of the Australian economy.
While this is a substantial shift in economic activity from the south to the north, it is likely
that the current economic structure will remain. That is, mining will be the primary focus
for much of the north, while the south will remain the financial centre of Australia. It is also
unlikely that mining companies would move their major headquarters from current
locations (whether they be in Perth, Melbourne or London) to the faster growing northern
regions.
An increasing share of the economic pie also leans towards faster growing populations.
Many of the regional centres are predicted to see faster growing populations than other
major centres – for example population growth in the Sydney region is expected to be 1.2%
per annum on average in the decade to 2020, while regions of WA such as the Kimberly are
forecast to grow at 2.1% per annum, and the Pilbara 2.6% per annum over the same
timeframe. However, sheer weight of numbers will mean that the absolute population of
capital cities continue to grow faster than the regional centres – Sydney’s population is
forecast to expand by around 600,000 in the decade to 2020, compared with 5,700 people
in the Kimberly, and 14,000 people in the Pilbara.
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Economic and demographic projections
Thus, while the north of the country is likely to see faster growth rates than the south, this
is unlikely to translate into large cities springing up in the NT or north of WA. Queensland
will remain a magnet for Australian interstate migrants, however the far north is likely to
remain far less populous than the south. It follows then that the economies of cities in the
north will not be as vibrant or diverse as that of larger cities in the south, although there
will undoubtedly be some increase in social infrastructure and amenities.
Employment in public services (comprising health, education, arts and recreation) varies
from State to State, as Table 2.3 shows, though the variations are not dramatic. Currently,
the Northern Territory and South Australia have the highest employment share in these
industries. Over time, public services are expected to account for a higher share of
employment in all States.
Table 2.3 : Public services employment share of total employment
State
2010
2040
NSW
20.4%
21.7%
VIC
20.4%
23.5%
QLD
20.1%
21.9%
WA
18.8%
20.3%
SA
22.0%
22.5%
NT
22.0%
23.0%
Source: Deloitte Access Economics
A discussion of the specific economic drivers of each region, along with projections of the
region’s output and population, is provided in the following chapters. For each region, a
comparison between our own population forecasts, and those provided by various ‘official’
sources, is also provided. Where differences occur, the likely reasons behind such
differences are discussed, though it should be noted that in many cases differing
geographical classifications makes a direct comparison of forecasts somewhat difficult.
For information regarding the regions climate and predicted changes in average
temperatures and rainfall, please see Appendix E.
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Economic and demographic projections
3 Western Australia
3.1 State overview
The mining boom has caused WA’s growth over the past decade to be significantly higher
than national averages – over the past ten years WA grew at an average annual rate of
4.5% (compared to 3.0% Australia wide).
Table 3.1: Western Australian forecasts
10 yrs to 2020
% change
Level
Western
Australia
10 yrs to 2030
% change
Level
10 yrs to 2040
% change
Level
GSP ($m)
3.73%
270,932
3.00%
363,940
2.94%
486,326
Population
1.86%
2,755,042
1.48%
3,192,078
1.20%
3,596,969
Working age
population
1.97%
2,243,300
1.55%
2,615,416
1.30%
2,976,691
Employment
1.90%
1,452,879
1.50%
1,686,353
1.21%
1,901,005
GDP ($m)
3.08%
1,738,118
2.95%
2,325,112
2.70%
3,036,259
Population
1.41%
25,642,412
1.22%
28,947,313
1.00%
31,985,490
Working age
population
1.52%
21,017,317
1.30%
23,916,047
1.09%
26,664,950
Employment
1.65%
13,018,012
1.19%
14,652,881
0.91%
16,040,868
Australia
Note: % changes are average annual changes. Levels are figures as at the end of the period.
And the mining investment in Western Australia is by no means at an end. The mega
projects are seemingly endless. Wheatstone - a $29 billion LNG project in the Pilbara, has
just received the green light from Chevron, and it managed to do so amid the current global
uncertainty. Projects such as this one will unquestionably form the WA economic story
over the coming decade. The leap in capital expenditure will be enormous, and the lift has
already been impressive.
These large projects will see Western Australia grow comfortably faster than Australia over
the forecast horizon to 2040, in terms of economic growth, population growth, and
employment growth. Indeed, our forecasts for population growth are higher than that
presented by the Western Australian Planning Commission in their report “Western
Australia Tomorrow”, which predicted a State population of 2.8 million people by 2030,
compared with the forecast here of 3.2 million. However, this is unsurprising given that the
WAPC forecasts were produced in 2005, and Western Australia has experienced a
significant investment boom since that time.
That isn’t to say that there aren’t major challenges to growth in the West. There certainly
are. In fact, if you are in a business (or a family) on the wrong side of ‘two speed economy
effects’, then just about the last place you want to be is in WA. For example, the mining
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Economic and demographic projections
boom means wage and material costs are higher and workers are at risk of being poached
by the resources sector. Skills shortages also loom as a large problem as demand for
workers (particularly construction related workers) leaps.
However, there is no denying the overall State story is one of great growth as it scrambles
to catch up to the business opportunities on offer to a resource rich part of the world amid
the fastest growth spurt in global industrial commodity demand ever recorded. The current
European debt crisis has merely taken the top off growth forecasts for both China and WA,
and in many ways this is a good thing, bringing growth back closer to their supply side
potential, which will help to contain rising inflation and skills shortages.
If Chinese strength continues to outweigh the bad news coming out of Europe (which is the
scenario built into our current forecasts), then Western Australia can expect the short term
to look like 2007 and 2008.
The following three charts show projected average annual growth rates for various regions
in Western Australia, for population, employment, and output.
Chart 3.2: Employment growth
Chart 3.1: Population growth
Average annual growth, 2010-2040
2.0%
Average annual growth, 2010-2040
2.0%
1.8%
1.8%
WA average
1.6%
1.6%
1.4%
1.4%
1.2%
1.2%
1.0%
1.0%
0.8%
0.8%
0.6%
0.6%
0.4%
0.4%
0.2%
0.2%
0.0%
WA average
0.0%
Gascoyne and
Geraldton
Rest of WA
Kimberly
Perth
Pilbara
Gascoyne and
Geraldton
Rest of WA
Kimberly
Perth
Pilbara
Chart 3.3: GRP growth
Average annual growth, 2010-2040
5.0%
4.5%
WA average
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Gascoyne and
Geraldton
Perth
Rest of WA
Kimberly
Pilbara
These charts show that, in all measures, the Pilbara region is expected to grow the fastest
over the forecast period, and the Gascoyne and Geraldton region the slowest.
Looking longer term, the forecasts still paint a rosy picture for Western Australia. While
average annual growth slows, it remains above that for the nation as a whole. Importantly
for the State, population growth should also continue to grow faster than the Australian
average, driven by longer term demand for workers. This faster population growth will
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Economic and demographic projections
provide a floor for the Western Australian economy, and mean that the State continues to
carve out a larger share of the national economy.
The following sections discuss the regions in further detail.
3.2 Perth
The majority of Western Australians live in the Perth region, as shown in Table 3.2, and as
such this region accounts for a large portion of the State’s economic growth.
Table 3.2: Vital statistics, Perth
Perth
Population (2010)
WA
1,696,065
Indigenous share of pop (2006)
Area (sq km)
Average taxable income (2008)
Participation rate (2010)
2,293,510
2%
3%
5,386
2,531,564
59,095
58,017
68%
68%
Source: Deloitte Access Economics, ABS National Regional Profiles
Table 3.3: Economic forecasts, Perth
GRP ($m)
Population
Working age
population
Employment
Share of WA
GRP
Population ('000)
Working age
population
Employment
2010
2020
2030
2040
131,284
1,696,065
183,817
2,062,042
242,604
2,417,337
328,625
2,757,167
1,375,040
900,660
1,686,081
1,101,568
1,986,160
1,296,131
2,287,317
1,477,469
69.9%
74.0%
67.8%
74.8%
66.7%
75.7%
67.6%
76.7%
74.5%
74.8%
75.2%
75.8%
75.9%
76.9%
76.8%
77.7%
2030-2040
2010-2020
2020-2030
Average annual growth
3.4%
2.8%
3.1%
2.0%
1.6%
1.3%
2.1%
2.0%
1.7%
1.6%
1.4%
1.3%
Deloitte Access Economics estimates that that Perth currently accounts for about 70% of
the State’s economy, with a Gross Regional Product (GRP) of $131 billion. This corresponds
with official estimates from WA’s Department of Regional Development and Lands.
The largest industries in terms of employment in Perth are healthcare, retail and
construction. Perth has a smaller share of workers in the agriculture and mining than seen
in the rest of the State, and, as you would expect for a State capital, a larger share of
professional, business and healthcare workers (see Chart 3.4).
‘Public services’, including education, health care, and arts and recreation (sports grounds,
art galleries and the like), account for 20% of Perth’s employment base, compared to 19%
of the State’s. By 2040, these services are projected to increase their share of Perth’s
employment base to 22%, and WA’s employment base to 20%. This implies that Perth will
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Economic and demographic projections
see a larger share of the growth in social amenities over the next 30 years, which will
translate into additional schools, hospitals and other social facilities.
As the administrative and financial centre of WA, Perth has become the ‘hub’ for the State’s
mining boom. Its growth will therefore be strongly influenced by the mining sector – which
for the foreseeable future shows no sign of slowing down. Of course, as a major financial
centre, it will also be driven by macro-economic drivers and global economic conditions, as
discussed in Chapter 2.
This combination is the reason for the moderate fall in Perth’s share of State output over
time. The rest of the State is heavily dependent on the mining industry, which is growing
faster than the rest of the economy at present. Therefore the other regions in WA will
carve out a larger share of the State’s economy while the mining boom is at its height. Our
forecasts have Perth’s share of GRP falling to 67.6% by 2040. This is not to say that Perth’s
economy will be struggling – quite the reverse. It just isn’t the standout region in a
standout State.
Chart 3.4: Employment by industry, Perth, 2010
Health care and social assistance
Retail trade
Construction
Professional, scientific and technical services
Education and training
Manufacturing
Transport, postal and warehousing
Public administration and safety
Accommodation and food services
Mining
Other services
Wholesale trade
Administrative and support services
Financial and insurance services
Rental, hiring and real estate services
Share of State
Arts and recreation services
Share of region
Information media and telecommunications
Electricity, gas, water and waste services
Agriculture, forestry and fishing
Perth
0%
2%
4%
6%
8%
10%
12%
In contrast, Perth’s population is expected to continue to rise as a share of the State, which
reflects two things. The first is that people prefer to live in the larger city and fly in – fly out
to their place of work in remote regions. The second is that the mining infrastructure
currently being built will produce a large increase in exports, without needing additional
people to the same degree to create these exports in the regional centres. This will have
the effect of lifting GRP in the mining regions, without the need for a notably increased
population.
It is worth noting that our own population projections are rather higher than the ‘official’
projections. We expect Perth’s population to grow at 2% a year to 2020 and 1.6% a year for
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Economic and demographic projections
the ten years to 2030, reaching a total population of 2.4 million by 2030. By contrast, the
WA Planning Commission (2005) expected 1.4% growth in the ten years to 2021 and 1%
growth in the 10 years to 2031, reaching 2 million people by 2030.
The ‘official’ projections, made in 2005, are simply too low. For a start, Perth’s population
is currently 1.7 million people - a population of 2 million people in 2030 would imply an
average growth rate for the next 20 years of just 0.8% per annum.
Strong growth has also meant that many of the ‘two speed economy’ effects appear more
pronounced in Perth, with non-mining companies also having to face high wage and
materials costs.
Strong population growth has also made housing affordability a cutting issue for Perth.
Between March 2002 and December 2010, the median house price in Perth grew 163%,
while the average median price (weighted by the number of housing transfers) for the eight
capital cities grew 118%.3 Relatively high house prices in Perth will place a speed limit in
the short term on how fast the region can grow as WA seeks to attract more labour from
interstate.
In aggregate terms, however, there is no denying that the overall State story, and indeed
that of Perth, is one of great growth. The State is experiencing the fastest growth spurt in
global industrial commodity demand ever recorded, and that shows no signs of abating.
Furthermore, just as it did during the GFC, the mining boom should provide a relatively
good shield for Perth and for WA more broadly.
3.3 Gascoyne and Geraldton (including
Exmouth)
Table 3.4: Vital statistics, Gascoyne and Geraldton,
Gascoyne & Geraldton
WA
Population (2010)
46,974
2,293,510
Indigenous share of pop (Gascoyne- 2006)
17.2%
3%
135,449
2,531,564
50,510
58,017
78%
68%
Area (sq km)
Average taxable income (2008)
Participation rate (2010)
Source: Deloitte Access Economics, ABS National Regional Profiles
3
ABS 6416.0, House Price Indexes: Eight Capital Cities, June 2011
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Economic and demographic projections
Table 3.5: Economic forecasts, Gascoyne and Geraldton
GRP ($m)
Population
Working age population
Employment
Share of WA
GRP
Population ('000)
Working age population
Employment
2010
2020
2030
2040
3,929
46,974
36,308
27,216
5,315
52,546
41,463
28,459
7,017
57,356
45,716
30,930
9,029
61,541
49,617
33,221
2.1%
2.0%
2.0%
2.3%
2.0%
1.9%
1.8%
2.0%
1.9%
1.8%
1.7%
1.8%
1.9%
1.7%
1.7%
1.7%
2010-2020
2020-2030
2030-2040
Average annual growth
3.1%
2.8%
2.6%
1.1%
0.9%
0.7%
1.3%
1.0%
0.8%
0.4%
0.8%
0.7%
Chart 3.5 shows that the region has a higher share of workers in the agriculture,
accommodation services, retail, transport and education industries, while the region has a
lower percentage of mining, healthcare and professional workers.
‘Public services’, including education, health care, and arts and recreation (sports grounds,
art galleries and the like), account for 17% of Gascoyne and Geraldton’s employment base,
compared to 19% of the State’s. In 2040 these services are projected to account for 19% of
the region’s employment, and 20% of the State’s employment base.
Chart 3.5: Employment by industry, Gascoyne and Geraldton, 2010
Retail trade
Construction
Education and training
Transport, postal and warehousing
Public administration and safety
Accommodation and food services
Agriculture, forestry and fishing
Health care and social assistance
Mining
Manufacturing
Other services
Professional, scientific and technical services
Wholesale trade
Administrative and support services
Electricity, gas, water and waste services
Share of State
Financial and insurance services
Share of region
Rental, hiring and real estate services
Information media and telecommunications
Arts and recreation services
Gascoyne and Geraldton
0%
2%
4%
6%
8%
10%
12%
14%
Deloitte Access Economics estimates that the Gascoyne and Geraldton region has a GRP of
around $3.9 billion.
The Gascoyne Development Commission (2011) estimated its GRP at $651 million in 200910, while the Midwest Development Commission (2011), of which Geraldton is a part,
Deloitte Access Economics
24
Economic and demographic projections
estimated that GRP in 2009-10 was $4.5 billion. Given the Mid West region includes towns
other than Geraldton, this suggests our estimate is in line with ‘official’ estimates.
‘Official’ projections from the WA Planning Commission (2005) are for Gascoyne’s
population to gradually stabilise. In the ten years to 2020 it is projected to grow at just
0.3% per annum, before declining by 0.1% per annum over the ten years to 2030. These
estimates are a fair bit lower than our own (1.1% growth in the ten years to 2020, and 0.9%
in the ten years to 2030), though they are difficult to compare because our estimates
include the major population centre of Geraldton. Importantly though, we, like the WA
Planning Commission, believe that Gascoyne’s population growth in the coming decades
will be among the slowest in the State.
Perhaps the Gascoyne region’s greatest strength is that it has a fairly diversified economy –
illustrated by the wide range of industries people are employed in throughout the region. It
has a large tourism industry (illustrated by a large number of workers in the retail and
accommodation industries), a significant agriculture sector, and also a mining presence.
The Gascoyne Development Commission (2011) notes there are a number of tourism
accommodation projects which should bode well for tourism in the near term. However a
strong Australian dollar will continue to put a dampener on tourism, with overseas markets
being relatively cheaper for visitors. Additionally, the higher Australian dollar makes
additional tourism infrastructure more expensive, and so less likely to go ahead.
Competition from other regions which are projected to grow more strongly than Gascoyne
will also affect Gascoyne’s tourism potential.
Although not currently a major mining region, Gascoyne will not be completely left behind
by a continuing mining boom. The region’s biggest potential lies in LNG, although it does
not have, as yet, any ‘mega’ projects on the horizon. There are some plans to expand the
salt mine, as well as a heavy mineral sands deposit. Geraldton is also heavily driven by
mining, however the mining is quite diversified, covering everything from gold to LNG, iron
ore, copper, nickel, cobalt and uranium.
However, this region, as mentioned above, does not yet have a slice of the LNG investment
shown in Investment Monitor. There is currently a $2.7 billion gold mine being constructed,
however this is the only major project which has been committed to. There are two larger
projects on the horizon, however it is not certain that these will go ahead – a $4.3 billion
iron ore project, and a $5.9 billion Oakajee Port development. The lack of committed
investment projects in the region shows up as slower growth for the region when
compared to the State average, although output growth over the forecast period for the
region is broadly in line with the national average.
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Economic and demographic projections
3.4 Pilbara (Karratha and Port Hedland)
Table 3.6: Vital statistics, Pilbara
Pilbara
WA
Population (2010)
48,610
2,293,510
Indigenous share of pop (2006)
16.9%
3%
506,575
2,531,564
76,001
58,017
79%
68%
Area (sq km)
Average taxable income (2008)
Participation rate (2010)
Source: Deloitte Access Economics, ABS National Regional Profiles
Deloitte Access Economics estimates that the Pilbara’s Gross Regional Product in 2009-10
was around $10 billion, which is in line with the estimated $9.2 billion of the Pilbara
Development Commission (2011). This is an impressive result, given that the region boasts
only 2.1% of the State’s population and 2.6% of the State’s employment.
This is a region in full swing due to the mining boom. Chart 3.6 shows that a third of all
workers in the region are employed in the mining industry, with over 10% in a supporting
role in the construction industry.
Table 3.7: Economic forecasts, Pilbara
GRP ($m)
Population
Working age
population
Employment
Share of WA
GRP
Population ('000)
Working age
population
Employment
2010
2020
2030
2040
10,152
48,610
19,746
62,790
30,855
73,977
40,660
81,106
36,629
30,930
48,072
39,193
56,822
46,605
62,820
51,614
5.4%
2.1%
7.3%
2.3%
8.5%
2.3%
8.4%
2.3%
2.0%
2.6%
2.1%
2.7%
2.2%
2.8%
2.1%
2.7%
2010-2020
2020-2030
2030-2040
Average annual growth
6.9%
4.6%
2.8%
2.6%
1.7%
0.9%
2.8%
2.4%
1.7%
1.7%
1.0%
1.0%
‘Public services’, including education, health care, and arts and recreation (sports grounds,
art galleries and the like), account for 12% of the Pilbara’s employment base, compared to
19% of the State’s. However, strong employment growth in mining means that the services
share of the Pilbara may not keep pace – by 2040 we expect public services to account for
only 9% of the region’s employment base. This indicates that the level of services in the
region is unlikely to keep pace with the mining expansion – that is, the number of aged care
facilities, schools or sporting fields per person is likely to decrease.
Deloitte Access Economics
26
Economic and demographic projections
Chart 3.6: Employment by industry, Pilbara, 2010
Mining
Construction
Education and training
Retail trade
Transport, postal and warehousing
Public administration and safety
Accommodation and food services
Health care and social assistance
Manufacturing
Other services
Administrative and support services
Professional, scientific and technical services
Wholesale trade
Rental, hiring and real estate services
Electricity, gas, water and waste services
Agriculture, forestry and fishing
Share of State
Financial and insurance services
Share of region
Information media and telecommunications
Arts and recreation services
Pilbara
0%
5%
10%
15%
20%
25%
30%
35%
As Deloitte Access Economics often notes, the developing world is demanding commodities
at an unprecedented rate, and despite economic uncertainty on a global scale, the mining
boom shows no sign of abating. For example, just witness the massive investments now
underway, or soon to commence, in LNG (see below).
This is the reason for the increasing share of output for the region over the majority of the
forecast period – output is forecast to grow a stunning 6.9% annually in the decade to 2020,
and 4.6% per annum over the decade to 2030. Over the same timeframes, Australia’s
average annual growth is expected to be 3.1% and 3.0% respectively.
However, the benefits to the region from this mining activity are not as high as they could
potentially be. A lack of appropriately skilled workers has forced most mines in the region
to make heavy use of FIFO workers. It is estimated that about half of all resource related
employment in the Pilbara in 2010 was from FIFO workers (Heuris Partners 2010). This is
backed up by a study undertaken by the Pilbara Industry Community Council, which
estimated that the proportion of FIFO workers in 2010 was 50%. Additionally, the study
estimated that this proportion would rise to 64% by 20204.
Although these workers do generate some additional economic activity in the region (they
still have to be fed, for instance), their overall contribution to the region will obviously be
significantly less than a resident mine worker. Significantly, much of their discretionary
income will be spent in other regions. Miners, even those who ‘live’ in the Pilbara, tend to
leave the region when they are not on shift. Miners are, on the whole, unmarried, and
generally have a lot of disposable income. With a large proportion of their income
4
http://www.pdc.wa.gov.au/media/81869/final%20-%20pilbara%20futures%20presentation%206%20sept.pdf
Deloitte Access Economics
27
Economic and demographic projections
discretionary, they’re likely to hop on a plane to Perth (or Bali) during their extended
breaks.
In recognition of this, key priorities of the Pilbara Development Commission (PDC) are
making the Pilbara an attractive location for mine workers to reside, and ultimately
developing a diverse and thriving regional economy. Diversity in the region’s employment
base goes hand in hand with sustainability in its overall population levels.
In striving to achieve this goal, the PDC makes two rather bold predictions about the
region’s future. The first is that the population of the region will be over 140,000 people by
2035 (it is currently about 50,000), with Karratha and Port Hedland expected to grow to
about 50,000 people (they currently have around 12,000 people each). Second, strong
population growth is expected to reduce the region’s dependence on mining.
Deloitte Access Economics’ forecasts however, do not support these predictions. Our
forecasts for the Pilbara are for an increase from just under 49,000 people in 2009-10 to
just over 80,000 by 2034-35. There are significant impediments to achieving a population
of 140,000 people by 2030. The first of which is that this would imply an average annual
population growth rate of 5.3% for 20 years, which would be a phenomenal rate to sustain
over two decades. The average annual national growth rate is expected to be 1.3%, and
the State average of 1.7% over the same timeframe.
The second is the looming skills shortage which will hit WA more so than any other State. A
lack of appropriately skilled workers will see companies increase their use of FIFO workers –
a fact acknowledged by the Pilbara Development Commission itself.
Investment agenda
Two words adequately describe the Pilbara’s investment agenda: LNG and iron ore. In LNG,
the Gorgon and Wheatstone projects will dominate. The former, which began in 2009, is
the massive Gorgon LNG project near Barrow Island, worth a whopping $43 billion. The
latter, only recently approved, involves an LNG project near the Carnarvon Basin, worth a
very respectable $29 billion.
The biggest iron ore projects are Hancock Prospecting’s $7.2 billion Roy Hill 1 iron ore
project and BHP’s $6.7 billon Rapid growth Project 5.
Outside of mining, the major projects are designed to support the mining industry – these
include the $890 million expansion of the Cape Lambert port near Karratha, the $600
million ‘Dampier Nitrogen’ project, and upgrades to power and fuel infrastructure at some
of Rio Tinto’s mine sites.
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Economic and demographic projections
3.5 Kimberley
Table 3.8: Vital statistics, Kimberley
Kimberley
WA
Population (2010)
24,390
2,293,510
Indigenous share of pop (2006)
47.4%
3%
420,798
2,531,564
55,361
58,017
73%
68%
Area (sq km)
Average taxable income (2008)
Participation rate (2010)
Source: Deloitte Access Economics, ABS National Regional Profiles
In 2009-10 Deloitte Access Economics estimates that the Kimberley region had an
estimated GRP of $1.6 billion. This compares with the estimate of about $2.2 billion by the
Kimberley Development Commission (2011), although this estimate also includes the Ord
region immediately to the east of the Kimberley. The region’s total population is just over
24,000, of which most live in Broome and Derby.
The WA Planning Commission (2005) forecast the Kimberley region to enjoy strong
population growth, of 2.6% a year for the ten years to 2020 and 2.0% a year for the ten
years to 2030. These estimates are now somewhat outdated as the projected population
for 2009 in fact turned out to be 21% higher than the actual value, according to the
Kimberley Development Commission (which continues to use these ‘official’ forecasts).
Table 3.9: Economic forecasts, Kimberly
Kimberley
GRP ($m)
Population
Working age population
Employment
Share of WA
GRP
Population ('000)
Working age population
Employment
2010
2020
2030
2040
1,633
24,390
18,579
13,204
2,587
30,152
23,590
15,721
3,964
34,830
27,461
18,357
5,385
39,000
31,006
20,751
0.9%
1.1%
1.0%
1.1%
1.0%
1.1%
1.1%
1.1%
1.1%
1.1%
1.0%
1.1%
1.1%
1.1%
1.0%
1.1%
Deloitte Access Economics
2030-2040
2010-2020
2020-2030
Average annual growth
4.7%
4.4%
3.1%
2.1%
1.5%
1.1%
2.4%
1.5%
1.2%
1.8%
1.6%
1.2%
29
Economic and demographic projections
Chart 3.7: Employment by industry, Kimberley, 2010
Public administration and safety
Health care and social assistance
Education and training
Construction
Retail trade
Accommodation and food services
Transport, postal and warehousing
Other services
Agriculture, forestry and fishing
Mining
Administrative and support services
Professional, scientific and technical services
Manufacturing
Electricity, gas, water and waste services
Rental, hiring and real estate services
Share of State
Wholesale trade
Share of region
Arts and recreation services
Information media and telecommunications
Financial and insurance services
Kimberley
0%
2%
4%
6%
8%
10%
12%
14%
Much of the Kimberley’s economic potential in the near term will come from its proximity
to South East Asia. A relatively high number of workers in the Kimberley are employed in
the public administration, transport, accommodation, and health care sectors – see Chart
3.7. However these sectors are not high value adding, so thus do not contribute nearly as
strongly to the region’s output.
However, the region does have a significant tourism presence, demonstrated by a large
number of workers in the retail and accommodation sectors. Tourism to the region
accounts for an important share of the region’s economy, with the number of visitors
consistently being between 250,000 and 300,000 over the past decade.
‘Public services’, including education, health care, and arts and recreation (sports grounds,
art galleries and the like), account for 22% of the Kimberley’s employment base, compared
to 19% of the State’s. By 2040 this share is expected to be 25% for the Kimberley and 20%
for the State, continuing the region’s historically higher than average share of public
services workers when compared to the rest of the State.
As with most regions in WA though, the story is predominantly about mining. While there
has been little in the way of ‘mega’ projects for this region in the first mining boom, that is
set to change – with the $8.9 billion Prelude LNG project in the Browse Basin set to
commence construction shortly. Additionally, the next North West Shelf LNG project seems
set to begin next year. Both these projects will provide a boost to the local economy, which
is the reason behind the good growth rates seen in Table 3.9, as well as the increasing
shares of Western Australia’s totals.
Agriculture presents a small downside to the Kimberley’s near term outlook. About three
quarters of the Kimberley’s agricultural output is in livestock disposals (i.e. live cattle
Deloitte Access Economics
30
Economic and demographic projections
exports). Following the suspension of live cattle exports to Indonesia in July, which has only
recently been lifted, ABARES expects Australian live cattle exports to fall to around 456,000
head in 2011-12 (compared to 728,000 head in 2010-11 and 871,000 in 2009-10). Given
the negative publicity generated over live cattle exports during the suspension, the
industry’s near term outlook is subject to a considerable degree of uncertainty.
Deloitte Access Economics
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Economic and demographic projections
4 Queensland
4.1 State overview
Table 4.1: Queensland forecasts
10 yrs to 2020
% change
Level
Western
Australia
10 yrs to 2030
% change
Level (m)
10 yrs to 2040
% change
Level (m)
GSP ($m)
4.56%
397,672
3.24%
547,097
3.04%
738,329
Population
1.89%
5,436,137
1.75%
6,465,407
1.46%
7,476,076
Working age
population
2.06%
4,424,843
1.87%
5,325,199
1.54%
6,202,657
Employment
2.23%
2,880,448
1.62%
3,381,089
1.29%
3,842,954
GDP ($m)
3.08%
1,738,118
2.95%
2,325,112
2.70%
3,036,259
Population
1.41%
25,642,412
1.22%
28,947,313
1.00%
31,985,490
Working age
population
1.52%
21,017,317
1.30%
23,916,047
1.09%
26,664,950
Employment
1.65%
13,018,012
1.19%
14,652,881
0.91%
16,040,868
Australia
Note: % changes are average annual changes. Levels are figures as at the end of the period.
Queensland is Australia’s best long run growth story, but when the global financial crisis hit
bank loans became harder to get in this State than anywhere else, and the housing
construction sector – flag bearer of Queensland’s strength in the good years – fell hard and
fast and is still falling.
Yet the State is supremely resource rich, and China’s recovery and continuing growth
allowed Queensland to shrug off the worst of the GFC. Moreover, the global interest in
Queensland’s coal seam gas reserves saw 2010 characterised not just by the State’s
economic recovery, but also by a series of high profile announcements of enormous
engineering projects.
Then the story took yet another twist in early 2011 as floods and cyclones tore through
Queensland, causing massive damage.
The poor growth in the last couple of years has generated collateral damage to the State’s
economy. Housing prices are falling, the pace of rental growth has dropped to its lowest
for some time, population growth is within an ace of the national rate for the first time in
many years and unemployment has been higher than the national rate since mid-2009.
Moreover, Queensland’s tourism sector has been hard hit by the rise of the $A. Occupancy
rates have been below national levels for a couple of years, a position not made any easier
by the publicity around the floods and cyclones.
Deloitte Access Economics
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Economic and demographic projections
However, against this the big rebound in State growth has begun. Just as the floods and
cyclones were a massive hit to the State, the recovery from them is a similarly massive
boost. More to the point, a lot of it is yet to show up in the figures – coal exports are still
well down on where they were at times during 2010.
In effect, that says there is a degree of ‘automatic rebound’ in the short term forecasts for
Queensland – the simple ‘return to normal’ in coal production won’t be complete until
early 2012, and that means petrol in the tank for Queensland’s recovery even if many
citizens of the State won’t see or even feel much of it.
The larger part of the growth story, however, is not the recovery from floods and cyclones.
It is the stunning surge in engineering work now commencing in Queensland. Spending by
corporates on capacity expansion is already a bigger share of the economy than it was just
ahead of the global financial crisis, and the lead that Queensland has on this measure is
already bigger than it was back then. It is this investment work that drives the stronger
growth than that seen nationally over the forecast period to 2040. Likewise the lure of
warmer weather will continue to see the State attract a growing share of the nation’s
population.
In aggregate, our population projections are comfortably between the low and middle
bands (closer to the middle) of Queensland Treasury’s most recent population projections
(Queensland Treasury 2011).
By 2021 Treasury’s low band estimate is 5.29 million and its medium band estimate is 5.59
million – our estimate for 2021 is 5.53 million. By 2031, Treasury’s low estimate is 5.96
million and its medium estimate is 6.59 million – our estimate for 2031 is 6.57 million.
Finally, by 2041 Treasury’s low estimate is 6.55 million and its medium estimate 7.60 million
– our estimate for 2040 is 7.48 million.
The three charts below show average annual growth rates for various regions in
Queensland, for population, employment, and output.
These charts show that Cairns is predicted to be the fastest growing region in terms of
population and employment, followed by Townsville. This largely reflects the fact that they
are significant tourism destinations, and retirement favourites. However, the Mackay and
Fitzroy region is expected to show the strongest output growth over the next 30 years. This
is primarily due to the large LNG projects which are currently being constructed off the
coast. The following sections discuss the regions in further detail.
Deloitte Access Economics
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Economic and demographic projections
Chart 4.1: Population growth
Chart 4.2: Employment growth
Average annual growth, 2010-2040
2.5%
Average annual growth, 2010-2040
2.0%
2.0%
1.5%
1.5%
2.5%
Queensland average
Queensland average
1.0%
1.0%
0.5%
0.5%
0.0%
0.0%
-0.5%
Chart 4.3: GRP growth
Average annual growth, 2010-2040
4.0%
Queensland average
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
4.2 Far North
Table 4.2: Vital statistics, Far North
Far North
Population (2010)
Indigenous share of pop (2006)
Area (sq km)
Average taxable income (2008)
Participation rate (2010)
Qld
124,138
4,513,850
22.9%
3.5%
272,658
1,734,175
44,281
50,591
67%
67.8%
Source: Deloitte Access Economics, ABS National Regional Profiles
We estimate that the Far North region of Queensland had a GRP of about $6.2 billion in
2010.
The Far North Queensland (FNQ) regional plan, the government’s official planning
document, includes low, medium and high growth scenario projections for population. Our
own forecasts fit in rather closely with these estimates. Over the 10 years to 2020 we
expect population growth of 1% a year, between the low and medium growth scenarios of
the FNQ plan. Over the ten years to 2030 we expect population to grow by 1.2% a year,
which is equal to the growth rate under the FNQ’s medium growth scenario. And over the
Deloitte Access Economics
34
Economic and demographic projections
20 years to 2030 we expect growth of 1.1% a year, just lower than the FNQ plan’s medium
growth rate of 1.2% a year.
Table 4.3 Economic forecasts, Far North
GRP ($m)
Population
Working age population
Employment
Share of Qld
GRP
Population ('000)
Working age population
Employment
2010
2020
2030
2040
6,247
124,138
96,797
59,031
8,920
136,706
109,639
64,882
11,209
153,726
125,194
71,035
14,186
170,900
140,454
77,367
2.5%
2.8%
2.7%
2.6%
2.2%
2.5%
2.5%
2.3%
2.0%
2.4%
2.4%
2.1%
1.9%
2.3%
2.3%
2.0%
2010-2020
2020-2030
2030-2040
Average annual growth
3.6%
2.3%
2.4%
1.0%
1.2%
1.1%
1.3%
1.3%
1.2%
0.9%
0.9%
0.9%
Chart 4.4: Employment by industry, Far North, 2010
Agriculture, forestry and fishing
Public administration and safety
Retail trade
Accommodation and food services
Health care and social assistance
Construction
Manufacturing
Education and training
Transport, postal and warehousing
Other services
Administrative and support services
Professional, scientific and technical services
Wholesale trade
Mining
Rental, hiring and real estate services
Share of State
Electricity, gas, water and waste services
Share of region
Arts and recreation services
Financial and insurance services
Information media and telecommunications
Far North
0%
2%
4%
6%
8%
10%
12%
14%
16%
With most of Queensland’s mining activity taking place nearer to Gladstone and Mackay,
and with Cairns being the service and administrative (and tourism) hub for the far north,
the Far North’s economy outside of Cairns is heavily dependent on agriculture (mostly
cattle grazing, sugar cane and bananas) – about 14% of the region’s workers are employed
in agriculture, forestry and fishing, compared with only a 4% share State-wide.
Another big employer in the region is public administration and safety. This is perhaps
reflective of the socioeconomic status of the area – as shown in Table 4.2 above, average
taxable income in the Far North is some 14% lower than the State average. Tourism is an
important industry, with retail trade and accommodation together employing almost 20%
Deloitte Access Economics
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Economic and demographic projections
of the region’s workers. It should be noted, however, that most visitors to the region do
not venture far inland from Cairns.
‘Public services’, including education, health care, and arts and recreation (sports grounds,
art galleries and the like), account for 16% of the Far North’s employment base, compared
to 20% of the State’s. By 2040 we project that these services will account for 21% of the
Far North’s employment and 22% of the State’s, reflecting some degree of catch up with
the rest of the State.
The main driver of the economy is agriculture. And, with the dry, non-arable land that
dominates the northern Australian landscape, most agricultural activity in the region is
restricted to cattle grazing. ABARES (2011b) estimates that of 6.7 million head of cattle in
Australia at 30 June 2011, 3.6 million were from northern Queensland regions (see Figure
4.1).
Figure 4.1: Cattle regions of northern Australia
Source: ABARES 2011b
ABARES expects beef cattle exports to fall over the next year, owing to subdued demand in
Japan, subdued demand and increasing domestic production in the United States, and
heightened competition from US beef in Japan. Live cattle exports from the region are also
likely to remain subdued for at least the next few years following the suspension of exports
to Indonesia in June 2011.
Deloitte Access Economics
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Economic and demographic projections
Tourism is also likely to remain relatively flat in the near term, with the prospect of the
Australian dollar remaining fairly well supported putting a dampener on the short term
outlook for domestic tourism, though the $A should retreat over hte course of the next
decade.
Over the longer term, any significant diversification of the economy away from agriculture
(and to a lesser extent, tourism) is unlikely. Opportunities within agriculture, such as the
potential for carbon offsets to be included in the eventual carbon trading scheme, may
nevertheless bode well for the medium to longer term agricultural outlook.
4.3 Cairns
Table 4.4: Vital statistics, Cairns
Cairns
Population (2010)
Qld
150,920
Indigenous share of pop (2006)
Area (sq km)
Average taxable income (2008)
Participation rate (2010)
4,513,850
8.9%
3.5%
490
1,734,175
47,666
50,591
76%
67.8%
Table 4.5: Economic forecasts, Cairns
GRP ($m)
Population
Working age population
Employment
Share of Qld
GRP
Population ('000)
Working age population
Employment
2010
2020
2030
2040
7,977
150,920
118,294
82,539
12,677
188,888
151,617
106,996
18,104
231,744
188,120
129,243
25,345
275,843
225,470
151,328
3.1%
3.3%
3.3%
3.6%
3.2%
3.5%
3.4%
3.7%
3.3%
3.6%
3.5%
3.8%
3.4%
3.7%
3.6%
3.9%
2010-2020
2020-2030
2030-2040
Average annual growth
4.7%
3.6%
3.4%
2.3%
2.1%
1.8%
2.5%
2.2%
1.8%
2.6%
1.9%
1.6%
Cairns City Council (2011) estimates that the region’s GRP in 2010 was $7.5 billion, slightly
lower than our own estimate of $8 billion.
The Advance Cairns submission forecasts that the Cairns Regional Council will have a
population of 241,494 by 2031, against our forecasts of 231,744 by 2030 (noting that the
regional definitions between the two reports are slightly different). This amounts to a
difference of around 4% of total population.
Deloitte Access Economics
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Economic and demographic projections
Chart 4.5: Employment by industry, Cairns, 2010
Retail trade
Accommodation and food services
Construction
Health care and social assistance
Transport, postal and warehousing
Public administration and safety
Education and training
Professional, scientific and technical services
Manufacturing
Administrative and support services
Other services
Wholesale trade
Rental, hiring and real estate services
Arts and recreation services
Financial and insurance services
Share of State
Electricity, gas, water and waste services
Share of region
Information media and telecommunications
Agriculture, forestry and fishing
Mining
Cairns
0%
2%
4%
6%
8%
10%
12%
14%
16%
The drivers of Cairns’ economy are rather different to Queensland’s. Unsurprisingly, the
‘tourist heavy’ sectors of retail accommodation and food services each make up a far
greater share of Cairns’ workforce than for the State as a whole. And, conversely, primary
and manufacturing industries are far more important to the State’s employment base than
to Cairns’.
In essence, then, much of Cairns’ economy is driven by the all important tourist trade.
Tourists eat at Cairns’ restaurants, shop in its shops and stay at its hotels. In turn, more
tourists mean more demand for restaurants, hotels and shops, which drives the
construction industry.
That means Cairns is more exposed than the State as a whole to the current difficulties with
international tourism, where a weak global economy and high $A are combining to stall
international tourist numbers. An expected decline in the $A over the medium term would
provide some support to international tourist numbers and the Cairns economy.
An issue that places considerable uncertainty over the economic outlook for Cairns, but
also one which is nearly impossible to quantify, is climate change. Climate change impacts
such as ocean acidification, sea level rise and warming sea temperatures have the potential
to place significant strains on the biodiversity and overall quality of the Great Barrier Reef,
and hence to affect reef related tourism. A study conducted for the Garnaut Climate
Change Review (Hoegh-Guldberg & Hoegh-Guldberg 2008) estimated that some 62% of
total visitor nights to northern Queensland regions were reef related – and Cairns is the hub
for most reef related activity.
‘Public services’, including education, health care, and arts and recreation (sports grounds,
art galleries and the like), account for 17% of Cairns’ employment base, compared to 20%
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Economic and demographic projections
of the State’s. By 2040 these services are projected to make up 21% of Cairns’ employment
base and 22% of the State’s.
4.4 Townsville
Table 4.6: Vital statistics, Townsville
Townsville
Population (2010)
Indigenous share of pop (2006)
Area (sq km)
Average taxable income (2008)
Participation rate (2010)
Qld
172,316
4,513,850
6.4%
3.5%
455
1,734,174.9
50,672
50,591
74%
67.8%
According to the Townsville City Council (2011), Townsville’s GRP in 2008-09 was $9.8
billion, pretty close to our own estimate for that year.
A range of publicly available population projections have been made for Townsville, all of
which assume strong population growth in the years to come, as Townsville transforms
from a regional centre to a fully fledged metropolitan city.
Toward the lower end, KPMG (2011) suggests that by 2026 the city’s population will be
235,908. Townsville City Council (2011) provides four population estimates for 2026:
medium (255,986), high (280,736), very high (307,879) and boom (340,725). Our own 2026
forecast, of 241,659, is comfortably between the low and medium estimates presented
above, and also comfortably between the low and medium bands of Queensland Treasury’s
‘official’ forecasts. By 2030, our population forecast of 260,083, is about 4% lower than the
corresponding medium range estimate from Townsville City Council, and about 1.5% lower
than the Queensland Government’s lower bound estimate.
Table 4.7: Economic forecasts, Townsville
GRP ($m)
Population
Working age population
Employment
Share of Qld
GRP
Population ('000)
Working age population
Employment
2010
2020
2030
2040
11,109
172,316
136,567
96,412
17,610
215,159
174,663
123,080
24,095
260,083
213,285
146,813
32,463
304,971
251,633
169,533
4.4%
3.8%
3.8%
4.2%
4.3%
4.0%
4.0%
4.3%
4.4%
4.0%
4.0%
4.3%
4.4%
4.1%
4.1%
4.4%
2010-2020
2020-2030
2030-2040
Average annual growth
4.7%
3.2%
3.0%
2.2%
1.9%
1.6%
2.5%
2.0%
1.7%
2.5%
1.8%
1.4%
Reflecting Townsville’s status as the service and administrative centre of North Queensland,
‘public services’, including education, health care, and arts and recreation (sports grounds,
art galleries and the like), account for 22% of Townsville’s employment base, compared to
20% of the State’s. These shares are projected to be similar in 2040 – 23% for Townsville
and 22% for Queensland.
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Economic and demographic projections
Chart 4.6: Employment by industry, Townsville, 2010
Health care and social assistance
Construction
Retail trade
Public administration and safety
Education and training
Transport, postal and warehousing
Manufacturing
Accommodation and food services
Professional, scientific and technical services
Other services
Wholesale trade
Administrative and support services
Mining
Financial and insurance services
Information media and telecommunications
Share of State
Rental, hiring and real estate services
Share of region
Arts and recreation services
Electricity, gas, water and waste services
Agriculture, forestry and fishing
Townsville
0%
2%
4%
6%
8%
10%
12%
14%
16%
Compared with some of the massive differences evident for other Queensland regions, it
has to be said that on the whole, Townsville’s employment base is rather similar to
Queensland’s.
The biggest relative differences are in public administration and safety, which makes up
11% of Townsville’s workforce compared to 6% of the State’s; health care and social
assistance, with 14% of Townsville’s workforce and 11% of the State’s; manufacturing, with
8% of the State’s workforce and 6% of Townsville’s; and agriculture, with 4% of the State’s
workforce and only 1% of Townsville’s.
These differences can be explained by the fact that Townsville is essentially the service and
administration centre for the northern parts of Queensland and has a notable Defence
presence.
Looking forward, Townsville’s greatest strength is that it is not overly dependent on any
one industry – as shown above it has a well diversified employment base and, according to
the Townsville City Council, an equally diversified output base, with no single sector
accounting for more than 13% of GRP.
On the down side, the burgeoning natural gas investment pipeline, and Queensland’s
historically strong coal mining industry, is generally focused south of Townsville. Although
Townsville will always be at the centre of Queensland’s strong minerals industry, the
anticipated growth in coal and LNG means that growth in the middle regions of
Queensland, and in particular Mackay, Rockhampton and Gladstone, is likely to outperform
the northern regions.
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Economic and demographic projections
Over the longer term, Townsville’s economy is far more diversified than those of Mackay,
Gladstone or Rockhampton, which should stand it in good stead when the mining boom
begins to slow. So the result for Townsville may be a contraction as a share of the
Queensland economy over the coming decade, but then a gradual improvement from 2020
to 2040 when mining becomes less important to overall economic growth.
4.5 Northern SD
Table 4.8: Vital statistics, Northern SD
Northern SD
Population (2010)
Qld
59,312
Indigenous share of pop (2006)
4,513,850
9.3%
3.5%
Area (sq km)
79,587
1734174.9
Average taxable income (2008)
48,348
50,591
72%
67.8%
Participation rate (2010)
Source: Deloitte Access Economics, ABS National Regional Profiles
The Northern SD’s dominant employer is agriculture, employing 22% of the region’s
workforce (compared to 4% of the State’s). As shown in Figure 4.1 above, the Northern
region is part of Queensland’s cattle grazing area, which likely accounts for a good chunk of
the region’s agricultural output. Some crops are grown closer to the coast (particularly
sugar cane and tropical fruits), though much of this is concentrated further north around
Innisfail and Cardwell.
Although it accounts for a relatively small share of the region’s workforce, the importance
of mining should not be overlooked. With most of Queensland’s coal mining located
further south (see Figure 4.2), mining activity in the Northern region is primarily
concentrated on minerals development. According to the Townsville City Council, it is the
second largest minerals mining region in the world, containing over 28% of the world’s
known zinc reserves, as well as sizeable deposits of silver, lead, zinc and copper.
Table 4.9: Economic forecasts, Northern SD
GRP ($m)
Population
Working age population
Employment
Share of Qld
GRP
Population ('000)
Working age population
Employment
2010
2020
2030
2040
3,967
59,312
46,439
31,844
5,485
60,635
49,068
32,246
6,328
62,089
50,998
32,320
7,247
62,193
51,530
31,812
1.6%
1.3%
1.3%
1.4%
1.4%
1.1%
1.1%
1.1%
1.2%
1.0%
1.0%
1.0%
1.0%
0.8%
0.8%
0.8%
2010-2020
2020-2030
2030-2040
Average annual growth
3.3%
1.4%
1.4%
0.2%
0.2%
0.0%
0.6%
0.4%
0.1%
0.1%
0.0%
-0.2%
The Bureau of Resources and Energy Economics (BREE) expects Australia’s production and
export of minerals to remain fairly steady in the near term, meaning there should be no
major change to the region’s economy in the near term.
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Economic and demographic projections
Looking forward, the region may underperform the expected growth performance for the
State as a whole. Minerals production is expected to grow more modestly than the massive
expansion of coal and iron ore nationally. Over the past decade, Australia’s coal production
grew by 26% and iron ore production by 168%; while production of copper grew only 8%,
and production of zinc and silver fell slightly (BREE 2011).
In view of this, we expect GRP to grow by 3.3% a year over the next decade, lower than the
growth rates in the coal mining/LNG regions.
Chart 4.7: Employment by industry, Northern SD, 2010
Agriculture, forestry and fishing
Health care and social assistance
Retail trade
Construction
Manufacturing
Education and training
Transport, postal and warehousing
Accommodation and food services
Public administration and safety
Mining
Other services
Professional, scientific and technical services
Wholesale trade
Administrative and support services
Financial and insurance services
Share of State
Electricity, gas, water and waste services
Share of region
Rental, hiring and real estate services
Arts and recreation services
Information media and telecommunications
Northern
0%
5%
10%
15%
20%
25%
That may not be enough to generate significant population growth. Queensland Treasury’s
high growth scenario has the region’s population growing at only 0.7% a year over the next
decade and 0.9% a year in the ten years to 2031. Our own forecasts are broadly in line with
Treasury’s low growth scenario.
‘Public services’, including education, health care, and arts and recreation (sports grounds,
art galleries and the like), account for 18% of the Northern region’s employment base,
compared to 20% of the State’s. By 2040 these services are projected to account for 22% of
both the region’s and the State’s employment base.
Investment agenda
The biggest project currently underway is Xstrata’s $589 million redevelopment of the
Ernest Henry underground copper mine.
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Economic and demographic projections
4.6 Mackay and Fitzroy
Table 4.10: Vital statistics, Mackay and Fitzroy region
Mackay and Fitzroy
region
Population (2010)
270,716
4,513,850
4.1%
3.5%
90,362.2
1,734,174.9
56,440
50,591
69%
67.8%
Indigenous share of pop (2006)
Area (sq km)
Qld
Average taxable income (2008)
Participation rate (2010)
Source: Deloitte Access Economics, ABS National Regional Profiles
According to the Mackay Regional Council (2011), in 2009-10 the Mackay-Isaac-Whitsunday
(MIW) region had an estimated GRP of $18.1 billion (the Mackay LGA accounted for about
32%, or $5.8 billion, of this.) The difference between this and our estimate ($27 billion) is
likely due to geographical definitions.
Our estimates of population growth are within the low and medium bands of Queensland
Treasury’s estimates, which predict 1.9% growth a year over the next decade and 1.8% over
the ten years to 2031.
Table 4.11: Economic forecasts, Mackay and Fitzroy
GRP ($m)
Population
Working age population
Employment
Share of Qld
GRP
Population ('000)
Working age population
Employment
2010
2020
2030
2040
27,308
270,716
212,890
141,939
51,835
328,463
264,258
183,746
68,986
387,047
315,302
213,554
90,558
444,254
364,484
241,973
10.7%
6.0%
5.9%
6.1%
13.0%
6.0%
6.0%
6.4%
12.6%
6.0%
5.9%
6.3%
12.3%
5.9%
5.9%
6.3%
2010-2020
2020-2030
2030-2040
Average annual growth
6.6%
2.9%
2.8%
2.0%
1.7%
1.4%
2.2%
1.8%
1.5%
2.6%
1.5%
1.3%
‘Public services’, including education, health care, and arts and recreation (sports grounds,
art galleries and the like), account for 13% of Mackay and Fitzroy’s employment base,
compared to 20% of the State’s. This share is expected to be the same in 2040 for the
region, while it is expected to rise slightly to 22% for the State as a whole. This reflects the
dominance of mining in the region – particularly coal.
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Economic and demographic projections
Chart 4.8: Employment by industry, Mackay and Fitzroy, 2010
Mining
Construction
Agriculture, forestry and fishing
Retail trade
Transport, postal and warehousing
Accommodation and food services
Health care and social assistance
Manufacturing
Education and training
Other services
Public administration and safety
Professional, scientific and technical services
Administrative and support services
Wholesale trade
Rental, hiring and real estate services
Share of State
Electricity, gas, water and waste services
Share of region
Financial and insurance services
Arts and recreation services
Information media and telecommunications
Mackay and Fitzroy
0%
2%
4%
6%
8%
10%
12%
14%
The region is the heart of Queensland’s all important coal industry (see Figure 4.2 below).
Mining is the largest employer in the region, accounting for about 13% of the workforce
(compared to only 2% State-wide). Mining’s share of output may be considerably larger –
the Mackay Regional Council (2008), estimated that mining accounted for some 58% of the
MIW region’s GRP in 2007-08.
The near term outlook for Australian coal mining is quite positive, with most of
Queensland’s coal operation back on track following the floods of early 2011. The Bureau
of Resources and Energy Economics, the government’s resources and energy forecaster,
expects Australian coal production to rise by 4% to 2011 and 6% to 2012, with exports
tipped to grow by 6% to 2011 and 8% to 2012 (BREE 2011). Buoyed by continued high
prices, Australia’s coal export earnings are tipped to increase from 2010-11 to 2011-12 by a
very strong 29%.
Just like the Pilbara and Kimberley regions of Western Australia, this region’s dependence
on mining represents an opportunity for very strong growth over the coming decade, but
that growth may fade in the periods after. Additionally, given the gradual move toward a
carbon constrained economy, the long term future of the coal industry faces further
challenges.
On the plus side, the diversification potential of the Mackay and Fitzroy region is perhaps
greater than the mining regions of WA, with a number of already strong alternate industries
providing a handy counter balance to coal mining.
First among these is tourism, with the southern part of the Great Barrier Reef and the
Whitsundays providing the region with significant tourist drawing potential. Between
2000-01 and 2009-10, passenger throughput at Mackay airport grew by 270%, and
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Economic and demographic projections
Proserpine airport’s throughput grew by 170% (BITRE 2011). Of course, the Mackay region
always has, and always will, have to compete for tourists’ money with other locations such
as Cairns, the Gold Coast and the Sunshine Coast.
The region also has a fairly strong agricultural presence, particularly in sugar cane, which in
the pre mining boom days underpinned the region’s economy.
Figure 4.2: Identified gas and coal deposits
Source: Department of Resources, Energy and Tourism, Energy in Australia 2011
Investment agenda
Some $35 billion worth of investment projects appear in the latest Investment Monitor
database for the Mackay region, of which $22 billion relate to coal mining.
Major coal investment projects dominate the agenda, many of which are in the ‘under
consideration’ phase (and thus are fairly likely to eventuate). They include: Hancock
Prospecting’s $7.5 billion Alpha Coal Project in the Galilee Basin; Xstrata Coal’s $6 billion
Wandoan coal mine; and BHP and Mitsubishi’s $4 billion Caval Ridge Project, which includes
a new coal mine in the Bowen Basin.
Looking beyond the ‘mining’ industry, it is worth noting that virtually all of the major
projects in the latest Investment Monitor database are in fact driven by mining. They
include $4.6 billion for an expansion to the Abbott Point coal terminal, $1.25 billion for a
coal fired power station in Galilee, $1 billion for the Southern missing Rail Link from
Wandoan to Theodore, and a $1 billion upgrade to the Dalrymple Bay coal terminal.
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Economic and demographic projections
The only large scale non mining project currently under way is the $408 million
redevelopment of the Mackay Base Hospital.
4.7 Gladstone and Rockhampton
Table 4.12: Vital statistics, Gladstone & Rockhampton
Gladstone & Rockhampton
Population (2010)
Qld
129,036
4,513,850
Indigenous share of pop (2006)
5.0%
3.5%
Area (sq km)
1053
1,734,174.9
53,941
50,591
69%
67.8%
Average taxable income (2008)
Participation rate (2010)
Source: Deloitte Access Economics, ABS National Regional Profiles
Table 4.13: Population characteristics, Gladstone and Rockhampton
GRP ($m)
Population
Working age population
Employment
Share of Qld
GRP
Population ('000)
Working age population
Employment
2010
2020
2030
2040
7,396
129,036
100,325
64,956
11,765
153,907
122,012
82,436
16,113
182,440
146,432
96,751
21,671
210,530
170,209
110,030
2.9%
2.9%
2.8%
2.8%
3.0%
2.8%
2.8%
2.9%
2.9%
2.8%
2.7%
2.9%
2.9%
2.8%
2.7%
2.9%
2010-2020
2020-2030
2030-2040
Average annual growth
4.8%
3.2%
3.0%
1.8%
1.7%
1.4%
2.0%
1.8%
1.5%
2.4%
1.6%
1.3%
We estimate the region’s GRP to be about $7.4 billion. Other estimates broadly match
ours: in 2005-06, the Gladstone region’s GRP was estimated at $2.2 billion (SGS Economics
and Planning 2010); and in 2009-10, the Rockhampton region‘s GRP was estimated at
$5.2 billion (Rockhampton Regional Council 2011).
Queensland Treasury’s population projections assume 1.7% growth a year over the next
decade and 1.4% for the ten years to 2031 under the low scenario, and 2.2% to 2021 and
2.03% to 2031 under the medium scenario. Our own estimates, of 1.8% growth to 2020
and 1.7% growth to 2030, are on the lower side of the official projections. Although the
region has enormous potential from LNG, its dependence on manufacturing is likely to act
as a strong counter-balance to LNG related growth over the near to medium term, meaning
that this region’s growth, while still strong, will not be the strongest in the State.
As with Mackay, coal mining makes a central contribution to Gladstone’s economy. Much
of this is through exports, with Gladstone Port accounting for 19% of Australia’s (and 33%
of Queensland’s) 2010-11 coal export by tonnage (Ports Australia 2011).
The largest industry in Gladstone itself is manufacturing, which accounts for about 12% of
total employment in Gladstone and Rockhampton, compared to 8% State-wide. Most of
Gladstone’s manufacturing output comes from metals processing, refineries and smelters.
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Economic and demographic projections
The challenges of a strong Australian dollar are likely to hit the Gladstone region hard,
although strong coal exports should counteract the decline in manufacturing.
However, like Townsville, the employment base of Gladstone and Rockhampton is fairly
well diversified, which means its longer term prospects are strong.
Strong growth is expected over the next decade, due to Gladstone being the nearest
population centre to the burgeoning LNG activity already underway (see below).
‘Public services’, including education, health care, and arts and recreation (sports grounds,
art galleries and the like), account for 18% of Gladstone and Rockhampton’s employment
base, compared to 20% of the State’s. This share is expected to increase by 2040, to 21%
for the region’s employment base and 22% of the State’s.
Chart 4.9: Employment by industry, Gladstone and Rockhampton, 2010
Manufacturing
Construction
Retail trade
Health care and social assistance
Transport, postal and warehousing
Education and training
Accommodation and food services
Public administration and safety
Other services
Professional, scientific and technical services
Electricity, gas, water and waste services
Administrative and support services
Wholesale trade
Mining
Rental, hiring and real estate services
Financial and insurance services
Share of State
Agriculture, forestry and fishing
Share of region
Arts and recreation services
Information media and telecommunications
Gladstone & Rockhampton
0%
2%
4%
6%
8%
10%
12%
14%
Investment agenda
A massive $69 billion worth of projects appear in the Investment Monitor database for the
region, thanks to Gladstone being at the centre of Queensland’s contribution to the
burgeoning LNG market. The $16.2 billion Gladstone LNG Facility is currently under
construction. Works in the pipeline are dominated by the $20 billion Australia Pacific LNG
project, which is due to commence construction shortly.
As with the Mackay region, most projects not technically classified as ‘mining’ projects are
nonetheless related to mining. They include: the $1.9 billion Yarwun alumina refinery in
Gladstone, which is currently under construction; a $2.7 billion development of a cobalt
and nickel refinery in Gladstone, which is under consideration; and $1.9 billion worth of
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Economic and demographic projections
railway works connecting the Port of Gladstone with surrounding coal mines, due to
commence in late 2011.
Non-mining works include about $330 million worth of works at the Rockhampton Hospital,
including a general upgrade and construction of a regional cancer centre.
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5 Northern Territory
5.1 Territory overview
Table 5.1: Northern Territory forecasts
10 yrs to 2020
% change
Level
NT
10 yrs to 2030
% change
Level (m)
10 yrs to 2040
% change
Level (m)
GSP ($m)
4.01%
25,010
2.03%
30,590
2.23%
38,122
Population
1.65%
269,976
1.38%
309,498
1.18%
347,920
Working age
population
1.90%
212,797
1.43%
245,301
1.25%
277,798
Employment
2.45%
153,627
1.10%
171,444
0.87%
186,989
GDP ($m)
3.08%
1,738,118
2.95%
2,325,112
2.70%
3,036,259
Population
1.41%
25,642,412
1.22%
28,947,313
1.00%
31,985,490
Working age
population
1.52%
21,017,317
1.30%
23,916,047
1.09%
26,664,950
Employment
1.65%
13,018,012
1.19%
14,652,881
0.91%
16,040,868
Australia
Note: % changes are average annual changes. Levels are figures as at the end of the period.
Although global conditions are still extremely favourable to the Territory’s growth
potential, right now this economy lacks a major growth driver. Retail sales are flat, housing
construction remains sluggish, housing prices are falling, and population growth has
dropped back to be substantially below the national rate. Of course that is no great
surprise – the Territory has always had a very mobile workforce, and if the work isn’t there,
then the workers soon aren’t either. That combination has sent the unemployment rate up
pretty sharply, though it still remains comfortably below the national rate.
This illustrates the Northern Territory’s conundrum. The Territory grows faster during the
construction phase of big resource projects. Yet although the potential on that front is
magnificent, right now there are few things getting built, leaving a modest forecast for
output, population growth, and employment.
Looking longer term the Territory’s growth depends heavily on ‘mega’ projects which are
still to get approval. The largest is the $25 billion Inpex LNG project, part of which involves
the construction of a processing facility in Darwin. This would significantly boost
employment and population growth in the Territory, particularly in the Darwin region.
For the reasons noted above, population projections for the Territory are perhaps more
uncertain than for some other regions. For example, another LNG project could create a
significant boost to the region.
By 2020 NT Treasury expects the Territory’s population to be between 267,000 and 277,000
- our own estimate of 269,000 falls comfortably within this range. By 2030, NT Treasury
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Economic and demographic projections
expects population to be between 309,500 and 334,338 – our own estimate is almost
exactly the same as Treasury’s lower bound estimate. Finally, by 2040 NT Treasury expects
population to be between 355,769 and 397,552. Our own 2040 estimate, 347,920, is
slightly lower than Treasury’s projection.
5.2 Darwin
Table 5.2: Vital statistics, Darwin
Darwin
Population (2010)
Indigenous share of pop (2006)
Area (sq km)
Average taxable income (2008)
Participation rate (2010)
NT
127,532
229,711
11%
30%
3,122
1,352,176
54,395
53,517
79%
70%
Source: Deloitte Access Economics, ABS National Regional Profiles
Deloitte Access Economics estimates that the GRP for Darwin in 2009-10 was $10.4 billion,
with a population of around 128,000. This is higher than the $7.5 billion estimate published
by the Darwin City Council (2011), and their estimate of population, of around 77,000.
However, the definition used in this report also includes Litchfield Shire.
Over the next decade NT Treasury expects Darwin’s population to grow by between 1.8%
and 2.6% a year. Our estimated growth rate of 2% a year fits within this range. In level
terms, by 2025 NT Treasury expects Darwin’s population to be between 166,359 and
188,951. Again, our estimate of 168,706 people by 2025 falls within this range.
As a capital city, Darwin’s employment base is relatively more dependent (compared to the
NT as a whole) on sectors such as retail, construction and professional services. Overall
however, because Darwin is by far the dominant employer in the Territory, its employment
base is fairly similar to the NT’s (see Chart 5.1).
‘Public services’, including education, health care, and arts and recreation (sports grounds,
art galleries and the like), account for 20% of Darwin’s employment base, compared to 22%
of the Territory’s. By 2040 this share is expected to be 21% and 23% for Darwin and the
Territory respectively.
The relatively high employment share of public services reflects both the Territory’s unique
demographic situation – public administration and safety, for example, is the largest
individual employer – and also the fact that financial and professional services are relatively
under-represented in the Territory compared to the other States (for example, they
account for 16% of NSW’s employment and only 7% of the Territory’s.
Looking forward, the burgeoning LNG market, particularly the development of the Ichthys
gas field, if it ever happens (see below), is likely to generate significant economic activity
and employment for Darwin and the Territory in general.
That being said, LNG investment is significantly lower than in the Kimberley and Pilbara
regions of WA. Given that skilled workers are scarce at the best of times, the Territory’s
Deloitte Access Economics
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Economic and demographic projections
LNG industry may find itself in a battle for staff with a bigger, better funded rival in Western
Australia.
Table 5.3: Economic forecasts, Darwin
GRP ($m)
Population
Working age population
Employment
Share of NT
GRP
Population ('000)
Working age population
Employment
2010
2020
2030
2040
10,432
127,532
100,458
77,967
15,606
155,228
124,896
100,843
19,336
182,826
147,994
114,435
24,429
209,785
170,956
126,722
61.8%
55.5%
57.0%
64.7%
62.4%
57.5%
58.7%
65.6%
63.2%
59.1%
60.3%
66.7%
64.1%
60.3%
61.5%
67.8%
2010-2020
2020-2030
2030-2040
Average annual growth
4.1%
2.2%
2.4%
2.0%
1.6%
1.4%
2.2%
1.7%
1.5%
2.6%
1.3%
1.0%
Chart 5.1: Employment by industry, Darwin, 2010
Public administration and safety
Retail trade
Construction
Health care and social assistance
Education and training
Accommodation and food services
Professional, scientific and technical services
Other services
Transport, postal and warehousing
Manufacturing
Administrative and support services
Wholesale trade
Rental, hiring and real estate services
Share of State
Mining
Share of region
Arts and recreation services
Information media and telecommunications
Electricity, gas, water and waste services
Agriculture, forestry and fishing
Financial and insurance services
Darwin
0%
2%
4%
6%
8%
10%
12%
14%
16%
A lack of confidence is also evident in Darwin’s office market – according to the Property
Council of Australia (2011), supply of office space in 2010-12 outstripped demand by a
factor of roughly two to one. Although oil and gas projects have the potential to generate
demand for office space looking forward, other things being equal, rental prices in Darwin’s
CBD may be on the way down.
The continuing development of the Darwin Waterfront (see below) shines some light in the
near term outlook, particularly for tourism and retail. Of course, and as other areas in
Australia which have a tourism focus, the high $A has been responsible for surpassing
demand. We do expect the value of the $A to fall away over the medium term.
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Economic and demographic projections
Investment agenda
As with the northern regions of WA, most large scale investment activity in Darwin is
centred on major LNG projects. Importantly however, only a very small share ($1.4 billion)
is under construction. The remaining projects, most notably the $27.4 billion Ichthys gas
field, remain uncertain at this stage.
Outside of mining, the biggest works include the $900 million redevelopment of Darwin
Waterfront, which begun construction in 2005 and is due to be completed in 2015; and a
possible $1 billion 5 year upgrade to Darwin’s electricity.
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6 New South Wales
6.1 State overview
Table 6.1: New South Wales forecasts
10 yrs to 2020
% change
Level
NSW
10 yrs to 2030
% change
Level (m)
10 yrs to 2040
% change
Level (m)
GSP ($m)
2.46%
512,300
3.02%
689,519
2.60%
891,431
Population
1.17%
8,111,675
1.00%
8,956,508
0.79%
9,689,382
Working age
population
1.27%
6,662,482
1.06%
7,401,570
0.88%
8,080,958
Employment
1.27%
3,965,594
1.12%
4,430,780
0.75%
4,773,978
GDP ($m)
3.08%
1,738,118
2.95%
2,325,112
2.70%
3,036,259
Population
1.41%
25,642,412
1.22%
28,947,313
1.00%
31,985,490
Working age
population
1.52%
21,017,317
1.30%
23,916,047
1.09%
26,664,950
Employment
1.65%
13,018,012
1.19%
14,652,881
0.91%
16,040,868
Australia
Note: % changes are average annual changes. Levels are figures as at the end of the period.
New South Wales’ short term outlook is not as upbeat as that for WA and Queensland. If
China does continue to dominate the outlook for the Australian economy, then both
interest rates and exchange rates will remain uncomfortably high for a State that has a
large manufacturing sector, Australia’s largest mortgages, a significant tourism presence,
and a notable industry selling to foreign students (all of which remain vulnerable with a
high $A). Not even Sydney’s financial sector, a key strength for the State, is enjoying
current circumstances. Housing credit growth is the lowest since the 1970s and business
credit growth is the lowest since the early 1980s.
Or, in other words, if the future is characterised as ‘more of the same’ for Australia, that
presents considerable challenges to a State which is known to be on the wrong side of
Australia’s two speed economy.
However, there are several opportunities for growth in NSW – indeed, when growth has
been slow for a protracted period, finding the impetus for growth becomes somewhat
easier. For example, housing construction has been weak for an extraordinarily long time,
which now sees the average number of people per household rising after decades of falling.
Rental markets in Sydney are tight, with the pace of rental costs rising notably. That
suggests there is a floor under which New South Wales’ housing activity won’t fall. It looks
like a good year for agriculture, approvals for commercial construction have risen lately,
and occupancy rates in hotels have risen – NSW may not be getting large numbers of
international visitors, but business travel is strong.
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Economic and demographic projections
Additionally, the new State Government has chosen to go steadily rather than hard at
tackling the longer term challenges in the State Budget, which will ease NSW into Budget
reform.
However, these opportunities pale in comparison to mining investment seen in Western
Australia and Queensland, putting NSW firmly on the wrong side of Australian growth.
Consequently, Table 6.1 shows our forecasts for NSW output growth are behind that of
Australia’s until 2020, after which time growth may be around the national average.
However, population, employment and workforce growth are expected to trail their
national equivalents over the course of the forecast period.
A key risk for NSW is the growing uncertainty in financial markets, this time stemming from
Europe. Were a second round financial crisis to hit the globe, then there would be some
relief for the State’s manufacturers and exporters as the $A and interest rates would fall.
However, there would be a similar effect on Sydney that the GFC brought. It is likely that a
renewed crisis would result in a lift in the cost of capital to businesses all around the globe
– affecting New South Wales’ financial sector. Nor will the rest of the world be too keen on
travel even if a sharp fall in the $A swings some people back towards Australia as their
preferred travel destination.
6.2 Sydney, Newcastle and Wollongong
Table 6.2: Vital statistics, Sydney, Newcastle & Wollongong
Sydney, Newcastle & Wollongong
Population (2010)
NSW
4,832,235
7,232,589
Area (sq km)
2%
17,278
2%
801,315
Average taxable income (2008)
54,185
56,295
63%
63%
Indigenous share of pop (2006)
Participation rate (2010)
Source: Deloitte Access Economics, ABS National Regional Profiles
Deloitte Access Economics estimates that the GRP for the Sydney, Newcastle and
Wollongong region was some $282 billion in 2010 – the equivalent to around 70% of total
output in New South Wales. The region is also expected to carve out a slightly larger share
of the total State economy over the next three decades as the State’s financial and business
centre.
Chart 6.1 shows some differences in the industry structure of Sydney, Newcastle and
Wollongong compared to NSW as a whole. Unsurprisingly, a relatively larger proportion of
financial and professional services workers are employed in these metro areas, while the
agricultural sector accounts for a far smaller share of total employment.
Labour force participation is a key driver of this region’s relatively stronger growth outlook
to 2040. While population growth is expected to be slightly higher than the NSW average
over the next three decades, stronger employment prospects in Sydney, Newcastle and
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Economic and demographic projections
Wollongong (along with higher labour productivity) will contribute to stronger growth in
output.
Table 6.3: Economic forecasts, Sydney, Newcastle, Wollongong
2010
GRP ($m)
Population
Working age
population
Employment
Share of NSW
GRP
Population ('000)
Working age
population
Employment
2020
2030
2040
282,065
4,832,235
362,437
5,438,198
491,400
6,037,787
637,233
6,563,358
3,943,381
2,363,406
4,479,860
2,718,045
4,999,844
3,063,034
5,482,608
3,315,652
70.2%
66.8%
70.7%
67.0%
71.3%
67.4%
71.5%
67.7%
67.2%
67.6%
67.2%
68.5%
67.6%
69.1%
67.8%
69.5%
2010-2020
2020-2030
2030-2040
Average annual growth
2.5%
3.1%
2.6%
1.2%
1.1%
0.8%
1.3%
1.4%
1.1%
1.2%
0.9%
0.8%
As the three main commercial/administrative districts of NSW, the share of public service
employment in Sydney, Newcastle and Wollongong is expected to be the same as NSW
throughout the projection period – that is, 20% in 2010 and 22% in 2020.
Chart 6.1: Employment by industry, Sydney, Newcastle, Wollongong, 2010
Health care and social assistance
Professional, scientific and technical services
Retail trade
Manufacturing
Construction
Education and training
Accommodation and food services
Financial and insurance services
Transport, postal and warehousing
Public administration and safety
Other services
Wholesale trade
Administrative and support services
Information media and telecommunications
Arts and recreation services
Rental, hiring and real estate services
Share of State
Electricity, gas, water and waste services
Share of region
Mining
Agriculture, forestry and fishing
Sydney, Newcastle, Wollongong
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0%
2%
4%
6%
8%
10%
12%
55
Economic and demographic projections
7 Victoria
7.1 State overview
Table 7.1: Victoria forecasts
10 yrs to 2020
% change
Level
Victoria
10 yrs to 2030
% change
Level
10 yrs to 2040
% change
Level
GSP ($m)
2.64%
380,649
3.58%
541,002
2.97%
725,182
Population
1.39%
6,361,119
1.17%
7,145,815
0.96%
7,861,965
Working age
population
1.47%
5,235,928
1.25%
5,926,032
1.06%
6,586,926
Employment
1.41%
3,220,839
1.23%
3,639,924
0.90%
3,980,023
GDP ($m)
3.08%
1,738,118
2.95%
2,325,112
2.70%
3,036,259
Population
1.41%
25,642,412
1.22%
28,947,313
1.00%
31,985,490
Working age
population
1.52%
21,017,317
1.30%
23,916,047
1.09%
26,664,950
Employment
1.65%
13,018,012
1.19%
14,652,881
0.91%
16,040,868
Australia
Note: % changes are average annual changes. Levels are figures as at the end of the period.
Victoria has performed well in recent years despite all the natural advantages flowing to
the resource States. But a lot of Victoria’s relative strength has been due to its good
population growth and, related to that, the better level of land release on the outskirts of
Melbourne (a factor not seen on a similar scale in other State capital cities).
Since the mid-2000s, Victorian population growth rates have mostly equalled or bettered
their national counterparts. That’s the first time that has been true since the early 1970s.
Not only has it allowed economic growth in the State to do well during a time of resource
boom, it is still providing an important degree of protection. For example, retail sales in
Victoria still are still ahead of their Australian equivalent, as is housing construction, car
sales and several other consumer demand measures.
Although employment growth is slowing, it remains better than seen nationally, while the
same is also true for Victoria’s unemployment rate. The latter may be rising, but it is
currently only just below the rate for Australia as a whole. Even the State’s hotels are
seeing higher occupancy rates, while its small business confidence is comfortably ahead of
the Australian average.
However, there are a couple of important challenges facing Victoria into the future.
Worryingly, they have the potential to undermine the population growth which has been
the key to so much of Victoria’s relative outperformance in recent years.
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One is that Victoria is the epicentre of manufacturing strength in Australia. And it is the
manufacturers and farmers who are notable victims of the exchange rate and interest rate
strength seen in the last couple of years.
There are many businesses who think that they can survive when the $A is high for quite
some time, but not forever. Though the global uncertainty recently has brought the $A
back to heel somewhat, it’s still at eye-watering levels as far as many manufacturers are
concerned. That’s why business closures are on the rise, and it’s also why many businesses
in Victoria look less comfortable than they did a year ago (when the $A was closer to US80
cents). In turn, the paucity of prospects for manufacturing is weighing on the outlook for
the State’s population growth.
Another is continuing disquiet in international education markets with Australia suffering as
a destination thanks to visa changes, the high $A and violence towards Indian students. For
Victoria, international education had been one of the State’s fastest growing sectors.
However, although Victoria’s strongest sectors are those that suffer from the biggest
challenges arising from the China boom, there is a solid pipeline of engineering work to be
undertaken in the State, which should maintain solid growth in the short term. However,
even with this solid pipeline of engineering work to be done, it pales in comparison to that
in the resource States, which means it will be hard for Victoria to maintain its current share
of Australia’s economy and population over time.
Looking longer term, it will be the $A and population challenges that have a large influence
over Victoria’s growth. A continuing mining boom would see the $A remain at elevated
levels, and a further decline in manufacturing, which would hit the State hard. Additionally,
if Victoria cannot turn around its poor productivity performance which has been seen over
the past couple of years (and is worse than the poor result seen nationally), then Victoria
will continue to lose ground to other States.
Consequently, and in a similar story to that of NSW, our forecasts have Victoria trailing the
national averages for output, population and employment growth over the decade to 2020.
After that time however, Victoria is expected to perform relatively better, with an average
annual growth rate in output of 3.6% (as compared to the national rate of 3.0%). This
reversal is primarily due to the expected fall back in the $A, making Victoria’s exports more
attractive to the rest of the world once again, and with the State’s proven ability to manage
population growth.
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Economic and demographic projections
8 South Australia
8.1 State overview
Table 8.1: South Australian forecasts
10 yrs to 2020
% change
Level
South
Australia
10 yrs to 2030
% change
Level
10 yrs to 2040
% change
Level
GSP ($m)
1.66%
92,591
3.13%
126,023
2.66%
163,794
Population
0.84%
1,787,794
0.76%
1,928,127
0.57%
2,041,574
Working age
population
0.94%
1,483,721
0.81%
1,608,873
0.66%
1,717,419
Employment
0.79%
872,566
0.64%
929,966
0.55%
982,812
GDP ($m)
3.08%
1,738,118
2.95%
2,325,112
2.70%
3,036,259
Population
1.41%
25,642,412
1.22%
28,947,313
1.00%
31,985,490
Working age
population
1.52%
21,017,317
1.30%
23,916,047
1.09%
26,664,950
Employment
1.65%
13,018,012
1.19%
14,652,881
0.91%
16,040,868
Australia
Note: % changes are average annual changes. Levels are figures as at the end of the period.
South Australia has great resource potential, with the approval of Olympic Dam facing the
final hurdle in South Australian parliament soon. BHP Billiton has already begun investing
in the project, which has the potential to transform South Australia into a resource
powerhouse in coming years. While Deloitte Access Economics doesn’t see Olympic Dam
as the be all and end all for South Australia’s development plans, there is no denying that
this project will reshuffle South Australia’s industry portfolio, which was desperately in
need of some diversification.
South Australia’s economy currently remains rather more heavily dependent on
manufacturing and agriculture, both of which are struggling under the high exchange rate
and interest rates. Add in relatively modest population growth (growth is now the weakest
that it’s been in five years) and a still weak outlook for housing construction and it’s safe to
categorise South Australia as a State that’s on the wrong side of Australia’s two speed
economy divide.
Of course Olympic Dam is not the only star on the horizon. Work on the Air Warfare
Destroyer Contract also helps prospects, with the State a heavyweight in defence related
manufacturing.
Yet overall business investment spending is little different today than five years ago, and
remains below levels it hit ahead of the global financial crisis. It will take significant
investment, such as the Olympic Dam project, to gradually turn around the prospects for
this State. Deloitte Access Economics forecasts have average annual South Australian
Deloitte Access Economics
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Economic and demographic projections
output to 2020 growing at just 1.7%, reflecting poor population and employment growth,
before rising to 3.1% in the ten years to 2030.
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9 Bibliography
Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) 2011a,
Agricultural Commodities, September Quarter 2011, Available from
http://adl.brs.gov.au/data/warehouse/pe_A20110920.01/AC2011.V1.1_AgCommodi
ties1.2.0_LR.pdf
2011b, ABARES survey of beef cattle producers in northern live cattle export regions,
July, Available from
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Bureau of Infrastructure, Transport and Regional Economics (BITRE) 2011, Airport Traffic
Data 1985-86 to 2010-11, Available from
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Bureau of Resources and Energy Economics (BREE) 2011, Resources and Energy Quarterly –
September Quarter 2011, Available from
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Cairns City Council 2011, Cairns Economic Snapshot, Invest Cairns, Available from
http://www.cairns.qld.gov.au/__data/assets/pdf_file/0006/19149/EcoSnap2011v2.p
df
Darwin City Council, Economic profile, Available from
http://economy.id.com.au/Default.aspx?id=146&pg=12000
Gascoyne Development Commission 2011, Gascoyne – A region in profile, WA Department
of Regional Development and Lands, Available from
http://www.gdc.wa.gov.au/uploads/files/Gascoyne%20Profile%20A4.pdf
Heuris Partners 2010, Planning for resources growth in the Pilbara: revised employment and
population projections to 2020, Available from
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Hoegh-Guldberg O & Hoegh-Guldberg H 2008, The impact of climate change and ocean
acidification on the Great Barrier Reef and its tourist industry, report for the Garnaut
Climate Change Review, Available from
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Kimberley Development Commission 2011, Kimberley – A region in profile, WA Department
of Regional Development and Lands, Available from
http://www.rdl.wa.gov.au/publications/Documents/Kimberley%20%20A%20region%20in%20profile.pdf
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60
Economic and demographic projections
KPMG 2011, Demographic Analysis of Townsville, Available from
http://www.townsville.qld.gov.au/townsville/economic/Documents/Honeycombes%
20Bernard%20Salt%20Report%20Jan2011.pdf
Mackay Regional Council 2008, Mackay LGA Regional Economic Report December 2008,
Available from
http://www.mwredc.org.au/~red34089/images/stories/regionalprofile/mackaylga/rp
081231mkylga.pdf
Mackay Regional Council 2011, Economic Development: prospectus, Available from
http://www.mackay.qld.gov.au/__data/assets/pdf_file/0009/111024/Small_version_
AAA_PRINT_FINAL_Economic_Development_Prospectus_2011.pdf
Midwest Development Commission Council 2011, Midwest – A region in profile, WA
Department of Regional Development and Lands, Available from
http://www.mwdc.wa.gov.au/assets/mid%20west%20profile%20a4.pdf
Northern Territory Government 2011, Northern Territory Population Projections, Available
from
http://www.nt.gov.au/ntt/economics/publications/population/ntpop_report_11.pdf
Pilbara Development Commission 2011, Pilbara – A region in profile, WA Department of
Regional Development and Lands, Available from
http://www.pdc.wa.gov.au/media/75465/pilbara%20a%20region%20in%20%20profil
e%202011.pdf
Ports Australia 2011, Trade Statistics 2010/11, Available from
http://www.portsaustralia.com.au/tradestats/
Property Council of Australia, Consensus Forecasts: Office, Spring 2011
Queensland Treasury 2011, Population projections, Office of Economic and Statistical
Research, Available from
http://www.oesr.qld.gov.au/subjects/demography/population-projections/index.php
Rockhampton Regional Council 2011, Rockhampton Region Economic Snapshot, Available
from
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c_SnapShot_v13.pdf
SGS Economics and Planning 2010, Prosperity 2030: Gladstone Region Economic
Development Strategy, Available from
http://www.sgsep.com.au/system/files/GREDS_january_2011.pdf
Townsville City Council 2011, Townsville’s Economic Strength, Available from
http://www.townsville.qld.gov.au/townsville/economic/Pages/strength.aspx
Western Australian Planning Commission 2005, Western Australia Tomorrow – population
projections for planning regions 2004 to 2031 and local government areas 2002 to 2021,
Perth
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Economic and demographic projections
Appendix A: Major towns in
regions
Table A.1: Major towns in the regions
Region
Sydney/Newcastle/Wollongong
Town
Sydney
Newcastle
Wollongong
Gladstone and Rockhampton
Gladstone
Rockhampton
Mackay Region
Mackay
Bowen
Proserpine
Emerald
North Queensland
Ingham
Charters Towers
Far North Queensland
Cooktown
Port Douglas
Innisfail
Townsville
Townsville
Cairns
Cairns
Perth
Perth
Gascoyne and Geraldton
Exmouth
Geraldton
Carnarvon
Pilbara
Port Hedland
Karratha
Roeburn
Kimberley
Broome
Derby
Darwin
Deloitte Access Economics
Darwin
62
Economic and demographic projections
Appendix B: Region maps
Figure 9.1: Western Australian regions
Perth
Pillbara
Deloitte Access Economics
Kimberley
Gascoyne and Geraldton
63
Economic and demographic projections
Figure 9.2: Perth
Deloitte Access Economics
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Economic and demographic projections
Figure 9.3: Gascoyne and Geraldton (including Exmouth)
Deloitte Access Economics
65
Economic and demographic projections
Figure 9.4: Pilbara (Karratha and Port Hedland)
Figure 9.5: Kimberley
Deloitte Access Economics
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Economic and demographic projections
Figure 9.6: Queensland regions
p
Mackay-Fitzroy
Far North
Deloitte Access Economics
North Queensland
Rockhampton and Gladstone
Townsville
Cairns
67
Economic and demographic projections
Figure 9.7: Rockhampton and Gladstone
Figure 9.8: Townsville
Deloitte Access Economics
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Economic and demographic projections
Figure 9.9: Cairns
Figure 9.10: Darwin
Deloitte Access Economics
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Economic and demographic projections
Figure 9.11: Newcastle/Sydney/Wollongong
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Economic and demographic projections
Appendix C: Major Projects
This Appendix lists the major projects identified in Deloitte Access Economics’ Investment
Monitor by region (individual projects with a value of over $400 million are shown in these
tables, while individual projects with a cost of over $20 million are considered within the
broader Investment Monitor database). These projects have been considered when
preparing the forecasts of population, employment and GRP for the regions. The total of all
projects for each State is also shown.
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Economic and demographic projections
Table C.1: Major investment projects from Investment Monitor
Region
Under
construction
($m)
Committed
($m)
Under consideration
($m)
Sydney/Newcastle/ Wollongong
18352
6469
5678
NSW total
33889
7474
13292
Gladstone and Rockhampton
20616
3108
42342
Mackay Region
2922
298
26910
0
0
88
Far North Queensland
476
63
278
Townsville
460
0
1713
North Queensland
486
0
0
QLD total
Cairns
51687
28248
80587
Perth
9708
1849
2497
Gascoyne and Geraldton
3272
0
13694
Pilbara
63399
37488
39370
31813
Kimberley
2240
8900
WA total
81137
50624
80088
Darwin
2410
357
32390
NT Total
VIC total
SA total
2502
764
32390
25726
8637
8851
11749
1457
30584
72
Economic and demographic projections
Region
Perth
New teaching hospital, Fiona Stanley Hospital
Under
Under
construction Committed consideration Total
($m)
($m)
($m)
($m)
1762
Outer Harbour Kwinana Bulk Jetty Infrastructure
1300
Children's hospital and a multi-storey carpark
1170
Commercial office development
1000
Perth City Link project - upgrades and construction
Major project total
Region total
609
4541
9708
1300
1849
0
2497
5841
14054
Gascoyne and Geraldton
Karara magnetite iron ore mine and pelletising plant
2700
Construction of a rail and port development
5940
Development of Jack Hills iron ore project
4300
Coolimba Power Project: coal fired power station
1500
Development of the Weld Range Haematite project
Major project total
Region total
2700
3272
0
0
1000
12740
13694
15440
16966
Pilbara
Gorgon LNG project (three liquefaction trains)
43000
Development of a LNG project, Wheatstone
29000
Pluto 2 LNG project
14900
Roy Hill 1 iron ore project
Rapid Growth Project 5
7200
6740
Major project total
49740
36200
14900 100840
Region total
63399
37488
39370 140257
Kimberley
North West Shelf LNG Project Kimberly Gas Hub
30000
Prelude LNG project
Underground expansion of Argyle diamond mine
8900
1700
Wingellina nickel project
1700
Major project total
1700
8900
31700
42300
Region total
2240
8900
31813
42953
81137
50624
WA State total
80088 211849
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Economic and demographic projections
Region
Gladstone and Rockhampton
Australia Pacific LNG' - New CSG to LNG facility
New LNG facility (GLNG), Gladstone
Gladstone nickel project , stage 1
Liquefied natural gas (LNG) plant
Major project total
Region total
Under
Under
construction Committed consideration Total
($m)
($m)
($m)
($m)
35000
16200
0
3108
2700
2200
39900
42342
56100
66066
0
2922
0
298
7500
6000
4000
17500
26910
17500
30130
0
0
0
0
88
88
88
88
88
720
817
16200
20616
Mackay Region
Alpha Coal Project: thermal coal mining project
Wandoan coal mine - including rail link
Caval Ridge Project
Major project total
Region total
North Queensland
Development of the Einasleigh copper project
Major project total
Region total
Far North Queensland
Expansion of the Lotus Glen Correctional Centre
Nornico nickel and cobalt mine
Major project total
Region total
442
476
0
63
278
278
278
Townsville
720km high-voltage transmission link
Major project total
Region total
0
460
0
0
1500
1500
1713
1500
2173
Cairns
Cairns Base Hospital Redevelopment
Major project total
Region total
446
446
486
0
0
0
0
446
486
51687
28248
442
QLD State total
Region
Darwin
Development of the Ichthys gas field
Major project total
Region total
NT State total
80587 160522
Under
Under
construction Committed consideration
($m)
($m)
($m)
Total ($m)
0
2410
0
357
25000
25000
32390
2502
764
32390
25000
35157
35656
74
Economic and demographic projections
Appendix D: Forecasting
methodology
Basic theory
The basic drivers of workforce numbers (employment of persons resident in a given area)
are population by age and gender, labour force participation rates by age and gender and
unemployment rates by age and gender (unemployment can be regarded as a further
manifestation of participation rates).
Population forecasts
The population forecasts for 2011 to 2040 are estimated from our demographic model of
Australia, the States, and the capital cities. This model begins with actual population levels
as at 30 December 2010 for the State and regions within, and uses the stated assumptions
for fertility, mortality and migration to calculate future population levels.
These projections are based on a number of underlying assumptions:
•
Total fertility rates for Australia remain at 1.80;
•
Relative fertility rates between capital cities, States and Australia remain constant;
•
Mortality rates decline, lifting life expectancy at birth across the forecast period.
However, the rate of increase declines slowly over this period;
•
After dipping to 180,000 in the near term, annual net migration is tipped to settle at
around 190,000 through the next few decades. Eventually, total migration rises to
ensure it does not fall below 0.65% of Australia’s population (that does not occur
until 2031).
•
States are assumed to have a consistent share of international migration from the
middle of the decade. Queensland’s share recovers from its current relatively weak
position to 19.5% of the national total (37,050 per year across most of the
projection), New South Wales also sees a minor increase to 33.8% of the total
(64,220). Western Australia receives 24,700 per year and the Northern Territory 950.
•
Interstate migration continues to see a net outflow of 23,000 each year from New
South Wales, while the other major regions see net inflows (an average of 33,000 per
year to Queensland, and around 300 to the Northern Territory) or little net
movement (Western Australia).
Participation and unemployment rates
Forecast trends in participation rates for the whole of Australia by age and gender are
based on projections included in the Productivity Commission’s 2005 report into long term
demographic trends, updated for measured changes in movements up until mid 2011.
These rates were then used to calculate total workforce levels for States and capital cities in
total, as well as to assist in the calculation of small area participation rates.
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Economic and demographic projections
A similar process was followed to calculate total unemployment levels for areas within
States – with unemployment rates by age and gender for each zone declining in line with
the trends forecast in the Productivity Commission’s 2005 report on long term demographic
trends.
These trends see higher age-specific participation rates, particularly for over 60s, as
increasing life expectancy, declining pension expectations and increasing health of older
persons makes prolonging a working life both possible and desirable. Unemployment rates
in all age groups decline, while the total unemployment rate declines marginally faster as
there is a declining share of population in those age groups with higher rates of
unemployment.
The small area implications
Detailed population by age forecasts are created for small areas within the State which are
then aggregated to the regions used in the report. This allows the creation of workforce
estimates at the regional level over time. Historical employment and unemployment levels
are then created using a combination of regional ABS Labour Force Survey data (these
regions are determined by the ABS) and census level data at the small area (which are
aggregated). The initial relative gap between the rate of employment participation and
unemployment and the relevant rate for the State as a whole is maintained so that if
population structure in each area had remained the same, then the relative participation
rates in each area would have remained at a constant separation from the State total.
These effects can be regarded as ‘tendencies’. An area will see participation remain
relatively high if its population structure remains favourable. However, if it begins with a
low participation rate then it will continue to have a lower rate than the overall State would
if the population structures were identical.
Unemployment tendencies are modelled the same way.
In effect, both participation and unemployment rates assume that differences between the
small area and the relevant in total are driven by two factors:
•
demographic make up; and
•
other factors.
The modelling assumes that the ‘other factors’, which include differences in educational
attainment, English proficiency and so on will remain constant into the future and that only
changing demographic structures will move relative rates.
Industry level forecasts
Total industry employment levels for each State are calculated using a simplified version of
the industry methodology used in the Deloitte Access Economics Macro – States and
Industries (AEM-SI) model, a dynamic model of the Australian economy which is regularly
used for macroeconomic forecasts. Overall economic output (GDP) is calculated as the
product of employment levels (as calculated above) and productivity (which grows at a
constant rate determined by the assumption used).
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Economic and demographic projections
Forecasts for national economic expenditure aggregates such as consumption, investment
and international trade are calculated as components of this total. In particular:
•
National exports grow slightly faster than overall growth, while national imports
change so as to keep the net trade position constant as a share of output;
•
Gross national expenditure (output less the trade component) is split into private and
public final demand, with both remaining a constant share of output ;
•
Housing investment (measured as a share of the GDP estimate) moves cyclically with
economic growth. When output growth is faster, housing takes up a larger share,
and when growth slows, housing loses share (and slows more rapidly). As the overall
growth rate slows with demographic ageing, housing investment also slows, but
slows more rapidly reflecting the importance of population change on the
construction sector;
•
Business investment occurs to keep the stock of capital per worker growing in line
with recent trends. This growth in capital stock per worker is called ‘capital
deepening’ and occurs at 1.04% a year. Business investment is calculated as the
growth in the required capital stock plus a component of replacement for
depreciation in the existing capital stock. This total investment is then split between
non-dwelling construction investment and plant and equipment investment – with a
slight increase in the share going towards plant and equipment over time, partly
reflecting slower demographic growth and a lowered requirement for growth in
infrastructure;
•
Public investment moves in line with changes in total business investment – if private
investment’s share of the economy rises, so does public investment’s; and
•
Private consumption and public consumption are equal to the non-investment
components of the respectively components of final demand.
Once the expenditure aggregates have been calculated, growth in employment by industry
is forecast using known relationships between components of final demand and industry
employment (based on input output data). For example, if the investment forecasts
suggest that residential construction is gaining strength, then the construction industry will
gain strength. Or, say, if rural exports are lifting, then the farm sector is similarly seen
lifting.
The relationships suggest that for a given change of $1 in any expenditure aggregate there
will be an induced change in employment. The induced changes are summed across all
aggregates to determine the total change in employment in an industry.
A counterfactual estimation is conducted on historical data to determine actual
employment growth not picked up by this methodology, for example due to changes in
worker productivity and structural changes in the economy. Corresponding adjustments
are made to the forecasts – although some past differences are ignored as they are not
expected to continue in the future (for example, the radical changes seen in the utilities
sector in the past decade). The modelling also allows for some adjustment to be made to
the early forecast periods to allow for any jumping-off problems, and to build current
cyclical patterns into the forecasts.
A final estimate of total workforce levels by industry are calculated to adjust to the
expected total workforce level in each region.
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Economic and demographic projections
Gross regional product
Gross regional product (GRP) estimates are created using both a limited income based (or
GRP(I)) measure (wages based) and a more detailed production based (GRP(P)) measure,
based on the reported output by industry data from the ABS.
In the production estimate case, measured employment by industry in each State is used to
distribute the value of production for each industry in each State. For the income measure,
relative industry wages (average weekly earnings) are used to weight employment in each
case to determine relative wages in each region of the State.
Overall, the production estimate is given a much larger weighting to the total as the
methodology used in the income measure covers only wages (and not profits) and the
measures of wages by industry are less reliable at the State level than production
measures.
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Appendix E – Current and
projected climate
This Appendix provides some overview maps of current and projected climate for Australia
as a whole. The current temperature and precipitation maps are sourced from the Bureau
of Meteorology (BoM) website (http://www.bom.gov.au/climate/averages/maps.shtml).
The maps showing projected changes in temperature and precipitation represent the
median (50th percentile) estimate from a range of climate models run jointly by CSIRO and
BoM (http://www.climatechangeinaustralia.gov.au/natrain34.php).
These maps are included only for completeness. For detailed information on current and
projected climate, readers are encouraged to refer to the original sources.
Figure E.1: Average maximum temperature
Source: BoM
Figure E.2: Average annual precipitation, 2008-2011
Source: BoM
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Figure E.3: projected temperature change
Source: CSIRO and BoM, Climate Change in Australia
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Figure E.4: Projected precipitation change
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Limitation of our work
General use restriction
This report is prepared solely for the internal use of the Department of Defence. This report
is not intended to and should not be used or relied upon by anyone else and we accept no
duty of care to any other person or entity. The report has been prepared for the purpose of
the ADF Posture Review. You should not refer to or use our name or the advice for any
other purpose.
Deloitte Access Economics
83
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