What’s going on in our local economy?
The local economy has really strengthened in the past six months on the back of continued coal production and improved coal prices, increased demand for residential building stimulated by the $25k building boost grant and strong demand for residential property. Here is a summary of what we are seeing various sectors of the local economy:
Coal production continues to be strong despite the worries about China taking Australian coal. The price for premium hard coking coal (FOB Aus) was US$134.47/tonne at 22/1/21. This compares to US $95.53/tonne on 2/11/20.
Mining services continue to see strong demand for their services from the Bowen Basin Coal Mines with many employers siting difficulties finding suitably trained and qualified staff.
Generally we would rate the outlook for the mining industry at present as cautiously optimistic.
Property Development and Real Estate
Vacant residential land sales have spiked over the past 6-12 months with several developers commencing new stages of their developments as well as clearing land held during the past slowdown. Residential vacancies are under 1% making it difficult to find a rental property and rental rates have spiked with some properties seeing increases in rentals of up to $100 per week over the last year. As a result, with low interest rates and high rents, many are turning to purchasing or building a property which in turn is driving up house prices, with houses often only lasting on the market for a couple of weeks before being snapped up.
Increase in demand in the mining services and building industry has seen virtually all of the vacant commercial space in Paget leased and many now have the confidence to reconsider owning and building their own facilities which has seen increased demand for industrial property and land particularly over the last 3-6 months.
The building boost grant of $25k has seen numerous people bring forward their building plans to take advantage of the grant. As a consequence, most residential builders are experiencing strong enquiry and their resources are stretched completing existing contracts. Trades are definitely in short supply, as I’m sure anyone trying to get a plumber, electrician, plasterer or tiler will verify.
Commercial infrastructure projects, along with several design and construct private enterprise projects, sees the commercial builders enjoying stronger demand for their services than recent times.
We have concern for what will happen at the end of the spike caused by the building boost and a slowdown in this sector is a real possibility.
White collar professionals, such as solicitors, financial planners, building design services and accountants are generally experiencing higher than usual demand for their services as the above industries try to cope with the increased demand for their services and the resulting support work generated by their own activity.
Being short staffed and a lack of quality candidates to fill vacancies is leading to longer than usual turnaround times.
Retail and Hospitality
Retailers and Restauranteurs continue to rally back from COVID as they learn the new norm. Some retailers are experiencing high demand, but inability to obtain stock, is hindering their recovery. This is especially evident in the leisure industries such as sporting goods. But it is certainly still tough to stay viable for most in these industries as the government assistance ends, and they certainly need local support to survive.
Since the borders have reopened, there has been a real spike in activity in this sector, with most accommodation houses and tourism operators seeing strong demand for their services as people look to travel domestically while the international borders remain closed. But their financial positions are vulnerable, as they have experienced low demand throughout the worst of COVID and a lot will take some time to recover, if they ever do.