Mackay Looking to Reposition for the Longer Term after Coal Revival

Wednesday 3 July, 2019 | By: Marcus Smith Categories: Finance and Trade;

The Mackay-Isaac-Whitsunday SA4 region (Mackay region) straddles the Townsville region to its north, the Fitzroy region to its south and the Outback Queensland region to its west where coal production remains the cornerstone of the economy.

Access to the Great Barrier Reef and Whitsunday Islands are the forefront of a region which boasts world-class facilities amidst a local environment which is home to some of Australia’s most unique wildlife.

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The coalmining industry is one of Queensland’s wealth generators with Asian led demand for metallurgical coal from the Bowen Basin exported through the region’s extensive port facilities at Abbott Point and Dalrymple Bay.

The Mackay region holds enormous greenfield potential in the Galilee Basin - an untapped­ coal province that geolo­gists estimate to be more than 27 billion tonnes  could conceivably support thousands of regional jobs in central and northern Queensland over the coming decades.

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Agriculture complements an export effort with the Mackay region one of the largest sugarcane producers in Australia, producing over a quarter of Australian’s sugarcane and 23% of the nation’s sugar.

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Major economic development projects include the centrally located Mackay Waterfront Priority Development Area, which aims to revitalise the Mackay urban area through projects including the redevelopment of the Pioneer River and Binnington Esplanade waterfronts.  

The establishment of a precinct for innovation and knowledge-based industries that promotes the city centre as a key business hub will underpin a broader strategy of boosting Mackay’s attractiveness in increased business investment and tourism appeal.

Mackay region’s business statistics

According to the Mackay Regional Council, the Mackay region’s Gross Regional Product is $15.9 billion, representing about 2.3% of Queensland's Gross State Product.

Australian Bureau of Statistics data shows the Mackay region to hold 9,713 businesses in June 2018, where small businesses employing less than 20 employees make up 97.3%.

Agriculture, Forestry and Fishing makes up the largest share (20.3%), followed by Construction (~15.6%) and Rental, Hiring and Real Estate (~10.8%).

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Regional labour force statistics

Data compiled by REMPLAN estimate that around 56% of those employed in the Mackay region work in Mackay itself, with the major employment industries including Health Care and Social Assistance (12.4%), Retail Trade (11.4%), Education and Training (8.4%) and Construction (8.3%).

Across the broader region, Australian Bureau of Statistics Trend labour force data compiled by Conus/CBC Staff Selection shows that the Mackay-Isaac-Whitsunday SA4 region is home to around 140,000 persons.

The Conus/CBC Staff Selection Trend data shows there were an estimated 88,000 persons in the regional labour force on a trend basis in May 2019; consisting of 81,700 persons employed (around 3.25% of Queensland’s 2,510,000 million total employed and 0.64% of national employment) and around 6,300 unemployed.

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The data indicates that since last year the Mackay region has experienced a substantial downturn and has shed some 16,800 jobs year-on-year in trend terms (17% decrease) – with the annual fall to May being made up of 10,700 less full-time jobs and 6,100 less part-time jobs.

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Moreover, the May 2019 Trend employment figure for the Mackay region is around 20,600 jobs off the historical high of 102,300 total employed persons on a trend basis in April 2014 and is down to levels during a similar slowdown in mid-2015.

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Detailed Trend employment data compiled by Conus/CBC Staff Selection to February 2019 shows that that the major industry employers in the Mackay region to be Mining (18.1%), Health Care and Social Assistance (10.5%), Retail Trade (8.6%) and Construction (8.0%).

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The ABS publish a quarterly series of employment breakdowns by industry and the February data indicates that, while Mining jobs in the Mackay region have held up relatively steady year on year, substantial declines have recently taken place in industries including Agriculture, Forestry and Fishing, Manufacturing, Accommodation and Food Services, and Retail Trade.

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Charting the changes in the monthly trend data illustrates the ebbs and flows across the labour force cycle in both the first difference and percentage changes – further highlighting the magnitude of the current downturn in the region.

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Charting the percentiles for each job growth number further highlights the stark decline in employment in the region over last year relative to all observations dating back to 1998; the period from June to December 2018 is shown to include the highest monthly declines on record with losses between 1,600 and 1,800 employed persons per month (~1.7 to 1.8%) – and is seemingly deeper than the downturn during 2014-15.

On a positive note, the statistics indicate the rate of job shedding in the region appears to have slowed somewhat over the past couple of months.

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Relative unemployment

The Mackay region’s unemployment rate for May (the proportion of persons considered to be in the workforce that are currently looking for a job) is at 7.2%, which has increased significantly since last year.

The Mackay region’s unemployment rate was one of the lowest in the state for the most part of 2017 and 2018, yet it has been rising sharply since late last year and is now above Queensland’s May headline rate of 6.0% on a trend basis and well above the region’s average trend unemployment rate of 4.97% since October 1998.

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Compared to other regions in Queensland, the May unemployment rate in Mackay is currently 0.7% higher than Townsville, 1.2% higher than Greater Brisbane, 3.1% higher than Cairns and 3.2% greater than the Fitzroy region.

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While the increase in unemployment is spread across all age groups, youth unemployment in particular has been rising the most substantially.

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Looking more closely at the region’s unemployment rate from an historical perspective, the results of an analysis of variance show that there is a highly, statistically significant difference of 1.0% between the average unemployment rates for the Mackay region and Queensland’s headline trend measure – with Mackay’s average unemployment rate a full percentage point lower than the state average of 5.97%.

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The following statistics show that indeed the Mackay region has the lowest average unemployment rate amongst other comparable regional centres as well as Greater Brisbane, with the analysis of variance indicating that the differences are all highly statistically significant.

Accordingly, the Mackay region’s average unemployment rate is 1.84% lower than the Cairns region, 1.82% lower than the Townsville region, 1.32% lower than the Fitzroy region, and 0.73% lower than Greater Brisbane.

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Finally, along with the rising unemployment rate, there was a sharp decline in the workforce participation rate across the region as well as a hefty increase in the median time spent searching for work - to about 28 weeks (i.e. 6.5 months).

The workforce participation statistic measures the proportion of the labour force in the economy between the age group of 16 to 64 that are employed or currently searching for work – however, unlike the unemployment rate, the participation rate considers also those unemployed workers who have given up altogether, even though they are willing to work.

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While there is naturally a degree of sampling error involving data compiled by the ABS, especially at the regional level, the key point to make from the data analysis is that there appears to have been a stark shift in the Mackay region’s labour market over the past 12 months since the heady days of 2018.

Thanks to Pete Faulkner and his team at Conus/CBC Staff Selection for doing a fantastic job compiling the trend regional labour force statistics.

Pulse survey responses from the Mackay business community

While employment trends for the Mackay region are generally positive based on the national accounts data, the recent labour force statistics indeed suggest that the regional labour market has faced a challenging 12 months.

24 businesses took part in the March quarter, 2019 Suncorp-CCIQ Pulse Survey of Business Sentiment, which provides the opportunity for business across the state to express their views about the outlook for the state and national economy as well as various factors affecting general business conditions.

The summary of results indicates that statistics are skewed toward increasing business costs, declining profitability and a weaker outlook of economic conditions at the state level in particular; while employment and capital expenditure levels are neutral. (Note that caution is warranted given the relatively small sample size.)

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The following heat map provides an intuitive depiction of the descriptive statistics derived from the responses.

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The standard errors of the sampling of 24 responses illustrate that there is substantial variability within responses; albeit, increasing operating and labour costs, as well as a decline in profitability over the quarter, were stand out issues.

Responses to open-ended questions regarding factors likely to affect the performance of the state and national economies over the next 12 months included the outcome of the federal election, the approval of the Adani mine and the expansion of the mining industry in the state, natural disasters, a slowdown in the property market and access to credit.

Finally, respondents indicated political and economic stability to be by far the most substantial impediment to business growth followed by the level of demand in the economy, direct wage costs, recruiting and retaining suitable staff, the level and complexity of government taxes on businesses as well as the cost of insurance.

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