The Gold Coast’s economy is riding the crest of a jobs wave
The Gold Coast is emerging as an economic zone in its own right; as Australia’s sixth largest city, it continues to diversify in services, exports, manufacturing, and education, which saw growth in the economy of around 3.7% to $35.3 billion in 2018.
The Gold Coast’s diversification and economic outperformance within the South-East corner is borne out of the makeup of businesses that are based on the Southernmost part of the Queensland coastline with more than 1 in 10 of the state’s workforce employed on the coast.
An analysis of the Gold Coast economy and its near-term prospect coalesce around population growth, infrastructure and accompany capital inflows as the city contends with the challenges of a being an emerging economy in its own right – and much more than a tourism hub.
Capital Works Program
A population surge in the South-East corner continues to maintain pressure on infrastructure in the state.
Over the last decade the Gold Coast has continued to draw workers from Northern NSW as well as increasing numbers commuting from Brisbane.
The completion of the third phase of light rail and extension of the M1 Pacific Highway are key priorities; whilst rail connection between Brisbane and Gold Coast will continue to be framed around the aspirational goal of having a very fast train network which has become the more recent focus of councils in the state’s South-East
Industrial hubs in the northern parts of the Gold Coast region continue to follow the strategy of the government’s advanced manufacturing focus, bolstered more recently by the awarding of the LAND 400 defence contract in March this year.
Gold Coast Business Statistics
Australian Bureau of Statistics data shows the Gold Coast region to hold around 64,870 businesses, of which construction makes up the largest share (~19%), followed by Rental, Hiring and Real Estate (~16%), and then Professional, Technical and Scientific Services (~11.5%). Read it here http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/8165.0Jun%202013%20to%20Jun%202017?OpenDocument
Economic statistics compiled by the National Institute of Economic and Industry Research estimate that largest employment division on the Gold Coast in 2017-18 was Health Care and Social Assistance (13.06%), followed closely by Construction (12.91%), Retail Trade (11.62%) and Accommodation and Food Services (10.95%). Read it here: https://economy.id.com.au/gold-coast/employment-by-industry
ABS employment data compiled by Mission Beach-based Economist Pete Faulkner and Conus/CBC Staff Selection shows that, over the past 12 months to October, the Gold Coast economy has added almost 9,000 jobs (~2.75% increase) in trend terms.
October’s estimate of around 334,400 total employed persons on a trend basis comes as the Gold Coast economy recorded twelve consecutive months of gains in part-time employment.
However, the gain in part-time employment has been offset by seven straight months of falls in persons employed on a full-time basis - incidentally, since the conclusion of the Commonwealth games in April.
Despite this apparent slowdown in total employment over the past few months, the data indeed reflects strong labour force market conditions on the Gold Coast over the last two decades - in fact, tracking on average at approximately 0.3% per month (3.75% per year) since October 1998.
The following graph illustrates the monthly employment growth estimates in terms of both first differences and percentage changes - showing that the Gold Coast experienced an extraordinary decade of almost continuous employment growth over the decade leading up to the financial crisis of 2008.
Moreover, there has been strong growth over the past decade with exception to some challenging employment conditions throughout 2016.
The following graph charts each growth estimate along with its relative percentile, which shows the magnitude of each month’s growth figure in relation to all monthly observations dating back to October 1998.
In other words, the relative percentile shows each monthly observation in the context of all observations in the sample – observations above the 50th percentile indicate above average growth, while any below the 50th percentile indicate below average growth.
The table below shows that that the apparent weakness in the labour market directly following the Commonwealth Games has indeed begun to turn around and to again move in the right direction.
Turning now to those persons considered to be in the labour force but looking for a job, there were around 14,800 unemployed persons on the Gold Coast in October.
The median time spent searching for a job was 8.7 weeks, which has not been so short on the Gold Coast since the end of 2009.
With an October rate of 4.26%, the Gold Coast has the lowest unemployment rate in the South East - and second lowest in the state behind Mackay.
Relative Unemployment Trends
The Gold Coast’s October unemployment rate of 4.26% is below its average trend unemployment rate of 5.76% since October 1998 - and far lower than Queensland’s October headline rate of 6.23%.
However, the results of an analysis of variance shows that there is no statistical difference at the 5% significance level between the average unemployment rate for Gold Coast (5.76%) and the Queensland average (5.97%) during this twenty-year period.
Comparisons made between the unemployment rate on the Gold Coast and other regions within South-East Queensland (SEQ) show that it is currently 2.14% lower than Greater Brisbane, 2.70% lower than the Sunshine Coast, 2.58% lower than Logan-Beaudesert, and 3.30% lower than Ipswich – indicating that it is the SEQ’s strongest performing region on the jobs front.
While the Gold Coast’s current unemployment rate (4.26%) is below the rate for Greater Brisbane (6.40%), an analysis of variance indicates that - statistically speaking - there is no difference between the Gold Coast’s average unemployment rate (5.76%) and that of Greater Brisbane (5.68%) over the period October 1998 to October 2018.
However, there are highly significant statistical differences in the average unemployment rates between Sunshine Coast (-1.25%), Logan Beaudesert (-1.74%) and Ipswich (-1.04%).
Employment Growth Prospects for a Lower Australian Dollar
While tourism and hospitality are not classified as ANZSIC industry divisions by the ABS, nevertheless, these are service industries critical to the city region’s economy.
A falling Australian dollar, as we have seen in recent years, should be beneficial to employment on the Gold Coast as a lower dollar improves the competitiveness of the Gold Coast tourism industry and should, in turn, lift business confidence and drive new investment.
However, looking at the time series of total employed persons on the Gold Coast together with the Australian dollar exchange rate (AUD/USD) suggests there may be no discerning association between the two.
To test the strength in association between the change in employed persons in the Gold Coast region and the exchange rate, I split the regressions into two distinct periods – one when the exchange rate was rising, and another when it was falling:
(i) over the sample period from October 1998 leading up to the peak of 1AUD = $US1.0945 in July 2011;
(ii) the remaining sample period after the peak in July 2011 where it has fallen to 1AUD = $US0.7085.
The results of both regressions indicated that there was no statistically significant association between employment growth and the exchange rate over either of the sample periods.
Furthermore, given that the coefficient of determinations (adjusted R2 value) indicated that the variation in the exchange rate explains less than 2% of the variation in employment growth in both cases, I subsequently looked at the unemployment rate as the dependent variable.
The regression outputs indicate that there is a statistically significant association between the unemployment rate on the Gold Coast and the level of the Australian dollar exchange rate – but it is not a relationship that one may initially expect to see.
The results showed that there appears to be a highly, statistically significant negative association between unemployment rates and the exchange rate – indicative of the unemployment rate falling (rising) with an increase (decrease) in the Aussie dollar.
The association was also relatively strong - with a correlation coefficient of 0.46, the coefficient of determination (adjusted R2 value) further suggests that the variation in the exchange rate explains 21% of the variation in the unemployment rate over the 20-year period.
Accordingly, while there are reasonably intuitive reasons why a lower exchange rate is a good thing for the Gold Coast tourism industry, the Gold Coast Council notes that the city has matured from a traditional economic base of tourism and construction to a more “diverse, knowledge-based economic environment”. Read it here: http://www.goldcoast.qld.gov.au/business/economic-development-288.html
Moreover, one cannot discount the income effect that the resources boom has had on the Queensland economy over recent decades – an industry that contributed 55 per cent to Australia’s total exports last year worth a record high $220 billion to the Australian economy. Read it here: https://www.minerals.org.au/news/australia%E2%80%99s-resources-sector-drives-record-exports-2017-18
Thanks to Pete Faulkner and his team in Mission Beach for doing a fantastic job compiling the regional labour force statistics.