2018 has all the elements to be the year for business. At the close of 2017, the State Government was re-elected with a majority, albeit slim, helping to solidify political certainty for the next 2 years and 10 months. The Queensland economy reached $309 billion GSP during 2016/17, growing by 1.8% over the past year. Although lagging behind the national average growth of 2%, Queensland’s economy goes into 2018 with momentum.
Other factors which will boost the economy throughout 2018 is the high value of commodity prices for Queensland’s key exports. Specifically, coal prices are high at the moment which could trigger a new round of investment in mines. Oil prices have also experienced a surge lately which could provide an additional boost to exploration investment in the oil and gas sector in Queensland. The State Government has already signalled an additional 450 square kilometers of new gas tenure for supply to the Australian market. However, there is a drawback to higher global oil prices as it could drive domestic gas prices higher (due to their linkage to LNG export prices) and increase business input costs.
Despite the Australian dollar depreciating further from parity this has vastly improved the competitiveness of trade exposed industries. Tourism, education, manufacturing industries as well as agriculture and mining have all benefitted from the lower dollar.
Construction had a bit of a shaky year in 2017, with residential construction activity beginning to decline and building approvals for apartments slowing as completions accelerated. Concerns of an apartment glut, have weighed down on confidence. However, by the close of 2017 the construction industry had welcomed news with data showing increasing rates of interstate migration and the employment market improving, which should soak up excess apartments in the market. Coupled with increasing population migration, approvals for new houses are on the rise, helping to offset some of the decline in apartment construction.
Therefore, there are several macroeconomic factors at play that should see Queensland businesses benefit during 2018. In the short-term businesses in South East Queensland can look forward to the Commonwealth Games, hosted on the Gold Coast. The Games will directly boost hospitality and tourism industries with the influx of patrons leading up to, during and following the games. It will also be a fantastic opportunity for Queensland to show of its business attributes with a key secondary focus of the Games centering on developing trade relations. Securing relationships with our close Asian neighbours will reward businesses with the potential to access up to 4 billion additional consumers. Another benefit of the Games is the impact of legacy planning. Efficient legacy planning ensures locals will continue to benefit from Games infrastructure.
The unsung hero of Queensland industry is the health services industry. In the past three years, it has grown in both employment and output by 28.8%, employing over four hundred thousand Queenslanders. With our ageing population, this number is projected to continue increasing.
Unfortunately, the manufacturing sector continued to go backwards in economic output and employment. This is predominantly due to manufacturers not being able to compete globally with mass producing nations due to increasing operational costs, especially the high and unpredictable electricity prices Queensland experienced in 2017. 2018 however is the year for manufacturers to capitalize on their advantages. Queensland manufacturers are highly skilled, highly educated and masters of their craft. Opportunities exist for smart, advanced and niche manufacturing operations to plug into global supply chains and provide specialist processes and components.
The arrival of Amazon at the tail end of 2017 did not cause the mass destruction to the retail sector as some commentators predicted, which was a relief for retailers experiencing a year of weak consumer spending. Despite jobs growth, household budgets are still under pressure. Wages are not growing much faster than inflation and households are spending a greater proportion of their incomes on services rather than retail goods. The latest data shows retailers have been discounting prices but this has not led to increased purchases by consumers. For the year ahead retailers should focus on service delivery to maintain customer loyalty and to differentiate from the big e-commerce retailers. Use disruption to their advantage would be CCIQ’s advice.
In 2018, businesses will be looking at ways to tackle their operational costs, namely electricity bills. In 2017 electricity costs caused irreparable damage to Queensland businesses and the economy. While businesses wait for Federal and State politicians to get their act together, 2018 is the year to take the power back behind the meter. Businesses are encouraged to enact tried and tested cost saving measures, such as:
- Buy energy efficient light bulbs and install timers for lighting.
- Consider more energy efficient heating, ventilation and air conditioning (HVAC) systems and practices.
- Implement staff awareness programs to encourage energy efficiency.
- If possible use energy intensive equipment in off peak hours (i.e. Hot water systems)
To the more innovative:
- Install solar panels and battery systems.
- Install Smart Meters
- Custom design buildings with convection cooling systems
Power prices are a big threat to businesses. Increasingly, our members are reporting taking matters into their own hands and installing their own grid independent power solutions, unfortunately distracting owners and managers from their key business focus and activities.
If you want to learn more about how to reduce your energy costs, contact EcoBiz today.
Overall, 2018 contains the elements for a cracker year for businesses, however, businesses will be looking for leadership and action in relation to tax reform, investment in infrastructure, electricity price reduction and fewer barriers to employment to make 2018 a great year.