The Surat Basin - comprising the Regional Council Areas of Maranoa, Western Downs and Toowoomba - is currently experiencing a high rate of growth fuelled predominately by resource sector activity. Brian Haratsis, the Chief Economist of MacroPlan Dimasi, provides a snapshot of what this means for industry and the challenges that lay ahead for the region.
Just recently, the state government released a list of projects planned by the state, local and private sectors throughout the Surat Basin. I read with interest that there were more than $83 billion in infrastructure projects planned over the next 20 years in addition to committed natural disaster relief and recover arrangements totalling $285 million. The state government has allocated these funds to support the expected increase of approximately 110,000 people throughout the Surat Basin over the next 20 years. These projects include community services, education and training, energy, health, rail and road networks, as well as water and sewerage infrastructure.
The forecast capital expenditure related to these projects will without doubt ensure that investment in the area will occur for a number of years to come. This is also supported at a national level by a future trade growth forecast of 129% by 2025. To put this in perspective, this trade forecast is almost double the global rate, which places it fourth overall in Asia (according to HSBC Trade Connections). HSBC Trade Connections, a new quarterly global trade forecast tool, predicts that Australia will be the second fastest growing export market in the world, equal to China. The tool, which assessed macroeconomic trends and market infl uences on trade, found that Australia will perform particularly well in the next fi ve years when trade growth will hit 7.7% annually, near four times world growth of 2% annually.
New capital expenditure has been increasing almost exponentially since the global fi nancial crisis and reached record levels in June 2011 with this trend expected to continue. Mining capital expenditure is expected to double in 2012. The Surat Basin Future Directions Statement highlights that industry (including the CSG/LNG industry) will see significant growth in workforce demand from major projects between 2011 and 2031. Overall demand will increase considerably over the next fi ve years as industries in the Surat Basin expand. Surat Basin employment will grow from around 85,800 in 2009 to 158,000 in 2031.
This clearly supports the notion of sustained investment in the Surat Region, and as such the ongoing demand for housing and accommodation product due to the ongoing expansion and introduction of new projects. With this in mind, I believe that the ongoing investment in the Surat Basin region, along with a number of labour constraints (which will likely extend project timeframes) and ongoing high commodity prices, will see the current economic super cycle last longer than previously expected.
Other economic activities and growth in general throughout the Surat Basin is, in most cases, linked to growth in the resources sector. However, this rapid growth, together with the remote nature of some projects, presents challenges for companies seeking to make the most of the resources boom. I have also observed that the proportion of FIFO workers in the Surat Basin is currently much less than the Bowen Basin. Maintaining this low reliance on FIFO workers will require appropriate residential product, long term local employment opportunities and amenity throughout townships and the region.
By Brian Haratsis
Chief Economist
MacroPlan Dimasi for Surat Basin Real Estate